FIRST NORTHERN COMMUNITY BANCORP 10-K

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 57 Table of Contents ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Management’s Report on Internal Control over Financial Reporting Page 59 Report of Independent Registered Public Accounting Firm (PCAOB ID # 659 ) Page 60 Consolidated Balance Sheets as of December 31, 2024 and 2023 Page 62 Consolidated Statements of Income for Years Ended December 31, 2024 and 2023 Page 63 Consolidated Statements of Comprehensive Income for Years Ended December 31, 2024 and 2023 Page 64 Consolidated Statement of Stockholders’ Equity for Years Ended December 31, 2024 and 2023 Page 65 Consolidated Statements of Cash Flows for Years Ended December 31, 2024 and 2023 Page 66 Notes to Consolidated Financial Statements Page 67 58 Table of Contents Management’s Report FIRST NORTHERN COMMUNITY BANCORP AND SUBSIDIARY MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management of First Northern Community Bancorp and subsidiary (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2024. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and the board of directors; and (iii) provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Management recognizes that even a highly effective internal control system has inherent risks, including the possibility of human error and the circumvention or overriding of controls, and that the effectiveness of an internal control system can change with circumstances. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, the Company conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management of the Company has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2024. /s/ Jeremiah Z. Smith Jeremiah Z. Smith President/Chief Executive Officer/Director (Principal Executive Officer) /s/ Kevin Spink Kevin Spink Executive Vice President/Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) March 7, 2025 59 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of First Northern Community Bancorp Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet s of First Northern Community Bancorp and subsidiary (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2024 and 2023, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting in accordance with the standards of the PCAOB. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for Credit Losses on Loans – Qualitative and Environmental Factors As described in Notes 1 and 3 to the consolidated financial statements, the Company’s allowance for credit losses balance was $15.9 million as of December 31, 2024, and is estimated using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The allowance for credit losses is a valuation account that is deducted from the loan’s amortized cost basis to present the net amount expected to be collected on the loans and is a material and complex estimate requiring significant management judgement in the estimation of expected lifetime losses within the loan portfolio at the balance sheet date. We identified management’s estimation of qualitative and environmental factors within the calculation of the allowance for credit losses as a critical audit matter. To estimate expected losses the Company generally utilizes historical loss trends and the remaining contractual lives of the loan portfolios to determine estimated credit losses through a reasonable and supportable forecast period. The qualitative and environmental factors are used to adjust the allowance for credit losses model forecasts for inherent limitations or biases that have been identified through independent validation and back-testing of model performance to actual realized results. Qualitative and environmental factors also consider the impact of portfolio concentrations, changes in underwriting practices, 60 Table of Contents imprecision of economic forecasts, and other risk factors that might influence the Company’s loss estimation process. Auditing management’s judgements regarding the qualitative and environmental factors applied to the allowance for credit losses involved a high degree of subjectivity. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures related to the allowance for credit losses included the following, among others: • Tested the mathematical accuracy and computation of the allowance for credit losses on loans, including the mathematical accuracy of the application of the qualitative and environmental factor adjustments used in the calculation. • Performed an independent sensitivity analysis to evaluate the reasonableness of the qualitative and environmental factors used by management. • Obtained management’s analysis and supporting documentation related to the qualitative and environmental factors and tested whether the qualitative and environmental factors used in the calculation of the allowance for credit losses are supported by the documentation provided by management. /s/ MOSS ADAMS LLP Sacramento, California March 7, 2025 We have served as the Company’s auditor since 2006. 61 Table of Contents FIRST NORTHERN COMMUNITY BANCORP AND SUBSIDIARY Consolidated Balance Sheets December 31, 2024 and 2023 (in thousands, except shares and share amounts) 2024 2023 Assets Cash and cash equivalents $ 119,448 $ 149,211 Certificates of deposit 16,074 19,710 Investment securities – available-for-sale, at estimated fair value, net of allowance for credit losses of $ 0 ; amortized cost of $ 682,346 at December 31, 2024 and $ 620,314 at December 31, 2023 633,853 572,357 Loans (net of allowance for credit losses of $ 15,885 at December 31, 2024 and $ 16,596 at December 31, 2023 ) 1,046,852 1,052,465 Stock in Federal Home Loan Bank and other equity securities, at cost 10,518 10,518 Premises and equipment, net 9,248 9,962 Core deposit intangible, net 3,321 4,141 Interest receivable and other assets 52,408 53,468 Total Assets $ 1,891,722 $ 1,871,832 Liabilities and Stockholders’ Equity Liabilities: Deposits: Demand $ 715,424 $ 744,799 Interest-bearing transaction deposits 376,250 380,477 Savings and MMDAs 458,445 431,472 Time, $250,000 or less 108,598 109,373 Time, over $250,000 41,372 26,323 Total Deposits 1,700,089 1,692,444 Interest payable and other liabilities 15,301 20,143 Total Liabilities 1,715,390 1,712,587 Commitments and contingencies (Note 9 and 10) Stockholders’ Equity: Common stock, no par value; 32,000,000 shares authorized; 15,943,051 and 15,482,332 shares issued and outstanding at December 31, 2024 and 2023 , respectively 127,902 123,235 Additional paid-in capital 977 977 Retained earnings 81,304 68,760 Accumulated other comprehensive loss, net ( 33,851 ) ( 33,727 ) Total Stockholders’ Equity 176,332 159,245 Total Liabilities and Stockholders’ Equity $ 1,891,722 $ 1,871,832 See accompanying notes to consolidated financial statements. 62 Table of Contents FIRST NORTHERN COMMUNITY BANCORP AND SUBSIDIARY Consolidated Statements of Income Years Ended December 31, 2024 and 2023 (in thousands, except per share amounts) 2024 2023 Interest and dividend income: Interest and fees on loans $ 55,389 $ 52,203 Due from banks interest bearing accounts 7,201 9,351 Investment securities: Taxable 13,795 10,850 Non-taxable 1,216 914 Other earning assets 1,051 805 Total interest and dividend income 78,652 74,123 Interest expense: Time deposits over $250,000 1,045 410 Other deposits 13,247 7,174 Total interest expense 14,292 7,584 Net interest income 64,360 66,539 (Reversal) of provision for credit losses ( 250 ) 1,100 Net interest income after (reversal of) provision for credit losses 64,610 65,439 Non-interest income: Service charges on deposit accounts 1,718 1,699 Losses on sales/calls of available-for-sale securities ( 234 ) ( 112 ) Gains on sales of loans held-for-sale 52 111 Debit card income 2,762 2,798 Gain on bargain purchase — 1,405 Other income 1,721 1,944 Total non-interest income 6,019 7,845 Non-interest expenses: Salaries and employee benefits 23,850 25,914 Occupancy and equipment 4,736 4,329 Data processing 4,224 4,043 Stationery and supplies 313 349 Advertising 460 474 Director fees 309 327 Amortization of core deposit intangible 820 829 Other expense 8,077 7,373 Total non-interest expenses 42,789 43,638 Income before provision for income tax 27,840 29,646 Provision for income tax 7,806 8,092 Net income $ 20,034 $ 21,554 Basic income per share $ 1.26 $ 1.35 Diluted income per share $ 1.24 $ 1.34 See accompanying notes to consolidated financial statements. 63 Table of Contents FIRST NORTHERN COMMUNITY BANCORP AND SUBSIDIARY Consolidated Statements of Comprehensive Income Years Ended December 31, 2024 and 2023 (in thousands) 2024 2023 Net income $ 20,034 $ 21,554 Other comprehensive (loss) income, net of tax: Unrealized holding (losses) gains on securities arising during the current period, net of tax effect of ($ 224 ) and $ 5,208 for the years ended December 31, 2024 and 2023 , respectively ( 546 ) 12,415 Reclassification adjustment due to losses realized on sales of securities, net of tax effect of $ 67 and $ 32 for the years ended December 31, 2024 and 2023 , respectively 167 80 Officers’ retirement plan equity adjustments, net of tax effect of $ 116 and $ 100 for the years ended December 31, 2024 and 2023 , respectively 277 238 Directors’ retirement plan equity adjustments, net of tax effect of ($ 8 ) and $ 28 for the years ended December 31, 2024 and 2023 , respectively ( 22 ) 68 Total other comprehensive (loss) income, net of tax effect of ($ 49 ) and $ 5,368 for the years ended December 31, 2024 and 2023 , respectively ( 124 ) 12,801 Comprehensive income $ 19,910 $ 34,355 See accompanying notes to consolidated financial statements. 64 Table of Contents FIRST NORTHERN COMMUNITY BANCORP AND SUBSIDIARY Consolidated Statement of Stockholders’ Equity Years Ended December 31, 2024 and 2023 (in thousands, except share data) Common Stock Additional Paid-in Retained Accumulated Other Comprehensive Shares Amounts Capital Earnings Income/(Loss) Total Balance at December 31, 2022 14,652,584 $ 116,099 $ 977 $ 54,492 $ ( 46,528 ) $ 125,040 Cumulative change from adoption of ASU 2016-13 on January 1, 2023 ( 916 ) ( 916 ) Balance at January 1, 2023 (as adjusted for adoption of accounting standard) 14,652,584 116,099 977 53,576 ( 46,528 ) 124,124 Net income 21,554 21,554 Other comprehensive income, net of tax 12,801 12,801 Stock dividend adjustment 3,525 296 ( 296 ) — 5 % stock dividend declared in 2024 737,253 6,067 ( 6,067 ) — Cash in lieu of fractional shares ( 164 ) ( 7 ) ( 7 ) Stock-based compensation 820 820 Common shares issued related to restricted stock grants and ESPP, net of restricted stock forfeited 76,261 96 96 Stock options exercised, net 32,927 — — Stock repurchase and retirement ( 20,054 ) ( 143 ) ( 143 ) Balance at December 31, 2023 15,482,332 $ 123,235 $ 977 $ 68,760 $ ( 33,727 ) $ 159,245 Net income 20,034 20,034 Other comprehensive loss, net of tax ( 124 ) ( 124 ) Stock dividend adjustment 2,671 325 ( 325 ) — 5 % stock dividend declared in 2025 759,192 7,158 ( 7,158 ) — Cash in lieu of fractional shares ( 148 ) ( 7 ) ( 7 ) Stock-based compensation 846 846 Common shares issued related to restricted stock grants and ESPP, net of restricted stock forfeited 77,816 102 102 Stock options exercised, net 10,259 — — Stock repurchase and retirement ( 389,071 ) ( 3,764 ) ( 3,764 ) Balance at December 31, 2024 15,943,051 $ 127,902 $ 977 $ 81,304 $ ( 33,851 ) $ 176,332 See accompanying notes to consolidated financial statements. 65 Table of Contents FIRST NORTHERN COMMUNITY BANCORP AND SUBSIDIARY Consolidated Statements of Cash Flows Years Ended December 31, 2024 and 2023 (in thousands) 2024 2023 Cash flows from operating activities: Net income $ 20,034 $ 21,554 Adjustments to reconcile net income to net cash provided by operating activities: (Reversal of) provision for credit losses ( 250 ) 1,100 Amortization of core deposit intangible 820 829 Stock-based compensation 846 820 Depreciation and amortization of bank premises and equipment 1,057 1,002 Accretion and amortization of securities, net 230 1,941 Net loss on sales/calls of available-for-sale securities 234 112 Gain on sale of loans held-for-sale ( 52 ) ( 111 ) Provision (benefit) for deferred income taxes 603 ( 404 ) Proceeds from sales of loans held-for-sale 4,590 5,918 Originations of loans held-for-sale ( 4,538 ) ( 5,807 ) (Decrease) increase in deferred loan origination fees and costs, net ( 64 ) 752 Amortization of operating lease right-of-use asset 918 1,077 Gain on bargain purchase — ( 1,405 ) Increase in interest receivable and other assets ( 412 ) ( 961 ) (Decrease) increase in interest payable and other liabilities ( 4,479 ) 883 Net cash provided by operating activities 19,537 27,300 Cash flows from investing activities: Proceeds from maturities of available-for-sale securities 85,775 62,765 Proceeds from sales of available-for-sale securities 6,563 18,067 Principal repayments on available-for-sale securities 75,500 71,909 Purchase of available-for-sale securities ( 230,334 ) ( 91,324 ) Proceeds from maturities of certificates of deposit 9,336 5,169 Purchase of certificates of deposit ( 5,700 ) ( 3,931 ) Purchases of stock in Federal Home Loan Bank and other equity securities, at cost — ( 1,078 ) Net decrease (increase) in loans 5,927 ( 80,173 ) Purchases of bank premises and equipment, net ( 343 ) ( 1,221 ) Cash and cash equivalents acquired in acquisition — 103,425 Net cash (used in) provided by investing activities ( 53,276 ) 83,608 Cash flows from financing activities: Net increase (decrease) in deposits 7,645 ( 149,060 ) Cash dividends paid in lieu of fractional shares ( 7 ) ( 7 ) Common stock issued 102 96 Repurchases of common stock ( 3,764 ) ( 143 ) Net cash provided by (used in) financing activities 3,976 ( 149,114 ) Net decrease in cash and cash equivalents ( 29,763 ) ( 38,206 ) Cash and cash equivalents at beginning of year 149,211 187,417 Cash and cash equivalents at end of year $ 119,448 $ 149,211 Supplemental Consolidated Statements of Cash Flows Information (Note 19) See accompanying notes to consolidated financial statements. 66 Table of Contents FIRST NORTHERN COMMUNITY BANCORP AND SUBSIDIARY Notes to Consolidated Financial Statements Years Ended December 31, 2024 and 2023 (in thousands, except shares and share amounts) (1) Summary of Significant Accounting Policies First Northern Community Bancorp (the “Company”) is a bank holding company whose only subsidiary, First Northern Bank of Dixon (“Bank”), a California state-chartered bank, conducts general banking activities, including collecting deposits and originating loans, and serves Solano, Yolo, Sacramento, Placer, El Dorado, Glenn, and Colusa Counties. All intercompany transactions between the Company and the Bank have been eliminated in consolidation. The consolidated financial statements also include the accounts of Yolano Realty Corporation, a wholly-owned subsidiary of the Bank. Yolano Realty Corporation was formed in September 2009 for the purpose of managing selected other real estate owned properties. Yolano Realty Corporation was an inactive subsidiary in 2024. The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States of America. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ from those estimates applied in the preparation of the accompanying consolidated financial statements. For the Company, the most significant accounting estimates are the allowance for credit losses on loans and business combinations. A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows. (a) Cash Equivalents For purposes of the consolidated statements of cash flows, the Company considers due from banks, federal funds sold for one-day periods and short-term bankers acceptances to be cash equivalents. At times, the Company maintains deposits with other financial institutions in amounts that may exceed federal deposit insurance coverage. Management regularly evaluates the credit risk associated with correspondent banks. (b) Investment Securities and Allowance for Credit Losses Investment securities consist of U.S. Treasury securities, U.S. Agency securities, obligations of states and political subdivisions, obligations of U.S. Corporations, collateralized mortgage obligations and mortgage-backed securities. At the time of purchase of a security the Company designates the security as held-to-maturity or available-for-sale, based on its investment objectives, operational needs, and intent to hold. The Company does not purchase securities with the intent to engage in trading activity. Held-to-maturity securities are recorded at amortized cost, adjusted for amortization or accretion of premiums or discounts. Available-for-sale securities are recorded at fair value with unrealized holding gains and losses, net of the related tax effect, reported as a separate component of stockholders’ equity until realized. The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to the earliest call date using the effective interest method. Such amortization and accretion is included in investment income, along with interest and dividends. The cost of securities sold is based on the specific identification method; realized gains and losses resulting from such sales are included in earnings. For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, an allowance for credit losses is recorded to bring the security’s amortized cost basis down to fair value. For debt securities available-for-sale that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any unrealized losses that have not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when 67 Table of Contents either of the criteria regarding intent or requirement to sell is met. Accrued interest receivable on available-for-sale debt securities is excluded from the estimate of credit losses. Accrued interest receivable on available-for-sale debt securities totaled $ 2,785 and $ 2,096 as of December 31, 2024 and December 31, 2023, respectively, and is included in interest receivable and other assets on the Consolidated Balance Sheet s. (c) Federal Home Loan Bank Stock and Other Equity Securities, at Cost The Bank is a member of the Federal Home Loan Bank of San Francisco (“FHLB”) and is required to obtain and hold a specific number of shares of capital stock of the FHLB. FHLB stock represents an equity interest that does not have a readily determinable fair value because its ownership is restricted and it lacks a market (liquidity). FHLB stock and other equity securities are recorded at cost and evaluated for impairment as of each reporting period . (d) Loans and Allowance for Credit Losses Loans are reported at the principal amount outstanding, net of deferred loan fees and costs and the allowance for credit losses. Loan fees net of certain direct costs of origination, which represent an adjustment to interest yield are deferred and amortized over the contractual term of the loan using the interest method. Unearned discount on installment loans is recognized as income over the terms of the loans by the interest method. Interest on other loans is calculated by using the simple interest method on the daily balance of the principal amount outstanding. Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is discontinued either when reasonable doubt exists as to the full and timely collection of interest or principal or when a loan becomes contractually past due by ninety days or more with respect to interest or principal. When a loan is placed on non-accrual status, all interest previously accrued but not collected is reversed against current period interest income. Interest accruals are resumed on such loans only when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to both principal and interest. Accrual of interest on loans that are modified commence after a sustained period of performance. Interest is generally accrued on such loans in accordance with the new terms. The allowance for credit l osses (ACL) is a valuation account that is deducted from the loan’s amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the recorded loan balance is confirmed as uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-of f. The Company measures its ACL using the current expected credit loss (CECL) methodology in accordance with Accounting Standards Codification Topic 326, Financial Instruments - Credit Losses (Topic 326). Management estimates the ACL using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. In determining the ACL, accruing loans with similar risk characteristics are generally evaluated collectively. To estimate expected losses the Company generally utilizes historical loss trends and the remaining contractual lives of the loan portfolios to determine estimated credit losses through a reasonable and supportable forecast period. Individual loan credit quality indicators, including historical credit losses, have been statistically correlated with various econometrics, including national unemployment rate and national gross domestic product. The Company moved from California state loss drivers to national loss drivers at the beginning of 2024. The reason for the change is a higher credit loss correlation between the national loss driver variables than the state loss driver variables. Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and back-testing of model performance to actual realized results. The Company utilized a reasonable and supportable forecast period of approximately four quarters and obtained the forecast data from Moody’s Analytics. The Company also considered the impact of portfolio concentrations, changes in underwriting practices, imprecision in its economic forecasts, and other risk factors that might influence its loss estimation process. Loans that do not share similar risk charac teristics are individually evaluated by management for potential impairment. Included in loans individually evaluated are collateral dep endent loans. A loan is considered to be collateral dependent when repayment is expected to be provided substantially through the operation or sale of the collateral. Collateral dependent loans are considered to have unique risk characteristics and are individually evaluated. The ACL on collateral dependent loans is measured using the fair value of the underlying collateral, adjusted for costs to sell when applicable, less the amortized cost basis of the financial asset. If the value of underlying collateral is determined to be less than the recorded amount of the loan, a charge-off will be taken. The ACL is measured on a collective (pool) basis whe n similar risk characteristics exist. The Company has identified the 68 Table of Contents following portfolio segments to evaluate and measure the ACL: Commercial : Commercial loans, whether secured or unsecured, generally are made to support the short-term operations and other needs of small businesses. These loans are generally secured by the receivables, equipment, and other real property of the business and are susceptible to the related risks described above. Problem commercial loans are generally identified by periodic review of financial information that may include financial statements, tax returns, and payment history of the borrower. Based on this information, the Company may decide to take any of several courses of action, including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors. Notwithstanding, when repayment becomes unlikely based on the borrower’s income and cash flow, repossession or foreclosure of the underlying collateral may become necessary. Collateral values may be determined by appraisals obtained through Bank-approved, licensed appraisers, qualified independent third parties, purchase invoices, or other appropriate documentation. Commercial Real Estate : Commercial real estate loans generally fall into two categories: owner-occupied and non-owner occupied. Loans secured by owner-occupied real estate are primarily susceptible to changes in the market conditions of the related business. This may be driven by, among other things, industry changes, geographic business changes, changes in the individual financial capacity of the business owner, general economic conditions, and changes in business cycles. These same risks apply to commercial loans whether secured by equipment, receivables or other personal property or unsecured. Problem commercial real estate loans are generally identified by periodic review of financial information that may include financial statements, tax returns, payment history of the borrower, and site inspections. Based on this information, the Company may decide to take any of several courses of action, including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors. Notwithstanding, when repayment becomes unlikely based on the borrower’s income and cash flow, repossession or foreclosure of the underlying collateral may become necessary. Losses on loans secured by owner occupied real estate, equipment, or other personal property generally are dictated by the value of underlying collateral at the time of default and liquidation of the collateral. When default is driven by issues related specifically to the business owner, collateral values tend to provide better repayment support and may result in little or no loss. Alternatively, when default is driven by more general economic conditions, underlying collateral generally has devalued more and results in larger losses due to default. Loans secured by non-owner occupied real estate are primarily susceptible to risks associated with swings in occupancy or vacancy and related shifts in lease rates, rental rates or room rates. Most often, these shifts are a result of changes in general economic or market conditions or overbuilding and resulting over-supply of space. Losses are dependent on the value of underlying collateral at the time of default. Values are generally driven by these same factors and influenced by interest rates and required rates of return as well as changes in occupancy costs. Collateral values may be determined by appraisals obtained through Bank-approved, licensed appraisers, qualified independent third parties, sales invoices, or other appropriate means. Agriculture : Agricultural loans, whether secured or unsecured, generally are made to producers and processors of crops and livestock. Repayment is primarily from the sale of an agricultural product or service. Agricultural loans are generally secured by inventory, receivables, equipment, and other real property. Agricultural loans primarily are susceptible to changes in market demand for specific commodities. This may be exacerbated by, among other things, industry changes, changes in the individual financial capacity of the business owner, general economic conditions and changes in business cycles, as well as adverse weather conditions such as drought, fire, or floods. Problem agricultural loans are generally identified by periodic review of financial information that may include financial statements, tax returns, crop budgets, payment history, and crop inspections. Based on this information, the Company may decide to take any of several courses of action, including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors. Notwithstanding, when repayment becomes unlikely based on the borrower’s income and cash flow, repossession or foreclosure of the underlying collateral may become necessary. Residential mortgage loans : Residential mortgage loans, which are secured by real estate, are primarily susceptible to four risks; non-payment due to diminished or lost income, over-extension of credit, a lack of borrow er’s cash flow to sustain payments, and shortfalls in collateral value. In general, non-payment is usually due to loss of employment and follows general economic trends in the economy, particularly the upward movement in the unemployment rate, loss of collateral value, and demand shifts. Residential construction loans : Construction loans, whether owner-occupied or non-owner occupied residential development loans, are not only susceptible to the risks related to residential mortgage loans, but the added risks of construction, including cost over-runs, mismanagement of the project, or lack of demand and market changes experienced at time of completion. Losses are primarily related to underlying collateral value and changes therein as described above. Problem construction loans are generally identified by periodic review of financial information that may include financia l statements, tax 69 Table of Contents returns and payment history of the borrower. Based on this information, the Company may decide to take any of several courses of action, including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors, or repossession or foreclosure of the underlying collateral. Collateral values may be determined by appraisals obtained through Bank-approved, licensed appraisers, qualified independent third parties, purchase invoices, or other appropriate documentation. Consumer : Consumer loans, whether unsecured or secured, are primarily susceptible to four risks: non-payment due to diminished or lost income, over-extension of credit, a lack of borrower’s cash flow to sustain payments, and shortfall in collateral value. In general, non-payment is usually due to loss of employment and will follow general economic trends in the economy, particularly the upward movements in the unemployment rate, loss of collateral value, inflation and demand shifts. Unfunded commitments : The estimated credit losses a ssociated with these unfunded lending commitments is calculated using the same models and methodologies noted above and incorporate utilization assumptions at time of default. The reserve for unfunded commitments is maintained on the Consolidated Balance Sheets in other liabilities. Accrued interest receivable on loans is not included in the calculation of the allowance for credit losses. Accrued interest receivable on loans totaled $ 4,875 and $ 4,713 as of December 31, 2024 and December 31, 2023, respectively, and is included in interest receivable and other assets on the Consolidated Balance Sheets. ( e ) Loans Held-for-Sale Loans originated and held-for-sale are carried at the lower of cost or estimated fair value in the aggregate. Net fees and costs of originating loans held for sale are deferred and are included in the basis for determining the gain or loss on sales of loans held for sale. Net unrealized losses are recognized through a valuation allowance by charges to income. ( f ) Premises and Equipment Premises and equipment are stated at cost, less accumulated depreciation. Depreciation is computed substantially by the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the estimated useful lives of the improvements or the terms of the related leases, whichever is shorter. The useful lives used in computing depreciation are as follows: Buildings and improvements 15 to 50 years Furniture and equipment 3 to 10 years ( g ) Other Real Estate Owned Other real estate acquired by foreclosure is carried at fair value less estimated selling costs. Prior to foreclosure, the value of the underlying loan is written down to the fair value of the real estate to be acquired by a charge to the allowance for credit losses, if necessary. Fair value of other real estate owned is generally determined based on an appraisal of the property. Any subsequent operating expenses or income, reduction in estimated values and gains or losses on disposition of such properties are included in other operating expenses. Gain recognition on the disposition of real estate is dependent upon the transaction meeting certain criteria relating to the nature of the property sold and the terms of the sale. Under certain circumstances, revenue recognition may be deferred until these criteria are met. The Bank held no other real estate owned (“OREO”) as of December 31, 2024 and 2023. ( h ) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of Long-lived assets and certain identifiable intangibles are required to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. 70 Table of Contents ( i ) Pension Benefit Plans The Company and the Bank maintain unfunded non-contributory defined benefit pension plans for a select group of highly compensated employees and directors, as well as a supplemental executive retirement plan. Net periodic benefit cost is recognized over the approximate service period of plan participants and includes discount rate assumptions. See Note 16 of Notes to Consolidated Financial Statements. ( j ) Revenue from Contracts with Customers The following are descriptions of the Company’s sources of Non-interest income within the scope of the FASB’s Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606) : Service charges on deposit accounts Service charges on deposit accounts include account maintenance and analysis fees and transaction-based fees. Account maintenance and analysis fees consist primarily of account fees and analyzed account fees charged on deposit accounts on a monthly basis. The performance obligation is satisfied and the fees are recognized on a monthly basis as the service period is completed. Transaction-based fees consist of non-sufficient funds fees, wire fees, overdraft fees and fees on other products and services and are charged to deposit customers for specific services provided to the customer. The performance obligation is completed as the transaction occurs and the fees are recognized at the time each specific service is provided to the customer. Investment and brokerage services income The Bank earns investment and brokerage services fees for providing a broad range of alternative investment products and services through Raymond James Financial Services, Inc. Brokerage fees are generally earned in two ways. Brokerage fees for managed accounts charge a set annual percentage fee based on the underlying portfolio value and are earned and recognized on a quarterly basis. Brokerage fees for a standard commission account are charged on a per transaction fee and are earned and recognized at the time of the transaction. Debit card income Debit card income represents fees earned on Bank-issued debit card transactions. The Bank earns interchange fees from debit cardholder transactions through the related payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the cardholders’ account. Certain expenses directly associated with the debit card are recorded on a net basis with the interchange income. Other income Other income within the scope of Topic 606 includes check sales fees, bankcard fees, and merchant fees. Check sales fees, based on check sales volume, are received from check printing companies and are recognized monthly. Bankcard fees are earned from the Bank’s credit card program and are recognized monthly as the service period is completed. Merchant fees are earned for card payment services provided to its merchant customers. The Bank has a contract with a third party to provide card payment services to merchants that contract for those services. Merchant fees are recognized monthly as the service period is completed. ( k ) Gain or Loss on Sale of Loans and Servicing Rights Transfers and servicing of financial assets are accounted for and reported based on consistent application of a financial-components approach that focuses on control. Transfers of financial assets that are sales are distinguished from transfers that are secured borrowings. A sale is recognized when the transaction closes and the proceeds are other than beneficial interests in the assets sold. A gain or loss is recognized to the extent that the sales proceeds and the fair value of the servicing asset exceed or are less than the book value of the loan. The Company recognizes an asset for the fair value of the rights to service loans for others when loans are sold on a servicing-retained basis. The Company sold substantially all of its conforming long-term residential mortgage loans originated during the years ended December 31, 2024 and 2023, for cash proceeds equal to the fair value of the loans. Mortgage servicing rights (“MSR”) in loans sold are measured by allocating the previous carrying amount of the transferred 71 Table of Contents assets between the loans sold and retained interest, if any, based on their relative fair value at the date of transfer. The Company determines its classes of servicing assets based on the asset type being serviced along with the methods used to manage the risk inherent in the servicing assets, which includes the market inputs used to value the servicing assets. The Company measures and reports its residential mortgage servicing assets initially at fair value and amortizes the servicing rights in proportion to, and over the period of, estimated net servicing revenues. Management assesses servicing rights for impairment as of each financial reporting date. Fair value adjustments that encompass market-driven valuation changes and the runoff in value that occurs from the passage of time are each separately reported. In determining the fair value of the MSR, the Company uses quoted market prices when available. Subsequent fair value measurements are determined using a discounted cash flow model. In order to determine the fair value of the MSR, the present value of expected future cash flows is estimated. Assumptions used include market discount rates, anticipated prepayment speeds, delinquency and foreclosure rates, and ancillary fee income. This model is periodically validated by an independent external model validation group. The model assumptions and the MSR fair value estimates are also compared to observable trades of similar portfolios as well as to MSR broker valuations and industry surveys, as available. Key assumptions used in measuring the fair value of the MSR as of December 31, were as follows: 2024 2023 Constant prepayment rate 6.76 % 6.09 % Discount rate 10.00 % 10.50 % Weighted average life (years) 7.55 7.99 The expected life of the loan can vary from management’s estimates due to prepayments by borrowers, especially when rates fall. Prepayments in excess of management’s estimates would negatively impact the recorded value of the mortgage servicing rights. The value of the mortgage servicing rights is also dependent upon the discount rate used in the model, which we base on current market rates. Management reviews this rate on an ongoing basis based on current market rates. A significant increase in the discount rate would reduce the value of mortgage servicing rights. ( l ) Income Taxes The Company accounts for income taxes under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A liability for uncertain tax positions is recorded for unrecognized tax benefits related to uncertain tax positions where it is more likely than not that the position will be sustained upon examination by a taxing authority. Interest and/or penalties related to income taxes are reported as a component of provision for income taxes. (m) Share Based Compensation The Company accounts for share based compensation transactions whereby the Company receives employee services in exchange for equity instruments, including stock options and restricted stock. The Company recognizes in the Consolidated Statements of Income the grant-date fair value of stock options and other equity-based forms of compensation issued to employees over their requisite service period (generally the vesting period). The fair value of options granted is determined on the date of the grant using a Black-Scholes-Merton pricing model. The grant date fair value of restricted stock is determined by the closing market price of the day prior to the grant date. The Company issues new shares of common stock upon the exercise of stock options. See Note 14 of Notes to Consolidated Financial Statements. ( n ) Earnings Per Share (“EPS”) Basic EPS includes no dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period, excluding non-vested restricted shares. Diluted EPS reflects the potential dilution of securities that could share in the earnings of an entity. The number of potential common shares included in annual diluted EPS is a year-to-date average of the number of potential common shares included in each quarter’s diluted EPS computation under the treasury stock method. The calculation of weighted average shares includes two classes of the Company’s outstanding common stock: common stock and restricted stock awards. Holders of restricted stock also receive dividends at the same rate as common shareholders, subject to vesting restrictions, and they both share equally in undistributed earnings. There are no unvested share-based payment awards that contain nonforfeitable rights to dividends. See Note 13 of Notes to Consolidated Financial Statements. 72 Table of Contents ( o ) Advertising Costs Advertising costs were $ 460 and $ 474 for the years ended December 31, 2024 and 2023, respectively. Advertising costs are expensed as incurred. ( p ) Comprehensive Income Accounting principles generally accepted in the United States require that recognized revenue, expenses, gains, and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gain and losses on available-for-sale securities and directors’ and officers’ retirement plans, are reported as a separate component of the equity section of the Consolidated Balance Sheet. Such items, along with net income, are components of comprehensive income. ( q ) Stock Dividend On January 25, 2024 , the Company announced that its Board of Directors had declared a 5 % stock dividend which resulted in 739,924 shares, which was paid on March 25, 2024 to shareholders of record as of February 29, 2024 . On January 23, 2025 , the Company announced that its Board of Directors had declared a 5 % stock dividend which will result in approximately 759,192 shares, which will be paid on March 25, 2025 to shareholders of record as of February 28, 2025 . Data for earnings per share and stock compensation plans for all periods presented have been adjusted to give retroactive effect to stock dividends and stock splits, including the 5 % stock dividend declared on January 23, 2025 . December 31, 2024 figures included in the Consolidated Balance Sheets and Consolidated Statement of Stockholders’ Equity have been adjusted to reflect the estimated impact of the 2025 stock dividend. Figures that have been adjusted include common stock shares issued and outstanding, common stock balance and retained earnings balance. The December 31, 2023 and 2022 balances included in the Consolidated Balance Sheets and Statement of Stockholders’ Equity have not been adjusted to retroactively reflect the stock dividends, but instead show the historical rollforward of stock dividends declared. ( r ) Segment Reporting The Company is a holding company for a community bank, which offers a wide array of products and services to its customers. The Bank’s primary business is that of a traditional banking institution, gathering deposits and originating loans in its respective primary market areas. Pursuant to its banking strategy, emphasis is placed on building relationships with its customers, as opposed to building specific lines of business. As a result, the Company is not organized around discernible lines of business and prefers to work as an integrated unit to customize solutions for its customers, with business line emphasis and product offerings changing over time as needs and demands change. The Company’s operations are managed, and financial performance is evaluated by our chief operating decision maker on a Company-wide basis. The performance of the Company is reviewed monthly by the Company’s executive management and Board of Directors. As resource allocation and performance decisions are not made based on discrete financial information of individual lines of business, the Company considers its current business and operations as a single reportable operating segment. See Note 22 of Notes to Consolidated Financial Statements. (s) Business Combinations The Company accounts for acquisitions of businesses using the acquisition method of accounting. Under the acquisition method, assets acquired and liabilities assumed are recorded at their estimated fair values at the date of acquisition. Management utilizes various valuation techniques including discounted cash flow analyses to determine these fair values. Any excess of the purchase consideration over the fair value of acquired assets, including identifiable intangible assets, and liabilities assumed is recorded as goodwill and a deficit is recognized as a bargain purchase gain. Goodwill and intangible assets acquired in a business combination and that are determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment tests to be performed. The Company has no goodwill arising from business combinations. The Company recognized a bargain purchase gain arising from business combinations in 2023. The Company recorded the fair values based on the valuations available as of reporting date. In accordance with business combination accounting guidance, the Company continued to evaluate these fair values for upto one year following the acquisition date. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Core deposit intangible assets arising from business combinations are amortized on an accelerated basis reflecting the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up. The total estimated life of the core deposit intangible is approximately 10 years . 73 Table of Contents (t) Impact of Recently Issued Accounting Standards Accounting Standards Adopted in 2024 In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. An entity may elect to apply ASU 2021-01 on contract modifications that change the interest rate used for margining, discounting, or contract price alignment retrospectively as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications from any date within the interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued. An entity may elect to apply ASU 2021-01 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020, and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 . This ASU extends the period of time preparers can utilize the reference rate reform relief guidance in Topic 848. ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. Adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. In August 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture (JV) Formations: Recognition and Initial Measurement . The guidance requires newly formed JVs to apply a new basis of accounting to all of its contributed net assets, which results in the JV initially measuring its contributed net assets under ASC 805-20, Business Combinations. The new guidance would be applied prospectively and is effective for all newly formed joint venture entities with a formation date on or after January 1, 2025, with early adoption permitted. Adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) : Improvements to Reportable Segment Disclosures. This ASU requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this ASU and all existing disclosures in Topic 280. The Company has determined that its current business and operations consist of a single business segment and a single reporting unit. The amendments in ASU 2023-07 are intended to improve segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The Company applied this ASU retrospectively with no material impact on the Company’s consolidated financial statements, however, new disclosures have been added as applicable for a single reportable operating segment. Recently Issued Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . Among other things, these amendments provide additional transparency into an entity’s income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The standard requires that public business entities disclose, on an annual basis, specific categories in the rate reconciliation and additional information for reconciling items meeting a certain quantitative threshold. The amendments also require that entities disclose on an annual basis: 1) income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes and 2) the income taxes paid (net of refunds received) disaggregated by individual jurisdictions exceeding 5% of total income taxes paid (net of refunds received). The amendments are effective for public business entities for annual periods beginning after December 15, 2024. The Company has evaluated this ASU and does not expect the adoption to have a material impact on the Company’s consolidated financial statements. In March 2024, the FASB issued guidance within ASU 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards . The amendments in the ASU apply to companies that provide employees and non-employees with profits interest and similar awards to align compensation with a company’s operating performance and provide those holders with the opportunity to participate in future profits and/or equity appreciation of the company. The purpose of the ASU is to clarify the application of the scope guidance in Accounting Standards Codification (ASC) paragraph 718-10-15-3 in determining if a profit interest award should be accounted for in accordance with Topic 718: Compensation—Stock Compensation. The amendment in ASC paragraph 718-10-15-3 is solely intended to improve the overall clarity and does not change the guidance. The ASU is effective for annual periods beginning after December 15, 2024. Early adoption is 74 Table of Contents permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. If a company adopts the amendments in an interim period, it should adopt them as of the beginning of the annual period that includes the interim period. The amendments should be applied either (1) retrospectively to all prior periods presented in the financial statements or (2) on a prospective basis. The Company has evaluated this ASU and does not expect the adoption to have a material impact on the Company’s consolidated financial statements, as the Company does not typically provide these types of awards. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . This ASU requires public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date . ASU 2025-01 amends the effective date of ASU 2024-03 to clarify that all 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 ASU 2024-03 is permitted. The Company is evaluating the accounting and disclosure requirements of this update and the impact of adopting the new guidance on the consolidated financial statements. 75 Table of Contents (2) Investment Securities The amortized cost, unrealized gains and losses, estimated fair values and related allowance for credit losses on investments in debt and other securities at December 31, 2024 are summarized as follows: Amortized cost Unrealized gains Unrealized losses Estimated fair value ACL Investment securities available-for-sale: U.S. Treasury securities $ 107,188 $ 134 $ ( 1,777 ) $ 105,545 $ — Securities of U.S. government agencies and corporations 100,218 62 ( 4,596 ) 95,684 — Obligations of states and political subdivisions 72,576 87 ( 5,072 ) 67,591 — Collateralized mortgage obligations 113,641 5 ( 18,701 ) 94,945 — Mortgage-backed securities 288,723 70 ( 18,705 ) 270,088 — Total debt securities $ 682,346 $ 358 $ ( 48,851 ) $ 633,853 $ — The amortized cost, unrealized gains and losses, estimated fair values and related allowance for credit losses on investments in debt and other securities at December 31, 2023 are summarized as follows: Amortized cost Unrealized gains Unrealized losses Estimated fair value ACL Investment securities available-for-sale: U.S. Treasury securities $ 90,063 $ 134 $ ( 3,015 ) $ 87,182 $ — Securities of U.S. government agencies and corporations 121,305 105 ( 6,331 ) 115,079 — Obligations of states and political subdivisions 55,021 237 ( 3,581 ) 51,677 — Collateralized mortgage obligations 107,658 15 ( 16,726 ) 90,947 — Mortgage-backed securities 246,267 242 ( 19,037 ) 227,472 — Total debt securities $ 620,314 $ 733 $ ( 48,690 ) $ 572,357 $ — Gross realized gains from sales and calls of available-for-sale securities were $ 0 and $ 96 for the years ended December 31, 2024 and 2023, respectively. Gross realized losses from sales of available-for-sale securities were $ 234 and $ 208 for the years ended December 31, 2024 and 2023, respectively. The amortized cost and estimated fair value of debt and other securities at December 31, 2024, by contractual maturity, are shown in the following table: Amortized cost Estimated fair value Maturity in years: Due in one year or less $ 62,647 $ 62,107 Due after one year through five years 131,918 127,071 Due after five years through ten years 40,745 38,370 Due after ten years 44,672 41,272 Subtotal 279,982 268,820 Mortgage-backed securities and Collateralized mortgage obligations 402,364 365,033 Total $ 682,346 $ 633,853 Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. In addition, factors such as prepayments and interest rates may affect the yield on the carrying value of mortgage-related securities. 76 Table of Contents An analysis of gross unrealized losses of the available-for-sale investment securities portfolio as of December 31, 2024, follows: Less than 12 months 12 months or more Total Fair Value Unrealized losses Fair Value Unrealized losses Fair Value Unrealized losses U.S. Treasury securities $ 27,055 $ ( 431 ) $ 42,603 $ ( 1,346 ) $ 69,658 $ ( 1,777 ) Securities of U.S. government agencies and corporations 22,383 ( 471 ) 58,585 ( 4,125 ) 80,968 ( 4,596 ) Obligations of states and political subdivisions 33,078 ( 1,083 ) 29,025 ( 3,989 ) 62,103 ( 5,072 ) Collateralized mortgage obligations 28,937 ( 1,860 ) 62,320 ( 16,841 ) 91,257 ( 18,701 ) Mortgage-backed securities 110,599 ( 2,715 ) 143,892 ( 15,990 ) 254,491 ( 18,705 ) Total $ 222,052 $ ( 6,560 ) $ 336,425 $ ( 42,291 ) $ 558,477 $ ( 48,851 ) One hundred fifty-five securities, all considered investment grade, which had a fair value of $ 222,052 and a total unrealized loss of $ 6,560 , have been in an unrealized loss position for less than twelve months as of December 31, 2024. Three hundred seventy-five securities, all considered investment grade, which had a fair value of $ 336,425 and total unrealized loss of $ 42,291 , have been in an unrealized loss position for more than twelve months as of December 31, 2024. The unrealized losses on the Company’s investment securities were caused by market conditions for these types of investments, particularly changes in risk-free interest rates. The decline in fair value is attributable to changes in interest rates and not credit quality, and the Company does not intend to sell the securities. The Company has concluded it is not more likely than not that the Company will be required to sell these securities prior to recovery of their anticipated cost basis. Therefore, as of December 31, 2024 and December 31, 2023, the Company had no t recorded an allowance for credit losses on these securities and the unrecognized or unrealized losses on these securities have not been recognized into income. The fair value of investment securities could decline in the future if the general economy deteriorates, inflation increases, credit ratings decline, the issuer’s financial condition deteriorates, or the liquidity for securities declines. As a result, a credit loss may occur in the future. An analysis of gross unrealized losses of the available-for-sale investment securities portfolio as of December 31, 2023, follows: Less than 12 months 12 months or more Total Fair Value Unrealized losses Fair Value Unrealized losses Fair Value Unrealized losses U.S. Treasury Securities $ — $ - $ 77,203 $ ( 3,015 ) $ 77,203 $ ( 3,015 ) Securities of U.S. government agencies and corporation 3,424 ( 7 ) 97,057 ( 6,324 ) 100,481 ( 6,331 ) Obligations of states and political subdivision 4,981 ( 31 ) 32,578 ( 3,550 ) 37,559 ( 3,581 ) Collateralized mortgage obligations 6,597 ( 26 ) 80,995 ( 16,700 ) 87,592 ( 16,726 ) Mortgage-backed securities 17,023 ( 124 ) 182,626 ( 18,913 ) 199,649 ( 19,037 ) Total $ 32,025 $ ( 188 ) $ 470,459 $ ( 48,502 ) $ 502,484 $ ( 48,690 ) Investment securities carried at $ 53,589 and $ 43,884 at December 31, 2024 and 2023, respectively, were pledged to secure public deposits or for other purposes as required or permitted by law. 77 Table of Contents (3) Loans and Allowance for Credit Losses The composition of the Company’s loan portfolio, by loan class, as of December 31, is as follows: 2024 2023 Commercial $ 117,921 $ 106,897 Commercial Real Estate 723,650 721,729 Agriculture 92,564 105,838 Residential Mortgage 105,886 107,328 Residential Construction 6,858 12,323 Consumer 15,716 14,868 1,062,595 1,068,983 Allowance for credit losses ( 15,885 ) ( 16,596 ) Net deferred origination fees and costs 142 78 Loans, net $ 1,046,852 $ 1,052,465 At December 31, 2024 and 2023, all loans were pledged under a blanket collateral lien to secure actual and potential borrowings from the Federal Home Loan Bank. Allowance for Credit Losses The following table summarizes the activity in the allowance for credit losses on loans which is recorded as a contra asset, and the reserve for unfunded commitments which is recorded on the Consolidated Balance Sheets within other liabilities as of December 31, 2024: Allowance for Credit Losses – Year ended December 31, 2024 ($ in thousands) Beginning balance Charge-offs Recoveries Provision (Recovery) Ending Balance Commercial $ 2,041 $ ( 956 ) $ 60 $ 477 $ 1,622 Commercial Real Estate 10,864 — — ( 619 ) 10,245 Agriculture 997 — — 558 1,555 Residential Mortgage 2,005 — — ( 226 ) 1,779 Residential Construction 334 — — 99 433 Consumer 355 ( 28 ) 13 ( 89 ) 251 Allowance for credit losses on loans 16,596 ( 984 ) 73 200 15,885 Reserve for unfunded commitments 1,150 — — ( 450 ) 700 Total $ 17,746 $ ( 984 ) $ 73 $ ( 250 ) $ 16,585 The following table summarizes the activity in the allowance for credit losses on loans which is recorded as a contra asset, and the reserve for unfunded commitments which is recorded on the Consolidated Balance Sheets within other liabilities as of December 31, 2023: Allowance for Credit Losses – Year ended December 31, 2023 ($ in thousands) Beginning balance Adoption of CECL Charge-offs Recoveries Provision (Recovery) Ending Balance Commercial $ 1,491 $ 689 $ ( 366 ) $ 235 $ ( 8 ) $ 2,041 Commercial Real Estate 10,259 ( 513 ) — — 1,118 10,864 Agriculture 1,789 ( 742 ) ( 2,567 ) 2,567 ( 50 ) 997 Residential Mortgage 896 923 ( 3 ) — 189 2,005 Residential Construction 181 221 — — ( 68 ) 334 Consumer 176 222 ( 13 ) 1 ( 31 ) 355 Allowance for credit losses on loans 14,792 800 ( 2,949 ) 2,803 1,150 16,596 Reserve for unfunded commitments 700 500 — — ( 50 ) 1,150 Total $ 15,492 $ 1,300 $ ( 2,949 ) $ 2,803 $ 1,100 $ 17,746 The Company utilizes two economic variables, forecasted unemployment and gross domestic product, as loss drivers for its allowance for credit losses. The Company moved from California state loss drivers to national loss drivers at the beginning of 2024. The reason for the change is a higher credit loss correlation between the national loss driver variables than the state loss driver variables. The levels of forecasted national unemployment and forecasted gross domestic product are forecasted to be relatively stable. A decrease in unfunded commitments was the primary driver for the reversal of provision expense of $ 250 recognized for the year ended December 78 Table of Contents 31, 2024. Management believes that the allowance for credit losses at December 31, 2024 appropriately reflected expected credit losses in the loan portfolio at that date. Collateral-Dependent Loans In accordance with ASC 326, a loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. All loans individually analyzed were collateral-dependent loans as of December 31, 2024 and December 31, 2023. The following table presents the amortized cost basis of collateral-dependent loans by class, which are individually evaluated to determine expected credit losses as of December 31, 2024 and December 31, 2023: December 31, 2024 ($ in thousands) Secured by 1-4 Family Residential Properties-1st lien Secured by 1-4 Family Residential Properties- junior lien Secured by 1-4 Family Residential Properties- revolving Commercial Construction and land development Commercial $ — $ — $ — $ 139 $ — Commercial Real Estate — — — — — Agriculture — — — — — Residential Mortgage 202 — — — — Residential Construction — — — — — Consumer — 282 360 — — Total $ 202 $ 282 $ 360 $ 139 $ — ($ in thousands) Secured by farmland Agriculture production loans Loans secured by owner- occupied, nonfarm nonresidential properties Loans secured by other nonfarm nonresidential properties Total Commercial $ — $ — $ — $ — $ 139 Commercial Real Estate — — — 7,993 7,993 Agriculture 740 1,496 — — 2,236 Residential Mortgage — — — — 202 Residential Construction — — — — — Consumer — — — — 642 Total $ 740 $ 1,496 $ — $ 7,993 $ 11,212 December 31, 2023 ($ in thousands) Secured by 1-4 Family Residential Properties-1st lien Secured by 1-4 Family Residential Properties- junior lien Secured by 1-4 Family Residential Properties- revolving Commercial Construction and land development Commercial $ — $ — $ — $ — $ — Commercial Real Estate — — — — — Agriculture — — — — — Residential Mortgage 424 — — — — Residential Construction — — — — — Consumer — 351 352 — — Total $ 424 $ 351 $ 352 $ — $ — ($ in thousands) Secured by farmland Agriculture production loans Loans secured by owner- occupied, nonfarm nonresidential properties Loans secured by other nonfarm nonresidential properties Total Commercial $ — $ — $ — $ — $ — Commercial Real Estate — — — — — Agriculture 946 1,925 — — 2,871 Residential Mortgage — — — — 424 Residential Construction — — — — — Consumer — — — — 703 Total $ 946 $ 1,925 $ — $ — $ 3,998 79 Table of Contents Foreclosure Proceedings The Company had no residential real estate property in the process of foreclosure at December 31, 2024 and December 31, 2023. Non-accrual and Past Due Loans The Company’s loans by delinquency and non-accrual status, as of December 31, 2024 and December 31, 2023, was as follows: ($ in thousands) 30-59 days Past Due & Accruing 60-89 days Past Due & Accruing 90 days or More Past Due & Accruing Nonaccrual Loans Total Past Due & Nonaccrual Loans Current & Accruing Loans Total Loans Nonaccrual loans with No ACL December 31, 2024 Commercial $ 2,287 $ — $ — $ 139 $ 2,426 $ 115,495 $ 117,921 $ 139 Commercial Real Estate — — — 7,993 7,993 715,657 723,650 7,993 Agriculture 1,354 500 — 2,236 4,090 88,474 92,564 2,236 Residential Mortgage 749 — — 202 951 104,935 105,886 202 Residential Construction — — — — — 6,858 6,858 — Consumer — 10 — 642 652 15,064 15,716 642 Total $ 4,390 $ 510 $ — $ 11,212 $ 16,112 $ 1,046,483 $ 1,062,595 $ 11,212 December 31, 2023 Commercial $ 91 $ 178 $ — $ — $ 269 $ 106,628 $ 106,897 $ — Commercial Real Estate — — — — — 721,729 721,729 — Agriculture — — — 2,871 2,871 102,967 105,838 2,871 Residential Mortgage 976 — 916 424 2,316 105,012 107,328 424 Residential Construction — — 3,420 — 3,420 8,903 12,323 — Consumer 194 — — 703 897 13,971 14,868 703 Total $ 1,261 $ 178 $ 4,336 $ 3,998 $ 9,773 $ 1,059,210 $ 1,068,983 $ 3,998 The Company recognized $ 450 and $ 1,626 of interest income on nonaccrual loans during the years ended December 31, 2024 and December 31, 2023, respectively. Loan Modifications Occasionally, the Company modifies loans to borrowers in financial difficulty by providing principal forgiveness, term extension, payment delays or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL. In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For the loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: a term extension, principal forgiveness, an other-than-insignificant payment delay and/or an interest rate reduction. 80 Table of Contents The following tables present the amortized cost basis of loans that were experiencing both financial difficulty and modification during the periods indicated, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below. The amortized cost basis of loans that were experiencing both financial difficulty and modification during the year ended December 31, 2024 were as follows: ($ in thousands) Term Extension Combination Term Extension and Interest Rate Reduction Total Class of Financing Receivable Commercial $ 1,832 $ 45 1.59 % Commercial Real Estate — — — Agriculture — — — Residential Mortgage — — — Residential Construction — — — Consumer — — — Total $ 1,832 $ 45 0.18 % The Company had no commitments to lend additional funds to borrowers whose loans were modified at December 31, 2024. The amortized cost basis of loans that were experiencing both financial difficulty and modification during the year ended December 31, 2023 were as follows: ($ in thousands) Term Extension Combination Term Extension and Interest Rate Reduction Total Class of Financing Receivable Commercial $ 1,990 $ 41 1.90 % Commercial Real Estate — 395 0.05 % Agriculture 4,005 — 3.78 % Residential Mortgage — — — Residential Construction 3,420 — 27.75 % Consumer — — — Total $ 9,415 $ 436 0.92 % The Company had no commitments to lend additional funds to borrowers whose loans were modified at December 31, 2023. The following table presents the financial effect of the loan modifications to borrowers experiencing financial difficulty during the year ended December 31, 2024: ($ in thousands) Weighted-Average Interest Rate Reduction Weighted-Average Term Extension (in months) Commercial 3.00 % $ 9 Commercial Real Estate — — Agriculture — — Residential Mortgage — — Residential Construction — — Consumer — — Total 3.00 % $ 9 81 Table of Contents The following table presents the financial effect of the loan modifications to borrowers experiencing financial difficulty during the year ended December 31, 2023: ($ in thousands) Weighted-Average Interest Rate Reduction Weighted-Average Term Extension (in months) Commercial 0.50 % $ 3 Commercial Real Estate 0.25 % 26 Agriculture — 4 Residential Mortgage — — Residential Construction — 1 Consumer — — Total 0.27 % $ 3 Loans that were modified within the previous twelve months were current on payments as of December 31, 2024 . There were no loans modified within the previous twelve months and for which there was a payment default during the year ended December 31, 2024. There were two agricultural loans totaling $ 4,005 and a residential construction loan totaling $ 3,420 that were modified within the previous twelve months and for which there was a payment default during the year ended December 31, 2023. In 2023, the Company recorded charge-offs on two agricultural loans totaling $ 2,567 that were subsequently recovered later in the year at payoff. The residential construction loan was 90 days or more past due as of December 31, 2023 and was subsequently paid off in 2024. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently become uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount. 82 Table of Contents Credit Quality Indicators All new loans are rated using the credit risk ratings and criteria adopted by the Company. Risk ratings are adjusted as future circumstances warrant. All credits risk rated 1, 2, 3 or 4 equate to a Pass as indicated by Federal and State regulatory agencies; a 5 equates to a Special Mention; a 6 equates to Substandard; a 7 equates to Doubtful; and an 8 equates to a Loss. General definitions for each risk rating are as follows: Risk Rating “1” – Pass (High Quality): This category is reserved for loans fully secured by Company CDs or savings accounts and properly margined (as defined in the Company’s Credit Policy) and actively traded securities (including stocks, as well as corporate, municipal and U.S. Government bonds). Risk Rating “2” – Pass (Above Average Quality): This category is reserved for borrowers with strong balance sheets that are well structured with manageable levels of debt and good liquidity. Cash flow is sufficient to service all debt, including the Company’s, as agreed. Historical earnings, cash flow, and payment performance have all been strong and trends are positive and consistent. Collateral protection is better than the Company’s Credit Policy guidelines. Risk Rating “3” – Pass (Average Quality): Credits within this category are considered to be of average, but acceptable, quality. Loan characteristics, including term and collateral advance rates, meet the Company’s Credit Policy guidelines; unsecured lines to borrowers with above average liquidity and cash flow may be considered for this category; the borrower’s financial strength is well documented, with adequate, but consistent, cash flow to meet all obligations. Liquidity should be sufficient and leverage should be moderate. Monitoring of collateral may be required, including a borrowing base or construction budget. Alternative financing is typically available. Risk Rating “4” – Pass (Below Average Quality): Credits within this category are considered sound, but merit additional attention due to industry concentrations within the borrower’s customer base, problems within their industry, deteriorating financial or earnings trends, declining collateral values, increased frequency of past due payments and/or overdrafts, discovery of documentation deficiencies which may impair our borrower’s ability to repay, or the Company’s ability to liquidate collateral. Financial performance is average but inconsistent. There also may be changes of ownership, management or professional advisors, which could be detrimental to the borrower’s future performance. Risk Rating “5” – Special Mention (Criticized): Loans in this category are currently protected by their collateral value and have no loss potential identified, but have potential weaknesses which may, if not monitored or corrected, weaken our ability to collect payments from the borrower or satisfactorily liquidate our collateral position. Loans where terms have been modified due to their failure to perform as agreed may be included in this category. Adverse trends in the borrower’s operation, such as reporting losses or inadequate cash flow, increasing and unsatisfactory leverage, or an adverse change in economic or market conditions may have weakened the borrower’s business and impaired their ability to repay based on original terms. The condition or value of the collateral has deteriorated to the point where adequate protection for our loan may be jeopardized in the future. Loans in this category are in transition and, generally, do not remain in this category beyond 12 months. During this time, efforts are focused on strategies aimed at upgrading the credit or locating alternative financing. Risk Rating “6” – Substandard (Classified): Loans in this category are inadequately protected by the borrower’s net worth, capacity to repay or collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. There exists a strong possibility of loss if the deficiencies are not corrected. Loans that are dependent on the liquidation of collateral to repay are included in this category, as well as borrowers in bankruptcy or where legal action is required to effect collection of our debt. Risk Rating “7” – Doubtful (Classified): Loans in this category indicate all of the weaknesses of a Substandard classification, however, collection of loan principal, in full, is highly questionable and improbable; possibility of loss is very high, but there is still a possibility that certain collection strategies may, yet, be successful, rendering a definitive loss difficult to estimate, at this time. Loans in this category are in transition and, generally, do not remain in this category more than 6 months. Risk Rating “8” – Loss (Classified): Active Charge-Off. Loans in this category are considered uncollectible and of such little value that their removal from the Company’s books is required. The charge-off is pending or already processed. Collateral positions have been or are in the process of being liquidated and the borrower/guarantor may or may not be cooperative in repayment of the debt. Recovery prospects are unknown, but the Company is actively engaged in the collection of the loan. Inactive Charge-Off. Loans in this category are considered uncollectible and of such little value that their removal from the Company’s books is required. The charge-off is pending or already processed. Collateral positions have been liquidated and the 83 Table of Contents borrower/guarantor has nothing of any value remaining to apply to the repayment of our loan. Any further collection activities would be of little value. The following tables present the loan portfolio by loan class, origination year, and internal risk rating as of December 31, 2024 and December 31, 2023. Generally, existing term loans that were re-underwritten are reflected in the table in the year of renewal. Lines of credit that have a conversion feature at the time of origination, such as construction to permanent loans, are presented by year of origination. Revolving loans converted to term loans totaled $ 3,121 and $ 881 as of December 31, 2024 and December 31, 2023, respectively. (in thousands) Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total Commercial Pass $ 36,065 $ 14,319 $ 11,885 $ 11,894 $ 3,442 $ 8,030 $ 27,272 $ 112,907 Special Mention — — 874 1,561 — — 1,590 4,025 Substandard 227 — — 32 471 — 259 989 Doubtful/Loss — — — — — — — — Total Commercial loans $ 36,292 $ 14,319 $ 12,759 $ 13,487 $ 3,913 $ 8,030 $ 29,121 $ 117,921 Year-to-date Charge-offs ( 47 ) ( 508 ) ( 224 ) ( 5 ) ( 163 ) ( 9 ) — ( 956 ) Year-to-date Recoveries — — 4 — — 56 — 60 Year-to-date Net Charge-offs ( 47 ) ( 508 ) ( 220 ) ( 5 ) ( 163 ) 47 — ( 896 ) Commercial Real Estate Pass $ 68,278 $ 113,937 $ 178,142 $ 160,484 $ 39,913 $ 121,862 $ 6,529 $ 689,145 Special Mention 2,909 — — 7,156 — 5,737 — 15,802 Substandard — 381 — 2,052 1,638 14,632 — 18,703 Doubtful/Loss — — — — — — — — Total Commercial Real Estate loans $ 71,187 $ 114,318 $ 178,142 $ 169,692 $ 41,551 $ 142,231 $ 6,529 $ 723,650 Year-to-date Charge-offs — — — — — — — — Year-to-date Recoveries — — — — — — — — Year-to-date Net Charge-offs — — — — — — — — Agriculture Pass $ 4,857 $ 6,562 $ 14,846 $ 17,245 $ 5,675 10,252 $ 20,420 $ 79,857 Special Mention — — 3,884 5,477 726 — 300 10,387 Substandard — — — 740 — — 1,580 2,320 Doubtful/Loss — — — — — — — — Total Agriculture loans $ 4,857 $ 6,562 $ 18,730 $ 23,462 $ 6,401 $ 10,252 $ 22,300 $ 92,564 Year-to-date Charge-offs — — — — — — — — Year-to-date Recoveries — — — — — — — — Year-to-date Net Charge-offs — — — — — — — — 84 Table of Contents (in thousands) Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total Residential Mortgage Pass $ 4,873 $ 20,162 $ 22,408 $ 26,123 $ 13,233 $ 18,886 $ — $ 105,685 Special Mention — — — — — — — — Substandard 79 — — 34 — 88 — 201 Doubtful/Loss — — — — — — — — Total Residential Mortgage loans $ 4,952 $ 20,162 $ 22,408 $ 26,157 $ 13,233 $ 18,974 $ — $ 105,886 Year-to-date Charge-offs — — — — — — — — Year-to-date Recoveries — — — — — — — — Year-to-date Net Charge-offs — — — — — — — — Residential Construction Pass $ 1,525 $ 2,117 $ 1,998 $ 1,218 $ — $ — $ — $ 6,858 Special Mention — — — — — — — — Substandard — — — — — — — — Doubtful/Loss — — — — — — — — Total Residential Construction loans $ 1,525 $ 2,117 $ 1,998 $ 1,218 $ — $ — $ — $ 6,858 Year-to-date Charge-offs — — — — — — — — Year-to-date Recoveries — — — — — — — — Year-to-date Net Charge-offs — — — — — — — — Consumer Pass $ 212 $ 145 $ 1,129 $ 109 $ 122 $ 286 $ 13,071 $ 15,074 Special Mention — — — — — — — — Substandard — — — — — — 642 642 Doubtful/Loss — — — — — — — — Total Consumer loans $ 212 $ 145 $ 1,129 $ 109 $ 122 $ 286 $ 13,713 $ 15,716 Year-to-date Charge-offs ( 28 ) — — — — — — ( 28 ) Year-to-date Recoveries 10 — — — — 3 — 13 Year-to-date Net Charge-offs ( 18 ) — — — — 3 — ( 15 ) Total Loans Pass $ 115,810 $ 157,242 $ 230,408 $ 217,073 $ 62,385 $ 159,316 $ 67,292 $ 1,009,526 Special Mention 2,909 — 4,758 14,194 726 5,737 1,890 30,214 Substandard 306 381 — 2,858 2,109 14,720 2,481 22,855 Doubtful/Loss — — — — — — — — Total Loans $ 119,025 $ 157,623 $ 235,166 $ 234,125 $ 65,220 $ 179,773 $ 71,663 $ 1,062,595 Year-to-date Charge-offs $ ( 75 ) $ ( 508 ) $ ( 224 ) $ ( 5 ) $ ( 163 ) $ ( 9 ) $ — $ ( 984 ) Year-to-date Recoveries $ 10 $ — $ 4 $ — $ — $ 59 $ — $ 73 Year-to-date Net Charge-offs $ ( 65 ) $ ( 508 ) $ ( 220 ) $ ( 5 ) $ ( 163 ) $ 50 $ — $ ( 911 ) 85 Table of Contents (in thousands) Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total Commercial Pass $ 19,776 $ 16,961 $ 15,833 $ 5,381 $ 7,420 $ 6,298 $ 26,183 $ 97,852 Special Mention — 1,122 2,530 235 308 — 2,936 7,131 Substandard — 32 1,152 542 — — 188 1,914 Doubtful/Loss — — — — — — — — Total Commercial loans $ 19,776 $ 18,115 $ 19,515 $ 6,158 $ 7,728 $ 6,298 $ 29,307 $ 106,897 Year-to-date Charge-offs ( 47 ) ( 196 ) ( 36 ) — ( 87 ) — — ( 366 ) Year-to-date Recoveries — — — — 87 148 — 235 Year-to-date Net Charge-offs ( 47 ) ( 196 ) ( 36 ) — — 148 — ( 131 ) Commercial Real Estate Pass $ 115,807 $ 173,918 $ 191,907 $ 50,150 $ 52,157 $ 107,909 $ 6,879 $ 698,727 Special Mention — — 7,448 — 2,869 1,273 — 11,590 Substandard 395 — 1,712 1,684 6,604 1,017 — 11,412 Doubtful/Loss — — — — — — — — Total Commercial Real Estate loans $ 116,202 $ 173,918 $ 201,067 $ 51,834 $ 61,630 $ 110,199 $ 6,879 $ 721,729 Year-to-date Charge-offs — — — — — — — — Year-to-date Recoveries — — — — — — — — Year-to-date Net Charge-offs — — — — — — — — Agriculture Pass $ 6,842 $ 16,985 $ 20,511 $ 8,792 $ 2,509 11,437 $ 29,893 $ 96,969 Special Mention — 1,937 2,996 — — 1,064 — 5,997 Substandard — — 946 — 1,926 — — 2,872 Doubtful/Loss — — — — — — — — Total Agriculture loans $ 6,842 $ 18,922 $ 24,453 $ 8,792 $ 4,435 $ 12,501 $ 29,893 $ 105,838 Year-to-date Charge-offs ( 1,825 ) — — — — — ( 742 ) ( 2,567 ) Year-to-date Recoveries 1,825 — — — — — 742 2,567 Year-to-date Net Charge-offs — — — — — — — — 86 Table of Contents (in thousands) Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total Residential Mortgage Pass $ 20,239 $ 24,906 $ 26,429 $ 14,500 $ 5,481 $ 15,349 $ — $ 106,904 Special Mention — — — — — — — — Substandard — — 39 — — 385 — 424 Doubtful/Loss — — — — — — — — Total Residential Mortgage loans $ 20,239 $ 24,906 $ 26,468 $ 14,500 $ 5,481 $ 15,734 $ — $ 107,328 Year-to-date Charge-offs — — — — — ( 3 ) — ( 3 ) Year-to-date Recoveries — — — — — — — — Year-to-date Net Charge-offs — — — — — ( 3 ) — ( 3 ) Residential Construction Pass $ 3,714 $ 1,991 $ 3,198 $ — $ — $ — $ — $ 8,903 Special Mention — — — — — — — — Substandard — 3,420 — — — — — 3,420 Doubtful/Loss — — — — — — — — Total Residential Construction loans $ 3,714 $ 5,411 $ 3,198 $ — $ — $ — $ — $ 12,323 Year-to-date Charge-offs — — — — — — — — Year-to-date Recoveries — — — — — — — — Year-to-date Net Charge-offs — — — — — — — — Consumer Pass $ 350 $ 758 $ 133 $ 149 $ 70 $ 273 $ 12,516 $ 14,249 Special Mention — — — — — — — — Substandard — — — — — — 619 619 Doubtful/Loss — — — — — — — — Total Consumer loans $ 350 $ 758 $ 133 $ 149 $ 70 $ 273 $ 13,135 $ 14,868 Year-to-date Charge-offs ( 13 ) — — — — — — ( 13 ) Year-to-date Recoveries — — — — — 1 — 1 Year-to-date Net Charge-offs ( 13 ) — — — — 1 — ( 12 ) Total Loans Pass $ 166,728 $ 235,519 $ 258,011 $ 78,972 $ 67,637 $ 141,266 $ 75,471 $ 1,023,604 Special Mention — 3,059 12,974 235 3,177 2,337 2,936 24,718 Substandard 395 3,452 3,849 2,226 8,530 1,402 807 20,661 Doubtful/Loss — — — — — — — — Total Loans $ 167,123 $ 242,030 $ 274,834 $ 81,433 $ 79,344 $ 145,005 $ 79,214 $ 1,068,983 Year-to-date Charge-offs $ ( 1,885 ) $ ( 196 ) $ ( 36 ) $ — $ ( 87 ) $ ( 3 ) $ ( 742 ) $ ( 2,949 ) Year-to-date Recoveries $ 1,825 $ — $ — $ — $ 87 $ 149 $ 742 $ 2,803 Year-to-date Net Charge-offs $ ( 60 ) $ ( 196 ) $ ( 36 ) $ — $ — $ 146 $ — $ ( 146 ) 87 Table of Contents (4) Mortgage Operations The Company recognizes a gain or loss and a related asset for the fair value of the rights to service loans for others when loans are sold and servicing is retained. The Company sold a substantial portion of its portfolio of conforming long-term residential mortgage loans originated during the year ended December 31, 2024 on a servicing retained basis, for cash proceeds equal to the fair value of the loans. At December 31, 2024 and 2023, the Company serviced real estate mortgage loans for others totaling $ 174,464 and $ 184,288 , respectively. The recorded value of mortgage servicing rights is amortized in proportion to, and over the period of, estimated net servicing revenues. The Company assesses capitalized mortgage servicing rights for impairment based upon the fair value of those rights at each reporting date. For purposes of measuring impairment, the rights are stratified based upon the product type, term and interest rates. Fair value is determined by discounting estimated net future cash flows from mortgage servicing activities using discount rates that approximate current market rates and estimated prepayment rates, among other assumptions. The amount of impairment recognized, if any, is the amount by which the capitalized mortgage servicing rights for a stratum exceeds their fair value. Impairment, if any, is recognized through a valuation allowance for each individual stratum. Changes in the carrying amount of mortgage servicing rights are reported in earnings under other operating income on the Consolidated Statements of Income. The following table summarizes the activity related to the Company’s mortgage servicing rights assets for the years ended December 31, 2024 and 2023. Mortgage servicing rights are included in Interest Receivable and Other Assets on the Consolidated Balance Sheets. December 31, 2023 Additions Reductions December 31, 2024 Mortgage servicing rights $ 1,482 $ 38 $ ( 208 ) $ 1,312 Valuation allowance — — — — Mortgage servicing rights, net of valuation allowance $ 1,482 $ 38 $ ( 208 ) $ 1,312 December 31, 2022 Additions Reductions December 31, 2023 Mortgage servicing rights $ 1,650 $ 67 $ ( 235 ) $ 1,482 Valuation allowance — — — — Mortgage servicing rights, net of valuation allowance $ 1,650 $ 67 $ ( 235 ) $ 1,482 At December 31, 2024 and December 31, 2023, the estimated fair market value of the Company’s mortgage servicing rights asset was $ 1,910 and $ 2,094 , respectively. The changes in fair value of mortgage servicing rights during 2024 and 2023 were primarily due to amortization and increase in estimated prepayment speeds . The Company received contractually specified servicing fees of $ 450 and $ 473 for the years ended December 31, 2024 and 2023, respectively. Contractually specified servicing fees are included in Other Income on the Consolidated Statements of Income. 88 Table of Contents (5) Premises and Equipment Premises and equipment consisted of the following at December 31, of the indicated years: 2024 2023 Land $ 2,823 $ 2,823 Buildings 8,703 8,659 Furniture and equipment 15,279 14,980 Leasehold improvements 2,673 2,673 29,478 29,135 Less accumulated depreciation and amortization 20,230 19,173 $ 9,248 $ 9,962 Depreciation and amortization expense, included in occupancy and equipment expense, was $ 1,057 and $ 1,002 for the years ended December 31, 2024 and 2023, respectively. (6) Interest Receivable and Other Assets Interest receivable and other assets consisted of the following at December 31, of the indicated years: 2024 2023 Interest receivable $ 7,660 $ 6,810 Mortgage servicing rights asset (see Note 4) 1,312 1,482 Officer’s life insurance 16,058 15,638 Deferred tax assets, net (see Note 17) 19,042 19,594 Operating lease right-of-use asset (see Note 8) 3,155 4,073 Prepaid and other 5,181 5,871 $ 52,408 $ 53,468 (7) Short-Term and Long-Term Borrowings The Company had no secured borrowings and no Federal Funds purchased at December 31, 2024 and December 31, 2023. Additional short-term borrowings available to the Company consist of a line of credit and advances with the Federal Home Loan Bank (“FHLB”) secured under terms of a blanket collateral agreement by a pledge of FHLB stock and all loans. At December 31, 2024, the Company had a current collateral borrowing capacity with the FHLB of $ 403,087 and, at such date, also had unsecured formal lines of credit totaling $ 130,000 with correspondent banks. The Company had no long-term borrowings at December 31, 2024 and 2023. 89 Table of Contents (8) Leases The Company leases ten branch and administrative locations under operating leases expiring on various dates through 2031. Leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expense is recognized on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company combines lease and nonlease components. The Bank had no financing leases as of December 31, 2024. Most leases include options to renew, with renewal terms that can extend the lease term from 3 to 10 years. The exercise of lease renewal options is at the Company’s sole discretion. Most leases are currently in the extension period. For the remaining leases with options to renew, the Company has not included the extended lease terms in the calculation of lease liabilities as the options are not reasonably certain of being exercised. Certain lease agreements include rental payments that are adjusted periodically for inflation. The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants. The Company uses its FHLB advance fixed rates, which are its incremental borrowing rates for secured borrowings, as the discount rates to calculate lease liabilities. The Company had right-of-use assets totaling $ 3,155 and $ 4,073 as of December 31, 2024 and December 31, 2023, respectively. Right-of-use assets are included in Interest receivable and other assets on the Consolidated Balance Sheets. The Company had lease liabilities totaling $ 3,645 and $ 4,585 as of December 31, 2024 and December 31, 2023, respectively. Lease liabilities are included in Interest payable and other liabilities on the Consolidated Balance Sheets. The Company recognized lease expenses totaling $ 1,228 and $ 1,217 for the years ended December 31, 2024 and December 31, 2023, respectively. Lease expense is included in Occupancy and Equipment expense on the Consolidated Statements of Income. The table below summarizes the payments of remaining lease liabilities at December 31: (in thousands) 2024 2025 $ 1,052 2026 672 2027 611 2028 625 2029 566 2030 and thereafter 329 Total lease payments 3,855 Less: interest ( 210 ) Present value of lease liabilities $ 3,645 The following table presents supplemental cash flow information related to leases for the year ended December 31: (in thousands) 2024 2023 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 1,098 $ 1,207 Right-of-use assets obtained in exchange for new operating lease liabilities $ — $ 245 The following table presents the weighted average operating lease term and discount rate at December 31: 2024 2023 Weighted-average remaining lease term - operating leases, in years 4.87 5.43 Weighted-average discount rate - operating leases 2.36 % 2.42 % 90 Table of Contents (9) Financial Instruments with Off-Balance Sheet Risk The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit in the form of loans or through standby letters of credit in addition to entering into commitments to sell loans in conjunction with our mortgage banking activities. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Bank’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Financial instruments, whose contract amounts represent credit risk at December 31 of the indicated periods, were as follows: 2024 2023 Undisbursed loan commitments $ 140,092 $ 187,401 Standby letters of credit 922 1,251 $ 141,014 $ 188,652 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank issues both financial and performance standby letters of credit. The financial standby letters of credit are primarily to guarantee payment to third parties. At December 31, 2024, there were no financial standby letters of credit outstanding. The performance standby letters of credit are typically issued to municipalities as specific performance bonds. At December 31, 2024, there was $ 922 issued in performance standby letters of credit and the Bank carried no liability. The Bank has experienced no draws on these letters of credit and does not expect to in the future; however, should a triggering event occur, the Bank either has collateral in excess of the letter of credit or imbedded agreements of recourse from the customer. The Bank has set aside a reserve for unfunded commitments in the amount of $ 700 and $ 1,150 at December 31, 2024 and 2023, respectively, which is recorded in “interest payable and other liabilities” on the Consolidated Balance Sheets. Commitments to extend credit and standby letters of credit bear similar credit risk characteristics as outstanding loans. As of December 31, 2024, the Company had no off-balance sheet derivatives requiring additional disclosure. The Company may enter into interest rate lock commitments in connection with its mortgage banking activities to fund residential mortgage loans within specified times in the future. There were no interest rate lock commitments at December 31, 2024 and 2023. These commitments expose the Company to the risk that the price of the loan underlying the interest rate lock commitment might decline from the inception of the interest rate lock to the funding of the mortgage loan. To protect against this risk, the Company may enter into commitments to sell loans to economically hedge the risk of potential changes in the value of the loans that would result from the commitment. There were no commitments at December 31, 2024 and 2023. Mortgage loans sold to investors may be sold with servicing rights retained, for which the Company makes only standard legal representations and warranties as to meeting certain underwriting and collateral documentation standards. In 2023, the Company had to repurchase one loan totaling $ 420 due to deficiencies in underwriting or loan documentation. Management believes that any liabilities that may result from such recourse provisions are not significant. 91 Table of Contents (10) Commitments and Contingencies At December 31, 2024, the aggregate maturities for time deposits were as follows: Year ending December 31: 2025 $ 141,580 2026 4,332 2027 2,242 2028 1,422 2029 394 Thereafter — $ 149,970 The Company is subject to various legal proceedings in the normal course of its business. In the opinion of management, after having consulted with legal counsel, the outcome of the pending legal proceedings should not have a material adverse effect on the consolidated financial condition or results of operations of the Company. 92 Table of Contents (11) Capital Adequacy and Restriction on Dividends The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company’s and the Bank’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. Quantitative measures established by regulation to help ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below). In July 2013, the FRB and the other U.S. federal banking agencies adopted final rules making significant changes to the U.S. regulatory capital framework for U.S. banking organizations and to conform this framework to the guidelines published by the Basel Committee known as the Basel III Global Regulatory Framework for Capital and Liquidity. The Basel Committee is a committee of banking supervisory authorities from major countries in the global financial system which formulates broad supervisory standards and guidelines relating to financial institutions for implementation on a country-by-country basis. These rules adopted by the FRB and the other federal banking agencies (the U.S. Basel III Capital Rules) replaced the federal banking agencies’ general risk-based capital rules, advanced approaches rule, market risk rule, and leverage rules, in accordance with certain transition provisions. Banks, such as First Northern, became subject to the final rules on January 1, 2015. The final rules implement higher minimum capital requirements, include a new common equity Tier 1 capital requirement, and established criteria that instruments must meet in order to be considered common equity Tier 1 capital, additional Tier 1 capital, or Tier 2 capital. The final rules provided for increased minimum capital ratios as follows: (a) a common equity Tier 1 capital ratio of 4.5%; (b) a Tier 1 capital ratio of 6%; (c) a total capital ratio of 8%; and (d) a Tier 1 leverage ratio to average consolidated assets of 4%. Under these rules, in order to avoid certain limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold a capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements (equal to 2.5% of total risk-weighted assets). The capital conservation buffer is designed to absorb losses during periods of economic stress. Pursuant to the EGRRCPA, the FRB adopted a final rule, effective August 31, 2018, amending the Small Bank Holding Company and Savings and Loan Holding Company Policy Statement (the “policy statement”) to increase the consolidated assets threshold to qualify to utilize the provisions of the policy statement from $1 billion to $3 billion. Bank holding companies, such as the Company, are subject to capital adequacy requirements of the FRB; however, bank holding companies which are subject to the policy statement are not subject to compliance with the regulatory capital requirements until they hold $3 billion or more in consolidated total assets. As a consequence, as of December 31, 2024, the Company was not required to comply with the FRB’s regulatory capital requirements until such time that its consolidated total assets equal $3 billion or more or if the FRB determines that the Company is no longer deemed to be a small bank holding company. However, if the Company had been subject to these regulatory capital requirements, it would have exceeded all regulatory requirements. In August of 2020, the federal banking agencies adopted the final version of the community bank leverage ratio framework rule (the “CBLR”), implementing two interim final rules adopted in April of 2020. The rule provides an optional, simplified measure of capital adequacy. Under the optional CBLR framework, the CBLR was 8.5% through calendar year 2021 and is 9% thereafter. The rule is applicable to all non-advanced approaches FDIC-supervised institutions with less than $10 billion in total consolidated assets. Banks not electing the CBLR framework will continue to be subject to the generally applicable risk-based capital rule. At the present time, while First Northern is a qualifying community banking organization, the Company and the Bank do not intend to elect to use the CBLR framework. Management believes, as of December 31, 2024, that the Bank met all capital adequacy requirements to which it is subject. As of December 31, 2024, the most recent notification from the FDIC categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized” the Bank must meet the minimum ratios as set forth below. As of the date hereof, there have been no conditions or events since that notification that management believes have changed the institution’s category. 93 Table of Contents The Bank had Tier I Leverage, Common Equity Tier 1, Tier I Risk-Based and Total Risk-Based capital above the “well capitalized” levels at December 31, 2024 and 2023, respectively, as set forth in the following table (calculated in accordance with the Basel III capital rules): The Bank 2024 2023 Adequately Capitalized Well Capitalized Capital Ratio Capital Ratio Ratio* Ratio Tier 1 Leverage Capital (to Average Assets) $ 205,326 10.5 % $ 187,248 9.7 % 4.0 % 5.0 % Common Equity Tier 1 Capital (to Risk-Weighted Assets) 205,326 16.4 % 187,248 14.8 % 4.5 % 6.5 % Tier 1 Capital (to Risk-Weighted Assets) 205,326 16.4 % 187,248 14.8 % 6.0 % 8.0 % Total Risk-Based Capital (to Risk-Weighted Assets) 220,977 17.7 % 203,096 16.0 % 8.0 % 10.0 % * Ratio for regulatory requirement excludes the capital conservation buffer of 2.50%. Cash dividends declared by the Bank are restricted under California State banking laws to the lesser of the Bank’s retained earnings or the Bank’s net income for the latest three fiscal years, less dividends previously declared during those periods. 94 Table of Contents (12) Fair Value Measurement The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale and trading securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a non-recurring basis, such as loans held-for-sale, loans held-for-investment and certain other assets. These non-recurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally corresponds with the Company’s quarterly valuation process. Assets Recorded at Fair Value on a Recurring Basis The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 and 2023. December 31, 2024 Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) U.S. Treasury securities $ 105,545 $ 105,545 $ — $ — Securities of U.S. government agencies and corporations 95,684 — 95,684 — Obligations of states and political subdivisions 67,591 — 67,591 — Collateralized mortgage obligations 94,945 — 94,945 — Mortgage-backed securities 270,088 — 270,088 — Total investments at fair value $ 633,853 $ 105,545 $ 528,308 $ — December 31, 2023 Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) U.S. Treasury securities $ 87,182 $ 87,182 $ — $ — Securities of U.S. government agencies and corporations 115,079 — 115,079 — Obligations of states and political subdivisions 51,677 — 51,677 — Collateralized mortgage obligations 90,947 — 90,947 — Mortgage-backed securities 227,472 — 227,472 — Total investments at fair value $ 572,357 $ 87,182 $ 485,175 $ — 95 Table of Contents Assets Recorded at Fair Value on a Non-recurring Basis Assets measured at fair value on a non-recurring basis are included in the table below by level within the fair value hierarchy as of December 31, 2024. (in thousands) December 31, 2024 Carrying Value Level 1 Level 2 Level 3 Individually evaluated loans $ 139 $ — $ — $ 139 Total assets at fair value $ 139 $ — $ — $ 139 There were no assets measured at fair value on a non-recurring basis as of December 31, 2023. There were no liabilities measured at fair value on a recurring or non-recurring basis at December 31, 2024 and 2023. Key methods and assumptions used in measuring the fair value of collateral dependent loans as of December 31, 2024 were as follows: Method Assumption Inputs Individually evaluated loans Collateral, market, income, enterprise, liquidation External appraised values, management assumptions regarding market trends or other relevant factors, selling costs generally ranging from 6 % to 10 % The following section describes the valuation methodologies used for assets recorded at fair value. Investment Securities Available-for-Sale Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, if available. If quoted market prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions, and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets where valuations include significant unobservable assumptions. Individually Evaluated Loans The Company does not record loans at fair value on a recurring basis. Loans that do not share similar risk characteristics are individually evaluated by management. Included in loans individually evaluated are collateral dependent loans. A loan is considered to be collateral dependent when repayment is expected to be provided substantially through the operation or sale of the collateral. Collateral dependent loans are considered to have unique risk characteristics and are individually evaluated. The ACL on collateral dependent loans is measured using the fair value of the underlying collateral, adjusted for costs to sell when applicable, less the amortized cost basis of the financial asset. If the value of underlying collateral is determined to be less than the recorded amount of the loan, a charge-off will be taken. Collateral dependent loans where a charge-off is recorded based on the fair value of collateral require classification in the fair value hierarchy. When a loan is evaluated based on the fair value of the underlying collateral securing the loan, the Company records the collateral dependent loan as non-recurring Level 3 given the valuation includes significant unobservable assumption s. 96 Table of Contents Disclosures about Fair Value of Financial Instruments The following table summarizes fair value estimates for financial instruments for the years ended December 31, 2024 and 2023, excluding financial instruments recorded at fair value on a recurring basis (summarized in the first table in this note). 2024 2023 Level Carrying amount Fair value Carrying amount Fair value Financial assets: Cash and cash equivalents 1 $ 119,448 $ 119,448 $ 149,211 $ 149,211 Certificates of deposit 2 16,074 16,129 19,710 19,570 Stock in Federal Home Loan Bank and other equity securities, at cost 3 10,518 10,518 10,518 10,518 Loans receivable: Net loans 3 1,046,852 974,746 1,052,465 958,077 Interest receivable 2 7,660 7,660 6,810 6,810 Mortgage servicing rights 3 1,312 1,910 1,482 2,094 Financial liabilities: Time deposits 3 149,970 149,752 135,696 135,540 Interest payable 2 1,215 1,215 1,567 1,567 Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument and expected exit prices. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets or liabilities include deferred tax liabilities and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in many of the estimates. 97 Table of Contents (13) Outstanding Shares and Earnings Per Share All income per share amounts have been adjusted to give retroactive effect to stock dividends and stock splits, including the 5 % stock dividend declared on January 23, 2025 , payable on March 25, 2025 , to shareholders of record as of February 28, 2025 . Earnings Per Share Basic and diluted earnings per share for the years ended December 31, were computed as follows: 2024 2023 Basic earnings per share: Net income $ 20,034 $ 21,554 Weighted average common shares outstanding 15,896,475 15,932,056 Basic earnings per share $ 1.26 $ 1.35 Diluted earnings per share: Net income $ 20,034 $ 21,554 Weighted average common shares outstanding 15,896,475 15,932,056 Effect of dilutive shares 212,565 150,815 Adjusted weighted average common shares outstanding 16,109,040 16,082,871 Diluted earnings per share $ 1.24 $ 1.34 Options not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect amounted to 247,729 shares and 494,769 shares for the years ended December 31, 2024 and 2023, respectively. Restricted stock not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect amounted to 2,037 shares and 37,372 shares for the years ended December 31, 2024 and 2023, respectively. 98 Table of Contents (14) Stock Compensation Plans The total number of shares authorized, number of shares outstanding, weighted average exercise prices, exercise prices and weighted average grant date fair value have been adjusted to give retroactive effect to stock dividends and stock splits, including the 5 % stock dividend declared on January 23, 2025 , payable on March 25, 2025 to shareholders of record as of February 28, 2025 . Under the Company’s 2016 Stock Incentive Plan (the “Plan”), the Company may grant option grants, stock appreciation rights, restricted stock, or stock units to an employee for an amount up to 50,000 total shares in any calendar year. With respect to awards granted to non-employee directors under the Plan during the term of the Plan, the total number of shares of common stock which may be issued upon exercise or settlement of such awards is 100,000 shares and no outside director may receive option grants, stock appreciation rights, restricted stock or stock units for more than 3,000 shares total in any calendar year. There are 1,593,465 shares authorized under the Plan. The Plan will terminate on March 15, 2026. The Compensation Committee of the Board of Directors is authorized to prescribe the terms and conditions of each option, including exercise price, vestings, or duration of the option. Generally, option grants vest at a rate of 25 % per year after the first anniversary of the date of grant and restricted stock awards vest at a rate of 100 % after four years . Options expire 10 years after the date of grant. Options are granted with an exercise price of the fair value of the related common stock on the date of grant. Stock option activity under the Plan during the year ended December 31, 2024, was as follows: Stock Options Number of shares Weighted average exercise price Balance at December 31, 2023 674,918 $ 8.00 Granted — — Exercised ( 52,905 ) 6.59 Cancelled/Forfeited ( 15,825 ) 9.26 Expired ( 92,981 ) 8.66 Balance at December 31, 2024 513,207 $ 7.99 The following table presents information on stock options for the year ended December 31, 2024: Number of Shares Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Contractual Term Options exercised 52,905 $ 6.59 $ 90 — Stock options outstanding and expected to vest: 513,207 $ 7.99 $ 784 3.77 Stock options vested and currently exercisable: 488,339 $ 7.94 $ 768 3.60 There were no stock options granted by the Company during the year ended December 31, 2024 and December 31, 2023. The intrinsic value of options exercised during the years ended December 31, was $ 90 in 2024 and $ 305 in 2023. The fair value of awards vested during the years ended December 31 was $ 88 in 2024 and $ 123 in 2023. As of December 31, 2024, there was $ 31 of total unrecognized compensation related to non-vested stock options. This cost is expected to be recognized over a weighted average period of approximately 1.2 years. For the years ended December 31, 2024 and 2023, there was $ 35 and $ 93 , respectively, of recognized compensation related to stock options. 99 Table of Contents The Company determines fair value at grant date using the Black-Scholes-Merton pricing model that takes into account the stock price at the grant date, the exercise price, the risk-free interest rate, the volatility of the underlying stock and the expected life of the option. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. Expected volatility is based on both the implied volatilities from the traded option on the Company’s stock and historical volatility on the Company’s stock. The Company expenses the fair value of the option on a straight line basis over the vesting period. The Company estimates forfeitures and only recognizes expense for those shares that actually vest. In addition to stock options, the Company also grants restricted stock awards to directors, certain officers and employees. The restricted shares awarded become fully vested after four years of continued employment or service from the date of grant. Restricted shares are forfeited if officers and employees terminate prior to the lapsing of restrictions. The following table presents information about non-vested restricted stock awards outstanding for the year ended December 31, 2024: Restricted Stock Awards Number of shares Weighted average grant date fair value Balance at December 31, 2023 287,981 $ 8.30 Granted 90,378 7.96 Vested ( 84,068 ) 8.50 Cancelled/Forfeited ( 21,530 ) 8.33 Balance at December 31, 2024 272,761 $ 8.12 The aggregate intrinsic value of restricted stock awards vested in calendar years 2024 and 2023, was $ 687 and $ 446 , respectively. The weighted average fair value per share of restricted stock awards granted during the years ended December 31, was $ 7.96 in 2024 and $ 7.72 in 2023. As of December 31, 2024, there was $ 941 of total unrecognized compensation related to non-vested restricted stock awards. This cost is expected to be recognized over a weighted average period of approximately 2.4 years. For the years ended December 31, 2024 and 2023, there was $ 761 and $ 701 , respectively, of recognized compensation related to restricted stock awards. Employee Stock Purchase Plan The Company has an Employee Stock Purchase Plan (“ESPP”). Under the ESPP, the Company is authorized to issue to an eligible employee shares of common stock. There are 395,699 shares authorized under the ESPP, which include authorized but unissued shares under the 2016 Amended ESPP. The ESPP will expire on March 16, 2026. The ESPP is implemented by participation periods of not more than twenty-seven months each. The Board of Directors determines the commencement date and duration of each participation period. An eligible employee is one who has been continually employed for at least ninety ( 90 ) days prior to commencement of a participation period. Under the terms of the ESPP, employees can choose to have up to 10 percent of their compensation withheld to purchase the Company’s common stock each participation period. The purchase price of the stock is 85 % of the lower of the fair value on the last trading day before the Date of Participation or the fair value on the last trading day during the participation period. Approximately 42 % of eligible employees are participating in the ESPP in the current participation period, which began November 24, 2024 and will end November 23, 2025. Under the ESPP, at the annual stock purchase date of November 23, 2024, there were $ 102 in contributions, and 15,878 shares were purchased at a price of $ 6.40 . For the years ended December 31, 2024 and 2023, there was $ 50 and $ 26 , respectively, of recognized compensation related to ESPP issuances. Compensation cost is reported in salaries and employee benefits expense in the Consolidated Statements of Income. The total number of shares authorized, number of shares purchased and stock price have been adjusted to give retroactive effect to 100 Table of Contents stock dividends and stock splits, including the 5 % stock dividend declared on January 23, 2025 , payable March 25, 2025 , to shareholders of record as of February 28, 2025 . (15) Profit Sharing Plan The Bank maintains a profit sharing plan for the benefit of its employees. Employees who have completed 1,000 hours of service and are actively employed on the last day of the plan year are eligible. Under the terms of this plan, a portion of the Bank’s profits, as determined by the Board of Directors, will be set aside and maintained in a trust fund for the benefit of qualified employees. Contributions to the plan, included in salaries and employee benefits in the Consolidated Statements of Income, were $ 1,870 and $ 3,240 in 2024 and 2023, respectively. The profit sharing plan also has a 401(k) feature that allows employees to contribute to the profit sharing plan, even if they are not eligible for a contribution from the Bank. An employee is eligible to make contributions through the 401(k) feature on the 1 st of the month following 90 days of employment. 101 Table of Contents (16) Supplemental Compensation Plans EXECUTIVE RETIREMENT PLAN Pension Benefit Plans The Company and the Bank maintain an unfunded non-contributory defined benefit pension plan (“ Salary Continuation Plan ”) and related split dollar plan for a select group of highly compensated employees. The Salary Continuation Plan provides defined annual benefit levels between $ 50 and $ 100 depending on responsibilities at the Bank. The retirement benefits are paid for 10 years following retirement at age 65 . Reduced retirement benefits are available after age 55 and 10 years of service. There are currently one active and four retired participants in the Salary Continuation Plan. Eligibility to participate in the Salary Continuation Plan is limited to a select group of management or highly compensated employees of the Bank that are designated by the Board. Additionally, the Company and the Bank adopted a supplemental executive retirement plan (“SERP”) in 2006. The SERP is intended to integrate the various forms of retirement payments offered to executives. There are currently two active and one retired participant in the SERP. The SERP benefit is calculated using 3 -year average salary plus 7 -year average bonus (average compensation). For each year of service, the benefit formula credits 2 % to 2.5 % of average compensation up to a cumulative maximum of 50%. Therefore, for an executive serving 20 to 25 years, the target benefit is 50 % of average compensation. The target benefit is reduced for other forms of retirement income provided by the Bank. Reductions are made for 50 % of the social security benefit expected at age 65 and for the accumulated value of contributions the Bank makes to the executive’s profit sharing plan. For purposes of this reduction, contributions to the profit sharing plan are accumulated each year at a 3 -year average of the yields on 10 -year Treasury securities. Retirement benefits are paid monthly for 120 months, plus 6 months for each full year of service over 10 years, up to a maximum of 180 months. Reduced benefits are payable for retirement prior to age 65. Should retirement occur prior to age 65, the benefit determined by the formula described above is reduced 5 % for each year payments commence prior to age 65. Therefore, the new SERP benefit is reduced 50 % for retirement at age 55 . No benefit is payable for voluntary terminations prior to age 55. 102 Table of Contents The following table sets forth the status of the Salary Continuation Plan and SERP as of December 31, 2024 and December 31, 2023: 2024 2023 Change in benefit obligation Benefit obligation at beginning of year $ 4,979 $ 5,339 Service cost 138 158 Interest cost 258 263 Plan gain ( 391 ) ( 336 ) Benefits paid ( 484 ) ( 445 ) Benefit obligation at end of year $ 4,500 $ 4,979 Change in plan assets Employer contribution $ 484 $ 445 Benefits paid ( 484 ) ( 445 ) Fair value of plan assets at end of year $ — $ — Reconciliation of funded status Funded status $ ( 4,500 ) $ ( 4,979 ) Unrecognized net plan loss ( 322 ) 69 Unrecognized prior service cost 29 31 Net amount recognized $ ( 4,793 ) $ ( 4,879 ) Amounts recognized in the consolidated balance sheets consist of: Accrued benefit liability $ ( 4,500 ) $ ( 4,979 ) Accumulated other comprehensive loss ( 293 ) 100 Net amount recognized $ ( 4,793 ) $ ( 4,879 ) The Company expects to recognize approximately $ 2 of the unrecognized net actuarial loss and prior service cost as a component of net periodic benefit cost in 2025. 103 Table of Contents For the Year ended December 31, 2024 2023 Components of net periodic benefit cost Service cost $ 138 $ 158 Interest cost 258 263 Amortization of prior service cost 2 2 Recognized actuarial loss — — Net periodic benefit cost 398 423 Additional Information Minimum benefit obligation at year end $ 4,500 $ 4,979 Decrease in minimum liability included in other comprehensive loss $ ( 393 ) $ ( 338 ) Assumptions used to determine benefit obligations at December 31 2024 2023 Discount rate used to determine net periodic benefit cost for years ended December 31 5.30 % 5.00 % Discount rate used to determine benefit obligations at December 31 5.50 % 5.30 % Future salary increases 5.30 % 5.60 % Plan Assets The Bank informally funds the liabilities of the Salary Continuation Plan through life insurance purchased on the lives of plan participants. This informal funding does not meet the definition of “plan assets” under pension accounting standards. Therefore, assets held for this purpose are not disclosed as part of the Salary Continuation Plan. Cash Flows Contributions and Estimated Benefit Payments For unfunded plans, contributions to the Salary Continuation Plan are the benefit payments made to participants. The Bank paid $ 484 in benefit payments during fiscal 2024. The following benefit payments, which reflect expected future service, are expected to be paid in future fiscal years: Year ending December 31, Pension Benefits 2025 $ 437 2026 352 2027 302 2028 302 2029 302 2030 - 2034 1,478 Disclosure of settlements and curtailments: There were no events during fiscal 2024 that would constitute a curtailment or settlement. 104 Table of Contents DIRECTORS’ RETIREMENT PLAN On July 19, 2001, the Company and the Bank approved an unfunded non-contributory defined benefit pension plan (“ Directors’ Retirement Plan ”) and related split dollar plan for the directors of the Bank. The Directors’ Retirement Plan provides a retirement benefit equal to $ 1 per year of service as a director, up to a maximum benefit amount of $ 15 . The retirement benefit is payable for ten years following retirement at age 65 . Reduced retirement benefits are available after age 55 and ten years of service. The following table sets forth the status of the Directors’ Retirement Plan as of December 31, 2024 and December 31, 2023: 2024 2023 Change in benefit obligation Benefit obligation at beginning of year $ 424 $ 560 Service cost — — Interest cost 20 24 Plan gain ( 2 ) ( 100 ) Benefits paid ( 45 ) ( 60 ) Benefit obligation at end of year $ 397 $ 424 Change in plan assets Employer contribution $ 45 $ 60 Benefits paid ( 45 ) ( 60 ) Fair value of plan assets at end of year $ — $ — Reconciliation of funded status Funded status $ ( 397 ) $ ( 424 ) Unrecognized net plan gain ( 142 ) ( 172 ) Net amount recognized $ ( 539 ) $ ( 596 ) Amounts recognized in the consolidated balance sheets consist of: Accrued benefit liability $ ( 397 ) $ ( 424 ) Accumulated other comprehensive gain ( 142 ) ( 172 ) Net amount recognized $ ( 539 ) $ ( 596 ) 105 Table of Contents For the Year Ended December 31, 2024 2023 Components of net periodic benefit cost Service cost $ — $ — Interest cost 20 24 Recognized actuarial gain ( 33 ) ( 4 ) Net periodic benefit cost ( 13 ) 20 Additional Information Minimum benefit obligation at year end $ 397 $ 424 Decrease in minimum liability included in other comprehensive loss $ 30 $ ( 96 ) Assumptions used to determine benefit obligations at December 31 2024 2023 Discount rate used to determine net periodic benefit cost for years ended December 31 5.00 % 4.60 % Discount rate used to determine benefit obligations at December 31 5.10 % 5.00 % Plan Assets The Bank informally funds the liabilities of the Directors’ Retirement Plan through life insurance purchased on the lives of plan participants. This informal funding does not meet the definition of “plan assets” under pension accounting standards. Therefore, assets held for this purpose are not disclosed as part of the Directors’ Retirement Plan. Cash Flows Contributions and Estimated Benefit Payments For unfunded plans, contributions to the Directors’ Retirement Plan are the benefit payments made to participants. The Bank paid $ 45 in benefit payments during fiscal year 2024. The following benefit payments, which reflect expected future service, are expected to be paid in future fiscal years: Year ending December 31, Pension Benefits 2025 $ 50 2026 45 2027 31 2028 20 2029 39 2030 - 2039 360 Disclosure of settlements and curtailments: There were no events during fiscal year 2024 that would constitute a curtailment or settlement. 106 Table of Contents EXECUTIVE ELECTIVE DEFERRED COMPENSATION PLAN — 2001 EXECUTIVE DEFERRAL PLAN On July 19, 2001, the Bank approved a revised Executive Elective Deferred Compensation Plan (“2001 Executive Deferral Plan”) for certain officers to provide them the ability to make elective deferrals of compensation due to tax law limitations on benefit levels under qualified plans. Deferred amounts earn interest at an annual rate determined by the Bank’s Board. The 2001 Executive Deferral Plan is a non-qualified plan funded with bank owned life insurance policies taken on the lives of the participating officers. During the year ended December 31, 2001, the Bank purchased insurance making a single-premium payment aggregating $ 1,125 , which is reported in other assets on the Consolidated Balance Sheets. The Bank is the beneficiary and owner of the policies. The cash surrender value of the related insurance policies as of December 31, 2024 and 2023 totaled $ 2,966 and $ 2,892 , respectively. The net decrease in accrued liability for the 2001 Executive Deferral Plan totaled $ 60 and $ 58 for the years ended December 31, 2024 and 2023, respectively. The net decrease was due to payments totaling $ 65 for each of the years ended December 31, 2024 and 2023, which was partially offset by interest accrued totaling $ 5 and $ 7 for the years ended December 31, 2024 and 2023, respectively. Interest expense for the 2001 Executive Deferral Plan totaled $ 5 and $ 7 for the years ended December 31, 2024 and 2023, respectively. DIRECTOR ELECTIVE DEFERRED FEE PLAN — 2001 DIRECTOR DEFERRAL PLAN On July 19, 2001, the Bank approved a Director Elective Deferred Fee Plan (“2001 Director Deferral Plan”) for directors to provide them the ability to make elective deferrals of director’s fees. Deferred amounts earn interest at an annual rate determined by the Bank’s Board. The 2001 Director Deferral Plan is a non-qualified plan funded with bank owned life insurance policies taken on the lives of the participating directors. The Bank is the beneficiary and owner of the policies. The cash surrender value of the related insurance policies as of December 31, 2024 and 2023 totaled $ 167 and $ 162 , respectively. The net decrease in accrued liability for the 2001 Director Deferral Plan totaled $ 4 for each of the years ended December 31, 2024 and 2023. The net decrease was due to payments totaling $ 4 and $ 5 for the years ended December 31, 2024 and 2023, respectively, which was partially offset by interest accrued totaling $ 0 and $ 1 for the years ended December 31, 2024 and 2023, respectively. Interest expense for the 2001 Director Deferral Plan totaled $ 0 and $ 1 for the years ended December 31, 2024 and 2023, respectively. 107 Table of Contents (17) Income Taxes The provision for income tax expense consisted of the following for the years ended December 31: 2024 2023 Current: Federal $ 4,525 $ 5,349 State 2,678 3,147 7,203 8,496 Deferred: Federal 324 ( 400 ) State 279 ( 4 ) 603 ( 404 ) $ 7,806 $ 8,092 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2024 and 2023, consisted of: 2024 2023 Deferred tax assets: Allowance for credit losses $ 4,903 $ 5,246 Deferred compensation 45 64 Retirement compensation 1,575 1,617 Stock option compensation 467 453 Current state franchise taxes 578 657 Non-accrual interest 426 333 Lease liability 1,065 1,349 Investment securities unrealized loss 14,337 14,178 Other 394 281 Deferred tax assets 23,790 24,178 Deferred tax liabilities: Fixed assets depreciation 761 970 FHLB dividends 184 184 Tax credit – loss on pass-through 824 489 Deferred loan costs 848 940 Mortgage servicing rights 388 383 Right of Use Asset 933 1,204 Postretirement benefits 129 21 Other 681 393 Total deferred tax liabilities 4,748 4,584 Net deferred tax assets (see Note 6) $ 19,042 $ 19,594 Based upon the level of historical taxable income and projections for future taxable income over the periods during which the deferred tax assets are deductible, management believed it is more-likely-than-not the Company will realize the benefits of these deductible differences. 108 Table of Contents At December 31, 2024, the Company had no state net operating loss carry forwards and no federal tax credit carry forwards. A reconciliation of income taxes computed at the federal statutory rate and the provision for income taxes for the years ended December 31, is as follows: 2024 2023 Federal statutory income tax rate 21.0 % 21.0 % Increase (decrease) in tax rate due to: State franchise tax, net of federal benefit 8.4 % 8.4 % Reduction for tax exempt interest ( 1.5 )% ( 1.2 )% Cash surrender value of life insurance ( 0.3 )% ( 0.4 )% Other 0.4 % ( 0.5 )% Effective income tax rate 28.0 % 27.3 % Accounting for Uncertainty in Income Taxes The Company had no unrecognized tax benefits for the years ended December 31, 2024 and 2023. The Company recognized no changes in unrecognized tax benefits during 2024 and 2023, due to the expiration of a statute of limitations. The Company had no significant uncertain tax positions as of December 31, 2024 and December 31, 2023. The Company does not currently anticipate any significant increase or decrease in unrecognized tax benefits during 2025. The Company classifies interest and penalties as a component of the provision for income taxes. At December 31, 2024, there were no unrecognized interest and penalties. The tax years ended December 31, 2023, 2022, and 2021 remain subject to examination by the Internal Revenue Service. The tax years ended December 31, 2023, 2022, 2021, and 2020 remain subject to examination by the California Franchise Tax Board. The deductibility of these tax positions will be determined through examination by the appropriate tax authorities or the expiration of the tax statute of limitations. 109 Table of Contents (18) Accumulated Other Comprehensive Income/(Loss) The following table details activity in accumulated other comprehensive loss for the year ended December 31, 2024. Unrealized Losses on Securities Officers’ retirement plan Directors’ retirement plan Accumulated Other Comprehensive loss Balance as of December 31, 2023 $ ( 33,778 ) $ ( 70 ) $ 121 $ ( 33,727 ) Current period other comprehensive income (loss), net of tax ( 379 ) 277 ( 22 ) ( 124 ) Balance as of December 31, 2024 $ ( 34,157 ) $ 207 $ 99 $ ( 33,851 ) The following table details activity in accumulated other comprehensive income/(loss) for the year ended December 31, 2023. Unrealized Gains (Losses) on Securities Officers’ retirement plan Directors’ retirement plan Accumulated Other Comprehensive Income/(loss) Balance as of December 31, 2022 $ ( 46,273 ) $ ( 308 ) $ 53 $ ( 46,528 ) Current period other comprehensive income, net of tax 12,495 238 68 12,801 Balance as of December 31, 2023 $ ( 33,778 ) $ ( 70 ) $ 121 $ ( 33,727 ) 110 Table of Contents (19) Supplemental Consolidated Statements of Cash Flows Information Supplemental disclosures to the Consolidated Statements of Cash Flows for the years ended December 31, are as follows: 2024 2023 Supplemental disclosure of cash flow information: Cash paid during the year for: Interest $ 14,644 $ 6,110 Income taxes 7,670 8,500 Supplemental disclosure of non-cash investing and financing activities: Stock dividend distributed 6,392 5,652 Fair value adjustment of securities available for sale, net of tax of $( 157 ) and 5,240 for the years ended December 31, 2024 and 2023 , respectively ( 379 ) 12,495 Recognition of right-of-use assets obtained in exchange for operating lease liabilities — 245 Market value of shares tendered in-lieu of cash to pay for exercise of options 348 361 Non-cash assets acquired (liabilities assumed) in acquisition: Total assets acquired — 12,612 Total liabilities assumed — ( 115,916 ) 111 Table of Contents (20) Parent Company Financial Information This information should be read in conjunction with the other notes to the consolidated financial statements. The following presents summary balance sheets and summary statements of income and cash flows information for the years ended December 31: Balance Sheets 2024 2023 Assets Cash $ 1,097 $ 1,359 Investment in wholly-owned subsidiary 174,796 157,662 Interest receivable and other assets 439 224 Total assets $ 176,332 $ 159,245 Liabilities and stockholders’ equity Liabilities — — Stockholders’ equity 176,332 159,245 Total liabilities and stockholders’ equity $ 176,332 $ 159,245 Statements of Income 2024 2023 Dividends from subsidiary $ 3,000 $ — Other operating expenses ( 318 ) ( 308 ) Income tax benefit 94 91 Loss before undistributed earnings of subsidiary 2,776 ( 217 ) Equity in undistributed earnings of subsidiary 17,258 21,771 Net income $ 20,034 $ 21,554 Statements of Cash Flows 2024 2023 Net income $ 20,034 $ 21,554 Adjustments to reconcile net income to net cash provided by operating activities Stock-based compensation 846 820 Increase in interest receivable and other assets ( 215 ) ( 224 ) Equity in undistributed earnings of subsidiary ( 17,258 ) ( 21,771 ) Net cash provided by operating activities 3,407 379 Cash flows from financing activities: Common stock issued 102 96 Stock repurchases ( 3,764 ) ( 143 ) Cash dividends paid in lieu of fractional shares ( 7 ) ( 7 ) Net cash provided by financing activities ( 3,669 ) ( 54 ) Net change in cash ( 262 ) 325 Cash at beginning of year 1,359 1,034 Cash at end of year $ 1,097 $ 1,359 112 Table of Contents (21) Related Party Transactions The Bank, in the ordinary course of business, has loan and deposit transactions with directors and executive officers. In management’s opinion, these transactions were on substantially the same terms as comparable transactions with other customers of the Bank. The amount of such deposits totaled approximately $ 3,963 and $ 4,058 at December 31, 2024 and 2023, respectively. The following is an analysis of the activity of loans to executive officers and directors for the years ended December 31: 2024 2023 Outstanding balance, beginning of year $ 2,422 $ 2,583 Credit granted — 25 Repayments / Reductions ( 865 ) ( 186 ) Outstanding balance, end of year $ 1,557 $ 2,422 (22) S egment Disclosures The Company has one reportable segment: banking operations. The Company is engaged in a single line of business, indicative of a traditional banking institution, gathering deposits and originating loans in its primary market areas. Loans, interest bearing accounts, investment securities, deposits, and non-interest income provide the revenues of the banking operation. Loan products offered to customers generate a majority of the Company’s interest and dividend income. Deposit products offered to customers generate non-interest income such as fees and service charges. Interest income on securities, net gains on sales of loans, and debit card income are other sources of revenue. Interest expense, provisions for credit losses, salaries and employee benefits, occupancy and equipment, and data processing provide significant expenses in banking operations. The Company manages its operations, allocates resources and monitors and reports its financials as a single operating segment. The Company's Chief Executive Officer is considered the Chief Operating Decision Maker. The Chief Operating Decision Maker evaluates segment performance using consolidated net income. Accounting policies for segments are the same as those described in Note 1 of Notes to Consolidated Financial Statements. For the Year Ended December 31 2024 2023 Interest and dividend income $ 78,652 $ 74,123 Reconciliation of revenue: Other revenues 6,019 7,845 Total consolidated revenue 84,671 81,968 Less: Interest expense 14,292 7,584 Segment net interest income and noninterest income 70,379 74,384 Less: (Reversal of) provision for credit losses ( 250 ) 1,100 Salaries and employee benefits 23,850 25,914 Occupancy and equipment 4,736 4,329 Data processing 4,224 4,043 Other banking segment items 9,979 9,352 Provision for income taxes 7,806 8,092 Segment net income/consolidated net income $ 20,034 $ 21,554 Reconciliation of assets: Total assets for reportable segment $ 1,891,722 $ 1,871,832 Other assets — — Total consolidated assets $ 1,891,722 $ 1,871,832 113 Table of Contents (23) Business Combinations On January 20, 2023, the Company completed the acquisition from Columbia State Bank of three branches located in the California cities of Colusa, Willows, and Orland , in accordance with a Purchase and Assumption Agreement dated as of November 5, 2022. The acquired assets included all the real property, cash on hand, personal property, safe deposit agreements, books and records along with certain loans (including accrued interest and fees) booked at the branches or allocated by the seller to the acquired branches. The assumed liabilities primarily consisted of the deposits booked in the branches or allocated by the seller to the acquired branches . In accordance with ASC 805, Business Combinations , the Company recorded a bargain purchase gain of $ 1,405 and $ 4,970 of core deposit intangibles on the acquisition date. The core deposit intangible will be amortized using the sum of the year’s digits method over the expected life of 10 years with no significant residual value. For tax purposes, acquisition accounting adjustments including the core deposit intangible are all non-taxable and/or non-deductible. Acquisition related costs of approximately $ 0 and $ 250 are included in the income statement for the years ended December 31, 2024 and 2023, respectively. The Company recorded the fair values based on the valuations available as of reporting date. In accordance with business combination accounting guidance, we evaluated these fair values for up to one year following the acquisition date of January 20, 2023. The valuations below were final one year following the acquisition date. This acquisition enabled the Company to extend its existing footprint and provided additional core deposit funding for future growth and liquidity and is expected to enhance profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded region. The following table summarizes the consideration paid for the acquired branches and amounts of assets acquired and liabilities assumed that were recorded at the acquisition date (in thousands): Acquired Branches January 20, 2023 Fair value of consideration received: Cash consideration $ 103,425 Total fair value of consideration received 103,425 Assets acquired: Cash and cash equivalents 1,284 Loans 4,006 Premises and equipment 3,621 Core deposit intangible 4,970 Other assets 15 Total assets acquired 13,896 Liabilities assumed: Deposits 115,914 Other liabilities 2 Total liabilities assumed 115,916 Total net liabilities assumed 102,020 Bargain purchase gain recognized $ 1,405 114 Table of Contents A summary of the estimated fair value adjustments resulting in the bargain purchase gain recorded in the branch acquisition are presented below (in thousands): Acquired Branches January 20, 2023 Cash consideration received $ 103,425 Less: Cost basis of net liabilities assumed ( 107,097 ) Fair Value Adjustments: Loans ( 363 ) Premises and equipment 307 Core deposit intangible 4,970 Deposits 163 Bargain purchase gain recognized $ 1,405 The loan portfolio of the acquired branches was recorded at fair value at the date of acquisition. For the purposes of the valuation analysis, the loan portfolio was segmented based on loan type and credit quality. None of the acquired loans were considered purchased credit deteriorated (PCD) at acquisition. The fair value of the acquired loans was calculated on a loan-level basis using the discounted cash flow method. The Company recorded a core deposit intangible of $ 4,970 at acquisition. A core deposit intangible refers to the intangible asset that represents the cost savings derived from available core deposits to an alternative funding source. The fair value of the core deposit intangible was calculated using a net cost savings method based on the present value of the estimated net cost savings attributable to the core deposit base over the expected remaining life of the deposits (plus the present value of the tax amortization benefit). The cost savings derived from the core deposit balance was calculated as the difference between the prevailing alternative cost of funds and the estimated cost of the core deposits. The Company assumed net liabilities, at fair value, of $ 102,020 at acquisition in exchange for cash consideration received of $ 103,425 . Under accounting guidance, a bargain purchase gain results if the fair value of consideration received is more than the fair value of the liabilities assumed. Because the cash consideration received exceeded the fair value of liabilities assumed, the Company recorded a bargain purchase gain of $ 1,405 related to the branch acquisitions during the first quarter of 2023. The bargain purchase gain is separately reported as a component of non-interest income in our Consolidated Statements of Income for the year ended December 31, 2023. We believe that we were able to negotiate a bargain purchase price primarily as a result of Columbia State Bank being required to divest of certain branches (along with the associated deposits and loans) for competitive reasons in accordance with a Letter of Agreement between Columbia State Bank, Umpqua and the Department of Justice Antitrust Division. This agreement was reached in conjunction with the Department of Justice’s required approval of the merger of Columbia State Bank and Umpqua. The required divestiture, in conjunction with the rural location of the branches acquired, allowed the Company to negotiate a favorable purchase price that, when combined with changes in market conditions between the date of agreement and the closing date, resulted in the recognition of the bargain purchase gai n. The Company completed the required reassessment prior to concluding recognition of a bargain purchase was appropriate. 115 Table of Contents ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.