What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-08-01 compared with 2025-05-02 · 252 added, 190 removed, 805 unchanged (35% of the section changed)

3 unchanged sentences

(dollars in thousands)

March 31, 2025

June 30, 2025

December 31, 2024

4 unchanged sentences

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

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

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

Total investment securities

Deferred loan (fees) and costs, net

Deferred loan costs, net

Allowance for credit losses on loans

2 unchanged sentences

Bank-owned life insurance

Operating right-of-use asset

LIABILITIES AND SHAREHOLDERS' EQUITY

7 unchanged sentences

Allowance for credit losses on unfunded loan commitments

Operating lease liability

Other liabilities

4 unchanged sentences

24,000,000 shares authorized;

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

13,681,828 and 14,223,046 shares issued and outstanding at June 30, 2025, and December 31, 2024, respectively

Additional paid-in capital

6 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

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

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2025, and 2024

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

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

Interest and dividend income

12 unchanged sentences

Credit loss expense - loans

Credit loss expense - unfunded commitments

Credit loss (benefit) expense - unfunded commitments

Net interest income after credit loss expense

3 unchanged sentences

Net (loss) gain on sale of fixed assets

(Decrease) increase in cash surrender value of life insurance

Increase in cash surrender value of life insurance

Total noninterest income

17 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2025, and 2024

(dollars in thousands, unaudited)

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

Other comprehensive income, net of tax:

5 unchanged sentences

(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 $( 36 ) thousand and $ 852 thousand for the three months ended March 31, 2025 and 2024, respectively.

There were no income tax expenses associated with the reclassification adjustment for the three months ended June 30, 2025, and 2024.

Income tax expenses (benefits) associated with the reclassification adjustment for the six months ended June 30, 2025, and 2024 were $ 37 thousand and $( 852 ) thousand, 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 THREE MONTHS ENDED MARCH 31, 2025, and 2024

FOR THE THREE MONTHS ENDED JUNE 30, 2025, and 2024

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

1 unchanged sentence

Shareholders'

(Loss) Income

Balance, March 31, 2024

Other comprehensive income, net of tax

Restricted stock forfeited / cancelled

Stock based compensation - stock options

Stock based compensation - restricted stock

Stock repurchase

Excise tax on stock repurchase

Cash dividends - $ 0.23 per share

Balance, June 30, 2024

Balance, March 31, 2025

Other comprehensive income, net of tax

Stock options exercised, net of shares surrendered for cashless exercises

Restricted shares withheld for taxes

Restricted stock forfeited / cancelled

Stock based compensation - restricted stock

Stock repurchase

Excise tax on stock repurchased

Cash dividends - $ 0.25 per share

Balance, June 30, 2025

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

SIERRA BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2025, and 2024

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

Comprehensive

Shareholders'

(Loss) Income

Balance, December 31, 2023

Other comprehensive gain, net of tax

Other comprehensive income, net of tax

Restricted stock granted

7 unchanged sentences

Cash dividends - $ 0.46 per share

Balance, March 31, 2024

Balance, June 30, 2024

Balance, December 31, 2024

Other comprehensive gain, net of tax

Other comprehensive income, net of tax

Stock options exercised, net of shares surrendered for cashless exercises

8 unchanged sentences

Cash dividends - $ 0.50 per share

Balance, March 31, 2025

Balance, June 30, 2025

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

FOR THE SIX MONTHS ENDED JUNE 30, 2025, AND 2024

(dollars in thousands, unaudited)

Three months ended March 31,

Six months ended June 30,

Cash flows from operating activities:

1 unchanged sentence

(Gain) loss on sales of securities

Realized gain on securities transaction

Loss (gain) on disposal of fixed assets

5 unchanged sentences

Net accretion of premiums/discounts for loans acquired

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

Increase in cash surrender value of life insurance policies

Amortization of core deposit intangible

(Increase) decrease in interest receivable and other assets

Increase (decrease) in other liabilities

Increase in interest receivable and other assets

Decrease in other liabilities

Deferred income tax benefit

Decrease in value of restricted bank equity securities

Excise tax on stock repurchases

Amortization of debt issuance costs

4 unchanged sentences

Proceeds from sales of securities available for sale

Purchase of securities available for sale

Purchases of securities available for sale

Principal pay downs on securities available for sale

Loan payments and (originations), net

Loan (originations) and payments, 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

Purchase of split dollar life insurance policies

Proceeds from BOLI death benefit

Net cash provided by investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities:

(Decrease) increase in deposits

Decrease in Fed funds purchased

Decrease in short-term Federal Home Loan Bank advances

Increase in deposits

Increase (decrease) in Fed funds purchased

Increase (decrease) in short-term Federal Home Loan Bank advances

Increase in customer repurchase agreements

2 unchanged sentences

Stock options exercised

Net cash used in financing activities

Net cash provided by (used in) financing activities

Increase in cash and cash equivalents

7 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2025

June 30, 2025

Note 1 – The Business of Sierra Bancorp

2 unchanged sentences

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

As of March 31, 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”).

As of June 30, 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.

5 unchanged sentences

As of the filing date of this report the Bank operates 35 full-service branches and an online branch and maintains ATMs at all but one branch location as well as at seven non-branch locations.

Moreover, the Bank has specialized lending units which focus on agricultural borrowers, commercial real estate, and mortgage warehouse lending.

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

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

Moreover, the Bank has specialized lending units which focus on commercial and industrial, commercial real estate, and mortgage warehouse borrowers.

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

The Company had total assets of $ 3.8 billion at June 30, 2025.

The Company’s deposit accounts, which totaled $ 3.0 billion at June 30, 2025, are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to maximum insurable amounts.

Note 2 – Basis of Presentation

4 unchanged sentences

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

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

In preparing the accompanying financial statements, Management has taken subsequent events into consideration, through August 1, 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.

5 unchanged sentences

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

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

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

39 unchanged sentences

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

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.

Options to purchase 161,593 shares granted under the 2017 Plan and options to purchase 56,897 shares that were granted under the 2007 Plan were still outstanding as of June 30, 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 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 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.

There were 55,781 unvested Restricted Stock Awards issued under the 2017 Plan and 154,604 unvested Restricted Stock Awards issued under the 2023 Equity Compensation Plan at June 30, 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.

2 unchanged sentences

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

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

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

For the first half of both, 2025 and 2024, the charges totaled $ 1.0 million.

Restricted Stock Grants

1 unchanged sentence

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;

provided, however, that no installment of any Restricted Stock Award shall become vested less than one year from the grant date.

The vesting period of Restricted Stock Awards is determined at the time the awards are issued, and different awards may have different vesting terms or performance measures, provided, however, that no installment of any Restricted Stock Award shall become vested less than one year from the grant date.

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

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

There were 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.

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

As of June 30, 2025, there was $ 2.9 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 2.2 years.

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,

The Company’s restricted stock award activity for the six months ended June 30, 2025, and 2024 is summarized below (unaudited):

Six months ended June 30,

Weighted Average Grant-Date Fair Value

1 unchanged sentence

Unvested shares, January 1,

Unvested shares, March 31,

Unvested shares, June 30,

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 three months ended March 31, 2025, and 2024 are summarized below (dollars in thousands, except per share data, unaudited):

Three months ended March 31,

The Company’s stock option activity during the six months ended June 30, 2025, and 2024 are summarized below (dollars in thousands, except per share data, unaudited):

Six months ended June 30,

Weighted Average

6 unchanged sentences

Forfeited/Expired

Outstanding at March 31,

Exercisable at March 31,

Outstanding at June 30,

Exercisable at June 30,

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

There were 13,563,910 weighted average shares outstanding during the second quarter of 2025 and 14,300,267 during the second quarter of 2024, while there were 13,692,003 weighted average shares outstanding during the first six months of 2025 and 14,404,368 during the first six months 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 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.

For the second quarter of 2025, calculations under the treasury stock method resulted in the equivalent of 73,342 shares being added to basic weighted average shares outstanding for purposes of determining diluted earnings per share, while 265,885 shares were excluded from the calculation due to being underwater and thus anti-dilutive.

For the second quarter of 2024 the equivalent of 81,159 shares were added in calculating diluted earnings per share, while 260,924 anti-dilutive shares were not factored into the computation.

Likewise, for the first half of 2025 the equivalent of 85,003

shares were added to basic weighted average shares outstanding in calculating diluted earnings per share and a weighted average of 47,798 options that were anti-dilutive for the period were not included, compared to the addition of the equivalent of 63,109 shares and non-inclusion of 265,107 anti-dilutive options in calculating diluted earnings per share for first half of 2024.

Note 6 – Comprehensive Income

9 unchanged sentences

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

March 31, 2025

June 30, 2025

December 31, 2024

8 unchanged sentences

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 $ 414.8 million at March 31, 2025, and $ 311.6 million at December 31, 2024.

Unused commitments on mortgage warehouse lines were $ 334.6 million at June 30, 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 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.

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

At June 30, 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.

3 unchanged sentences

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.

In addition to disclosure requirements, FASB’s standard on investments requires that debt securities classified as available-for-sale and equity securities with 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.

13 unchanged sentences

(dollars in thousands, unaudited)

March 31, 2025

June 30, 2025

Fair Value Measurements

27 unchanged sentences

Subordinated debentures

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:

For financial asset categories carried on the consolidated balance sheet at fair value as of June 30, 2025, and December 31, 2024, the Company used the following methods and significant assumptions:

● Investment securities :

4 unchanged sentences

● 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.

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.

2 unchanged sentences

(dollars in thousands, unaudited)

Fair Value Measurements at March 31, 2025, using

Fair Value Measurements at June 30, 2025, using

Quoted Prices in

17 unchanged sentences

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

The following tables present quantitative information about recurring level 3 fair value measurements at June 30, 2025, and December 31, 2024 (dollars in thousands):

June 30, 2025

Corporate Bonds

New issue pricing

Risk appetite

Secondary market pricing

Market volatility

Credit quality of issuer

Credit spread

Broker estimate

Market conditions

December 31, 2024

Valuation Technique(s)

Unobservable Input(s)

Weighted Average

Corporate Bonds

5 unchanged sentences

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:

The significant unobservable inputs utilized in the fair value measurement of the Company’s corporate bonds included risk profile and market conditions, and are not quantifiable inputs.

Differing unobservable input assumptions, for example, a change in market conditions, may have resulted in reduced or increased fair value.

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 six months ended June 30, 2025, and 2024:

Fair Value Measurements - Level 3 Recurring

5 unchanged sentences

Transfers into Level 3

Balance of recurring Level 3 assets at March 31,

Balance of recurring Level 3 assets at June 30,

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.

1 unchanged sentence

(dollars in thousands, unaudited)

Fair Value Measurements at March 31, 2025, using

Fair Value Measurements at June 30, 2025, using

Quoted Prices in

4 unchanged sentences

Individually evaluated collateral dependent loans

Other commercial

Commercial real estate

Total assets measured on a nonrecurring basis

8 unchanged sentences

Total assets measured on a nonrecurring basis

The table above includes collateral-dependent loan balances for which a specific reserve has been established or on which a write-down has been taken.

The table above includes collateral-dependent loan balances for which a specific reserve has been established.

Information on the Company’s total collateral-dependent loan balances and specific loss reserves associated with those balances is included in Note 10 below.

1 unchanged sentence

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

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

The following table presents quantitative information about level 3 fair value measurements for assets measured at fair value on a non-recurring basis at June 30, 2025 (dollars in thousands, unaudited):

June 30, 2025

Collateral-dependent individually evaluated loans, net of ACL

1 unchanged sentence

Selling costs

Net realizable value

Expected recovery rates

Sales comparison approach

Selling costs

Adjust to comparables

1 unchanged sentence

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 (loss) in shareholders’ equity.

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 reflected in accumulated other comprehensive income (loss) 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)

March 31, 2025

June 30, 2025

Allowance for Credit Losses

31 unchanged sentences

Total held-to-maturity securities

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.

An unrealized loss of $ 25.2 million and $ 26.3 million, on securities transferred from the available-for-sale to held-to-maturity categorization, remains as of June 30, 2025 and December 31, 2024, respectively, and is included in accumulated other comprehensive income (loss), 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 (loss) each increasing over time.

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 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 is included in other assets on the Company’s consolidated balance sheet and as of June 30, 2025, measured at $ 6.4 million and $ 2.4 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 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.

During the first three-and-six 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 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.

As of June 30, 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 U.S.

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

March 31, 2025

June 30, 2025

December 31, 2024

1 unchanged sentence

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

For the remainder of available-sale-debt securities in an unrealized loss position, which do not meet the previously outlined criteria, management evaluates whether the decline in fair value is a reflection of credit deterioration or other factors.

For the remainder of available-for-sale debt securities in an unrealized loss position, which do not meet the previously outlined criteria, Management evaluates whether the decline in fair value is a reflection of credit deterioration or other factors.

In performing this evaluation, Management considers the extent to which fair value has fallen below amortized cost, changes in ratings by rating agencies, and other information indicating a deterioration in repayment capacity of either the underlying issuer or the borrowers providing repayment capacity in a securitization.

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

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 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 (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.

The following table summarizes available-for-sale debt securities in an unrealized loss position for which an ACL has not been recorded:

Investment Portfolio - Unrealized Losses

(dollars in thousands, unaudited)

March 31, 2025

June 30, 2025

Less than twelve months

21 unchanged sentences

(dollars in thousands, unaudited)

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

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 March 31, 2025, and December 31, 2024 (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 June 30, 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.

March 31, 2025

June 30, 2025

Available-for-Sale

21 unchanged sentences

Collateralized loan obligations

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.

At June 30, 2025, the Company’s investment portfolio included 224 municipal bonds issued by 189 different government municipalities and agencies located within 28 different states, with an aggregate fair value of $ 204.2 million.

The largest exposure to any single municipality or agency was a combined $ 4.9 million (fair value) in general obligation bonds issued

10 unchanged sentences

(dollars in thousands, unaudited)

March 31, 2025

June 30, 2025

December 31, 2024

13 unchanged sentences

(dollars in thousands, unaudited)

March 31, 2025

June 30, 2025

December 31, 2024

8 unchanged sentences

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.

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 allocated to the limited partners for tax purposes.

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.

2 unchanged sentences

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 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.

As of June 30, 2025, the Company’s total LIHTC investment book balance was $ 24.0 million, which is included in “Other Assets” on the consolidated balance sheet.

This investment is offset by $ 16.8 million in remaining commitments for additional capital contributions, which is included in “Other Liabilities” on the consolidated balance sheet.

There were approximately $ 1.5 million in tax credits derived from the Company’s LIHTC investments that were recognized during the six months ended June 30, 2025, and “below the line” amortization expense of $ 1.5 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.

5 unchanged sentences

The ACL on the loan portfolio is a valuation allowance deducted from the recorded balance in loans.

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

Under CECL the ACL represents principal which is not expected to be collected over the contractual life of the loans, adjusted for expected prepayments.

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

3 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 $ 7.5 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.

Accrued interest receivable on loans of $ 7.3 million and $ 6.1 million at June 30, 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.

The final table in this section separates a roll forward of the ACL at the portfolio segment level.

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

1 unchanged sentence

(dollars in thousands, unaudited)

March 31, 2025

June 30, 2025

December 31, 2024

6 unchanged sentences

Consumer loans

Net deferred loan (fees) and costs

Net deferred loan costs

Loans, amortized cost basis

1 unchanged sentence

The Company places loans on nonaccrual status when Management has determined that the full repayment of principal and collection of contractually agreed upon interest is unlikely or when the loan in question has become delinquent more than 90 days.

The Company may decide that it is appropriate to continue to accrue interest on certain loans more than 90 days delinquent if they are well-secured by collateral and collection is in process.

The Company may decide it is appropriate to continue to accrue interest on certain loans more than 90 days delinquent if they are well-secured by collateral and collection is in process.

When a loan is placed on nonaccrual status, any accrued but uncollected interest for the loan is reversed out of interest income in the period in which the loan’s status changed.

4 unchanged sentences

(dollars in thousands, unaudited)

March 31, 2025

June 30, 2025

Nonaccrual Loans

12 unchanged sentences

Residential real estate

Commercial real estate

Total real estate

Other commercial

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:

The Company did not recognize any interest on nonaccrual loans during the three or six months ended June 30, 2025, and 2024, and would have recognized an additional $ 0.2 million and $ 0.3 million in interest income on nonaccrual loans during the second quarter of 2025 and 2024, respectively, had those loans not been designated as nonaccrual.

For the year-to-date periods of 2025 and 2024, the Company would have recognized an additional $ 0.6 million and $ 0.3 million, respectively, in interest income on nonaccrual loans had those loans not been designated as nonaccrual.

Due to loans being placed on nonaccrual status, during the second quarter of 2025, $ 0.1 million of interest receivable on loans was reversed against interest income, as compared to an immaterial amount during the second quarter of 2024.

During the first half of 2025, and 2024, $ 0.3 million and $ 0.1 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 June 30, 2025, and December 31, 2024:

Collateral Dependent Loans

(dollars in thousands, unaudited)

March 31, 2025

June 30, 2025

December 31, 2024

7 unchanged sentences

Other commercial

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.

During the first six months of 2025 the amortized cost balance of collateral-dependent loans decreased by $ 4.7 million due primarily to a $ 5.3 million charge-off of on agriculture production loan in the other commercial category, principal

payments received on the same 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 83.4 % at June 30, 2025.

There were no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of June 30, 2025 and December 31, 2024.

Past Due Loans

(dollars in thousands, unaudited)

March 31, 2025

June 30, 2025

30-59 Days Past Due

24 unchanged sentences

Loan Modifications

Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, rate reductions, payment deferral, or term extension.

Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, rate reduction, payment deferral, or term extension.

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

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

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

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

3 unchanged sentences

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

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.

There was an immaterial amount of term extensions for the three months ended June 30, 2025, and none for the three months ended June 30, 2024.

The following tables present the amortized cost basis of loans at June 30, 2025, and 2024, that were both experiencing financial difficulty and modified during the six months ended June 30, 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):

March 31, 2025

Six months ended June 30, 2025

Principal Forgiveness

4 unchanged sentences

Other commercial

March 31, 2024

Six months ended June 30, 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 months ended March 31, 2025 and 2024 (dollars in thousands, unaudited):

March 31, 2025

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three and six months ended June 30, 2025 and 2024 (dollars in thousands, unaudited):

Three months ended June 30, 2025

Principal Forgiveness

2 unchanged sentences

Other commercial

March 31, 2024

Three months ended June 30, 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 March 31, 2025, and 2024.

Six months ended June 30, 2025

Principal Forgiveness

Weighted-Average Interest Rate Reduction

Weighted-Average Term Extension (years)

Other commercial

Six months ended June 30, 2024

Principal Forgiveness

Weighted-Average Interest Rate Reduction

Weighted-Average Term Extension (years)

Other construction/land

Other commercial

There were no payment defaults on loans previously modified in the preceding 12 months for either of the periods ending June 30, 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 March 31, 2025 and none as of March 31, 2024.

The Company had $ 0.1 million in additional funds committed on loans which have been modified to borrowers experiencing financial difficulty as of June 30, 2025, and none as of June 30, 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.

1 unchanged sentence

The Company uses the following definitions of risk classifications:

Pass – Loans listed as pass include larger non-homogeneous loans not meeting the risk rating definitions below and smaller, homogeneous loans not assessed on an individual basis.

Special Mention – Loans classified as special mention have the potential weakness that deserves Management’s close attention.

If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard – Loans classified as substandard are those loans with clear and well-defined weaknesses such as a highly leveraged position, unfavorable financial operating results and/or trends, or uncertain repayment sources or poor financial condition, which may jeopardize ultimate recoverability of the debt.

Includes larger non-homogeneous loans not meeting the risk rating definitions below and smaller, homogeneous loans not assessed on an individual basis.

● Special Mention:

Includes loans with a potential weakness that deserves Management’s close attention.

If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

● Substandard :

Includes loans with clear and well-defined weaknesses, such as a highly leveraged position, unfavorable financial operating results and/or trends, uncertain repayment sources, or poor financial condition, which may jeopardize ultimate recoverability of the debt.

Loan Credit Quality by Vintage

(dollars in thousands, unaudited)

March 31, 2025

June 30, 2025

Term Loans Amortized Cost Basis by Origination Year

19 unchanged sentences

Current period gross charge-offs (1)

(1) Consumer overdrafts are included in consumer loans and make up the majority of the gross charge-offs in the period for this loan class.

Loan Credit Quality by Vintage

22 unchanged sentences

Current period gross charge-offs (1)

(1) Consumer overdrafts are included in consumer loans and make up the majority of the gross charge-offs in the period for this loan class.

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

As of June 30, 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.

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.

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

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

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

For purposes of estimating the Company’s ACL, Management generally evaluates collectively evaluated loans by Federal Call code in order to group loans with similar risk characteristics together, however management has grouped loans in selected call codes together in determining portfolio segments, due to similar risk characteristics and reserve methodologies used for certain call code classifications.

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

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

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

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 Farmland, Agricultural Production, and Consumer categories, a Remaining Life methodology is utilized.

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

1 unchanged sentence

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

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

Regression models are 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.

2 unchanged sentences

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

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

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

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

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 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).

The call code multiple factor regression models utilized as of June 30, 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 June 30, 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.

2 unchanged sentences

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

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

As current and expected conditions may vary

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

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

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

As current and expected conditions may vary compared with conditions over the historical lookback period, which is utilized in the calculation of quantitative reserves,

Management considers whether additional or reduced reserve levels on collectively evaluated loans may be warranted given the consideration of a variety of qualitative factors.

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

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

7 unchanged sentences

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

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

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

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

5 unchanged sentences

● Mortgage Warehouse

● Consumer loans.

Loans secured by Residential Real Estate have a different profile from loans secured by Commercial Real Estate.

Loans secured by Residential Real Estate have a different profile from those secured by Commercial Real Estate.

Generally, the borrowers for Residential Real Estate loans are consumers whereas borrowers for Commercial Real Estate are often businesses.

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

Farmland and Agricultural Production loans are included in a single segment as these loans are often times to the same borrowers, facing the same risks relating to commodity prices, water supply and drought conditions in addition to other environmental concerns.

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

Mortgage warehouse loans are also unique in the Company’s portfolio and warrant separate presentation as an individual portfolio segment, given the specific nature of these constantly revolving lines to mortgage originators and also attributable

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

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

Farmland and Agricultural Production loans are included in a single segment as these loans are oftentimes to the same borrowers, facing the same risks relating to commodity prices, water supply and drought conditions, in addition to other environmental concerns.

Commercial & Industrial loans are separated into separate segment given the uniqueness of these loans, which are often revolving and secured by business assets other than real estate.

Mortgage Warehouse loans warrant presentation as an individual portfolio segment given the specific nature of these constantly revolving lines to mortgage originators and due to a very limited loss history, even after consideration of peer data.

Finally, Consumer loans are split out as a result of the small balance, homogeneous terms that characterize these loans.

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

As of March 31, 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:

As of June 30, 2025 and 2024, the only loans Management considered to have different risk characteristics from other loans sharing the same call report code were loans designated as nonaccrual.

The following tables present the activity in the allowance for credit losses by portfolio segment for the quarters ended June 30, 2025, and 2024:

Allowance for Credit Losses

6 unchanged sentences

Allowance for credit losses:

Balance, March 31, 2025

(Benefit) provision for credit losses

Balance June 30, 2025

Residential Real Estate

Commercial Real Estate

Farmland & Agricultural Production

Commercial & Industrial

Mortgage Warehouse

Allowance for credit losses:

Balance, March 31, 2024

(Benefit) provision for credit losses

Balance June 30, 2024

The following tables present the activity in the allowance for credit losses by portfolio segment for the six months ended June 30, 2025, and 2024:

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

Ending allowance balance:

Balance June 30, 2025

Residential Real Estate

6 unchanged sentences

(Benefit) provision for credit losses

Ending allowance balance:

Balance June 30, 2024

Note 11 – Goodwill

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 balance of goodwill at the three-and-six months beginning and ended June 30, 2025 and 2024 was $ 27.4 million.

There was no acquired goodwill for the three-and-six months ended June 30, 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 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.

Therefore, goodwill was not impaired as of June 30, 2025, and there were no impairment charges related to the Company’s goodwill recorded during the three-and-six months ended June 30, 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 separate non-deposit accounts.

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.

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 March 31, 2025, and $ 49.4 million at December 31, 2024.

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 $ 126.5 million at June 30, 2025, relative to a balance of $ 108.9 million at December 31, 2024.

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 June 30, 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 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

At June 30, 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 June 30, 2025, and December 31, 2024:

June 30, 2025

December 31, 2024

4 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 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 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.

Federal Funds Purchased – The Company had lines of credit with its correspondent banks which, in the aggregate, amounted to $ 485.8 million unsecured and $ 25.0 million secured at June 30, 2025 and December 31, 2024, at fixed interest rates which vary with market conditions.

There was $ 40.0 million in outstanding overnight balances under these lines of credit at June 30, 2025 and no ne at December 31, 2024.

Secured FHLB Borrowings – At June 30, 2025, and December 31, 2024, the Company had secured available lines of credit with the FHLB totaling $ 605.6 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 FRB of San Francisco secured by certain loans and investments.

At June 30, 2025, and December 31, 2024, the Company had borrowing capacity under this line totaling $ 321.4 million and $ 298.3 million, respectively.

The Company had no outstanding borrowings on this line of credit as of June 30, 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 March 31, 2025, March 31, 2024, and December 31, 2024.

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 June 30, 2025, June 30, 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 March 31,

Three months ended June 30,

Six months ended June 30,

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