SIERRA BANCORP

Previous wording

Third quarter 2025 net income was $9.7 million, and $0.72 per diluted share as compared to $10.6 million, and $0.74 per diluted share in the third quarter of 2024. The Company’s annualized return on average equity was 10.81% and annualized return on average assets was 1.04% for the quarter ended September 30, 2025, compared to 11.95% and 1.14%,

Current wording

First quarter 2026 net income was $12.5 million, and $0.96 per diluted share as compared to $9.1 million and $0.65 per diluted share in the first quarter of 2025. The Company’s annualized return on average equity was 13.88% and annualized

Previous wording

respectively, for the same quarter in 2024. The primary drivers behind the variance in third quarter net income are as follows:

Current wording

return on average assets was 1.39% for the quarter March 31, 2026, compared to 10.44% and 1.02%, respectively, for the same quarter in 2025. The primary drivers behind the variance in first quarter net income are as follows:

Previous wording

The Company’s assets totaled $3.7 billion at September 30, 2025, an increase of $95.1 million, or 3.0% from December 31, 2024. The following provides a summary of key balance sheet changes during the first nine months of 2025:

Current wording

The Company’s assets totaled $3.8 billion at March 31, 2026, a decrease of $74.8 million, or 2.0% from December 31, 2025. The following provides a summary of key balance sheet changes during the first three months of 2026:

Previous wording

The Company earns income from two primary sources. The first is net interest income, which is interest income generated by earning assets less interest expense on deposits and other borrowed money. The second is noninterest income, which primarily consists of customer service charges and fees but also comes from non-customer sources such as BOLI, equity investments, and investment gains. The majority of the Company’s noninterest expense is comprised of operating costs that facilitate offering a full range of banking services to its customers.

Current wording

The Company earns income from two primary sources. The first is net interest income, which is interest income generated by earning assets less interest expense on deposits and other borrowed money. The second is noninterest income, which primarily consists of customer service charges and fees but also comes from non-customer sources such as BOLI, equity

Previous wording

The Company had $1.8 billion in adjustable and variable rate loans and $268.0 million in floating rate bonds, as compared to $245.0 million in floating rate CDs and $36.0 million in floating rate trust preferred securities at September 30, 2025. The adjustable-rate loans have repricing frequencies ranging from 30-days to 10-years. Of the $1.8 billion in adjustable and variable rate loans, $779.9 million reprice or mature in the next twelve months. In addition, there were $642.8 million of fixed-term deposits that reprice or mature within twelve months. Based on current rates, of the $779.9 million in adjustable and variable rate loans that reprice or mature over the next twelve months, $117.1 million, or 15%, have a pricing index rate higher than the current index, while $146.1 million, or 19%, have a pricing index rate lower than the current index. The remaining balance of $516.7 million are priced at the current index rate or are expected to mature.

Current wording

The Company had $1.8 billion in adjustable and variable rate loans and $232.6 million in floating rate bonds, as compared to $227.0 million in floating rate CDs and $36.1 million in floating rate trust preferred securities at March 31, 2026. The adjustable-rate loans have repricing frequencies ranging from 30-days to 10-years. Of the $1.8 billion in adjustable and variable rate loans, $797.4 million reprice or mature in the next twelve months. In addition, there were $513.3 million of fixed-term deposits that reprice or mature within twelve months. Based on current rates of the $797.4 million in adjustable and variable rate loans that reprice or mature over the next twelve months, $197.6 million, or 25%, have a pricing index rate higher than the current index, while $49.0 million, or 6%, have a pricing index rate lower than the current index. The remaining balance of $550.8 million in loans are priced at the current index rate or are expected to mature.

Previous wording

The level of net interest income recognized in any given period depends on a combination of factors including the average volume and yield for interest-earning assets, the average volume and cost of interest-bearing liabilities, and the mix of products which comprise the Company’s earning assets, deposits, and other interest-bearing liabilities.

Current wording

Overall, the Company continues to benefit from continued lower cost funding, which was partially offset by lower yields on investment securities, as assets repriced in a lower rate environment, resulting in a stable net interest margin compared to the prior year. The level of net interest income recognized in any given period depends on a combination of factors including the average volume and yield for interest-earning assets, the average volume and cost of interest-bearing liabilities, and the mix of products which comprise the Company’s earning assets, deposits, and other interest-bearing liabilities.

Previous wording

Credit risk is inherent in the business of making loans. The Company sets aside an allowance for credit losses on loans, a contra-asset account, through periodic charges to earnings, which are reflected in the income statement as the provision for credit losses on loans. Specifically identifiable and quantifiable loan losses are immediately charged off against the allowance, with subsequent recoveries reflected as an increase to the allowance. The Company recorded a provision for credit losses of $3.7 million in the third quarter of 2025, as compared to $1.2 million in the third quarter of 2024. The year-to-date provision for credit losses on loans was $6.9 million in 2025, as compared to $2.3 million for the same period in 2024. The $2.5 million increase in the provision for credit losses on loans in the third quarter of 2025, as compared to the third quarter of 2024, and the $4.6 million year-to-date increase in the provision for credit losses on loans, compared to the same period in 2024, was primarily due to the addition of $3.5 million in individual reserves mostly related to a single agricultural production loan, in the third quarter of 2025. At September 30, 2025, such agricultural production loan had a remaining book balance of $3.5 million with an associated individual reserve of $3.5 million fully offsetting such loan. See “Allowance for Credit Losses – Loans” for additional information on this credit.

Current wording

Credit risk is inherent in the business of making loans. The Company sets aside an allowance for credit losses on loans, a contra-asset account, through periodic charges to earnings, which are reflected in the income statement as the provision for credit losses on loans. Specifically identifiable and quantifiable loan losses are immediately charged off against the allowance, with subsequent recoveries reflected as an increase to the allowance. The Company recorded a provision for credit losses on loans of $0.1 million for the first quarter of 2026, compared to a credit loss benefit of $0.8 million in the fourth quarter of 2025 and a provision of $2.0 million in the first quarter of 2025. The $0.8 million release in allowance for credit losses during the fourth quarter of 2025 was due mostly to the $1.5 million release of specific reserve on loans individually evaluated, partially offset by higher reserve on loans collectively evaluated. The provision recorded during the first quarter of 2026 is due to the increase in specific reserve and changes to certain assumptions used, partially offset by lower loan balances and net loan charge-offs.

Previous wording

The Company sets aside a provision for income taxes on a monthly basis. The amount of that provision is deter­mined by first applying the Company’s statutory income tax rates to estimated taxable income, which is pre-tax book income adjusted for permanent dif­ferences, and then subtracting available tax credits. Permanent differences include, but are not limited to, tax-exempt interest income, BOLI income, and certain book expenses that are not allowed as tax deductions. Tax credits consist primarily of those generated by investments in low-income housing tax credit funds. The Company's provision for income taxes was 23.6% of pre-tax income in the third quarter of 2025, relative to 26.4% in the third quarter of 2024, and 24.9% of pre-tax income for the first nine months of 2025 relative to 26.8% for the same period in 2024.

Current wording

The Company sets aside a provision for income taxes on a monthly basis. The amount of that provision is deter­mined by first applying the Company’s statutory income tax rates to estimated taxable income, which is pre-tax book income adjusted for permanent dif­ferences, and then subtracting available tax credits. Permanent differences include, but are not limited to, tax-exempt interest income, BOLI income, and certain book expenses that are not allowed as tax deductions. Tax credits consist primarily of those generated by investments in low-income housing tax credit funds. The Company's provision for income taxes was 25.2% of pre-tax income in the first quarter of 2026, relative to 25.8% in the first quarter of 2025. The decrease in effective tax rate for both the quarterly and year-to-date comparisons was due to the tax credits and tax-exempt income representing a larger percentage of total taxable income.

Previous wording

The investment portfolio is reflected on the balance sheet as investment securities and totaled $891.4 million, or 24% of total assets at September 30, 2025, and $961.5 million, or 27% of total assets at December 31, 2024. The decrease was due to maturities and paydowns, partially used to offset brokered deposit maturities.

Current wording

The investment portfolio is reflected on the balance sheet as investment securities and totaled $903.0 million, or 24% of total assets at March 31, 2026, and $916.1 million, or 24% of total assets at December 31, 2025. The modest decrease was due to regularly scheduled maturities and paydowns.

Previous wording

The Company carries “available-for-sale” investments at their fair market values and “held-to-maturity” investments at amortized cost, net of allowance for credit losses. The Company currently has the intent and ability to hold investment securities to maturity, but the securities are all marketable. The expected effective duration was 2.4 years for available-for-sale investments and 5.9 years for held-to-maturity investments at September 30, 2025, as compared to 1.5 years for available-for-sale investments and 6.0 years for held-to-maturity investments at December 31, 2024.

Current wording

The Company carries “available-for-sale” investments at their fair market values and “held-to-maturity” investments at amortized cost, net of allowance for credit losses. The Company currently has the intent and ability to hold investment securities to maturity, but the securities are all marketable. The expected effective duration was 2.8 years for available-for-sale investments and 5.7 years for held-to-maturity investments at March 31, 2026, as compared to 2.8 years for available-for-sale investments and 5.6 years for held-to-maturity investments at December 31, 2025.

Previous wording

Investment securities pledged as collateral for borrowings and/or potential borrowings from the FHLB and the FRB, customer repurchase agreements, and other purposes as required or permitted by law totaled $403.7 million at September 30, 2025, and $403.4 million at December 31, 2024, leaving $487.7 million in unpledged debt securities at September 30, 2025, and $558.1 million at December 31, 2024. Securities pledged in excess of actual pledging needs and thus available for liquidity purposes, if needed, totaled $230.6 million at September 30, 2025, and $242.2 million at December 31, 2024.

Current wording

Investment securities pledged as collateral for borrowings and/or potential borrowings from the FHLB and the FRB, customer repurchase agreements, and other purposes as required or permitted by law totaled $363.5 million at March 31, 2026, and $367.5 million at December 31, 2025, leaving $539.5 million in unpledged debt securities at March 31, 2026, and $548.6 million at December 31, 2025. Securities pledged in excess of actual pledging needs and thus available for liquidity purposes, if needed, totaled $191.1 million at March 31, 2026, and $192.3 million at December 31, 2025.

Previous wording

At September 30, 2025, the total regulatory CRE concentration ratio of total CRE over Tier 1 Capital plus allowance was 242.7% as compared to 236.3% at December 31, 2024. The overall level of construction and land development lending was 2.9% of regulatory capital plus allowance for credit losses at September 30, 2025. At September 30, 2025, non-owner occupied commercial real estate includes $306.8 million of retail; $143.5 million of warehouse/industrial; $157.5 million of office; and $231.3 million of hospitality. Approximately $34.6 million, or 22% of the office real estate matures or reprices in less than two years.

Current wording

At March 31, 2026, the total regulatory CRE concentration ratio of total CRE over Tier 1 Capital plus allowance was 238.7% as compared to 242.1% at December 31, 2025. The overall level of construction and land development lending was 3.3% of regulatory capital plus allowance for credit losses at March 31, 2026. At March 31, 2026, non-owner occupied commercial real estate included $305.1 million of retail; $136.6 million of warehouse/industrial; $150.0 million of office; and $235.3 million of hospitality. Approximately $25.5 million, or 17% of the office real estate matures or reprices in less than two years.

Previous wording

The Company had $0.2 million in loans past due 30-89 days and still accruing at September 30, 2025. This was a decrease of $1.2 million over the balance at December 31, 2024. All of these past due loans are under Management supervision and every effort is being taken to assist the borrowers and manage credit risk in this regard.

Current wording

The Company had $0.9 million in loans past due 30-89 days and still accruing at March 31, 2026. This was a decrease of $5.9 million compared to the balance at December 31, 2025. All of these past due loans are under Management supervision, and every effort is being taken to assist the borrowers and manage credit risk in this regard.

Previous wording

The allowance as a percentage of gross loans was 1.01% and 1.07%, at September 30, 2025 and December 31, 2024, respectively. Management's detailed analysis indicates that the Company's allowance for credit losses on loans should be sufficient to cover credit losses for the life of the loans outstanding as of September 30, 2025, but no assurance can be given that the Company will not experience substantial future losses relative to the size of the credit loss allowance for loans. The total allowance for credit losses on loans of $25.2 million at September 30, 2025, included $0.5 million of allowance related to $452.7 million of mortgage warehouse lines. A separate allowance of $0.8 million for potential credit losses inherent in unused commitments is included in other liabilities at September 30, 2025, an increase of $0.1 million, from December 31, 2024.

Current wording

The allowance as a percentage of gross loans was 0.86% and 0.84%, at March 31, 2026, and December 31, 2025, respectively. Management's detailed analysis indicates that the Company's allowance for credit losses on loans should be sufficient to cover credit losses for the life of the loans outstanding as of March 31, 2026, but no assurance can be given that the Company will not experience substantial future losses relative to the size of the credit loss allowance for loans. The total allowance for credit losses on loans of $21.3 million at March 31, 2026, included $0.6 million of allowance related to $478.5 million of mortgage warehouse lines. A separate allowance of $0.7 million for potential credit losses inherent in unused commitments is included in other liabilities at March 31, 2026, a decrease of $0.1 million, from December 31, 2025.

Previous wording

The Company maintains commitments to extend credit in the normal course of business, as long as there are no violations of conditions established in the outstanding contractual arrangements. It is unlikely that all unused commitments will ultimately be drawn down. Unused commitments to extend credit, which included standby letters of credit, totaled $641.8 million at September 30, 2025, and $641.5 million at December 31, 2024, representing approximately 26% of gross loans outstanding at September 30, 2025, and 28% at December 31, 2024. Included in unused commitments are mortgage warehouse lines, which are mostly in the form of repurchase lines and are unconditionally cancellable. Unused commitments on mortgage warehouse lines were $308.8 million at September 30, 2025, and $311.6 million at December 31, 2024, while mortgage warehouse utilization was 59% and 51%, respectively.

Current wording

The Company maintains commitments to extend credit in the normal course of business, as long as there are no violations of conditions established in the outstanding contractual arrangements. It is unlikely that all unused commitments will ultimately be drawn down.

Previous wording

The mortgage warehouse lines are structured as repurchase agreement lines. The repurchase agreement structure provides stronger credit protection to the Company, as well as more favorable regulatory capital treatment, as these repurchase lines are not considered off-balance sheet commitments for regulatory capital purposes as they are unconditionally cancellable.

Current wording

Included in unused commitments are mortgage warehouse lines, which are mostly in the form of repurchase lines. The repurchase agreement structure provides stronger credit protection to the Company, as well as more favorable regulatory capital treatment, as these repurchase lines are not considered off-balance sheet commitments for regulatory capital purposes as they are unconditionally cancellable.

Previous wording

The Company also had undrawn letters of credit issued to customers totaling $4.3 million at September 30, 2025, and $5.0 million at December 31, 2024. The effect on the Company’s revenues, expenses, cash flows and liquidity from the unused portion of commitments to provide credit cannot be reasonably predicted because there is no guarantee that the lines of credit will ever be used. However, the “Liquidity” section in this Form 10-Q outlines resources available to draw upon should the Company be required to fund a significant portion of unused commitments.

Current wording

The Company also had undrawn letters of credit issued to customers totaling $5.8 million at March 31, 2026, and $5.7 million at December 31, 2025. The effect on the Company’s revenues, expenses, cash flows and liquidity from the unused portion of commitments to provide credit cannot be reasonably predicted because there is no guarantee that the lines of credit will ever be used. However, the “Liquidity” section in this Form 10-Q outlines resources available to draw upon should the Company be required to fund a significant portion of unused commitments.

Previous wording

In addition to unused commitments to provide credit, the Company is utilizing a $125 million letter of credit issued by the FHLB on the Company’s behalf as security for certain local agency deposits which totaled $85.3 million at September 30, 2025. That letter of credit is backed by loans pledged to the FHLB by the Company. For more information on the Company’s off-balance sheet arrangements, see Note 7 to the consolidated financial statements located elsewhere herein.

Current wording

In addition to unused commitments to provide credit, the Company is utilizing a $125 million letter of credit issued by the FHLB on the Company’s behalf as security for certain local agency deposits which totaled $80.1 million at March 31, 2026. That letter of credit is backed by loans pledged to the FHLB by the Company. For more information on the Company’s off-balance sheet arrangements, see Note 7 to the consolidated financial statements located elsewhere herein.

Previous wording

Interest-earning cash balances were discussed above in the “Investments” section, but the Company also maintains a certain level of cash on hand in the normal course of business, as well as non-earning deposits at other financial institutions. The Company’s balance of cash and due from banks depends on the timing of collection of outstanding cash items (checks), the amount of cash held in the branches, and the reserve requirement among other things, and it is subject to significant fluctuations in the normal course of business. While cash flows are normally predictable within limits, those limits are fairly broad and the Company manages its short-term cash position through the utilization of overnight loans to, and borrowings from, correspondent banks, including the FRB and the FHLB. Should a large “short” overnight position persist for any length of time, the Company typically raises money through focused retail deposit gathering efforts or by adding brokered time deposits. If a “long” position is prevalent, the Company could let brokered deposits or other wholesale borrowings roll off as they mature, or invest excess liquidity into investments or loans, subject to the Company’s risk tolerances. The Company’s balance of non-earning cash and due from banks was $81.8 million at September 30, 2025, relative to $79.6 million at December 31, 2024.

Current wording

Interest-earning cash balances were discussed above in the “Investments” section, but the Company also maintains a certain level of cash on hand in the normal course of business, as well as non-earning deposits at other financial institutions. The Company’s balance of cash and due from banks depends on the timing of collection of outstanding cash items (checks), the amount of cash held in the branches, and the reserve requirement among other things, and it is subject to significant fluctuations in the normal course of business. While cash flows are normally predictable within limits, those limits are fairly broad and the Company manages its short-term cash position through the utilization of overnight loans to, and borrowings from, correspondent banks, including the FRB and the FHLB. Should a large “short” overnight position persist for any length of time, the Company typically raises money through focused retail deposit gathering efforts or by adding brokered time deposits. If a “long” position is prevalent, the Company could let brokered deposits or other wholesale borrowings roll off as they mature, or invest excess liquidity into investments or loans, subject to the Company’s risk

Previous wording

Net premises and equipment decreased by $0.4 million during the first nine months of 2025, to $15.1 million. This decline was mostly a result of depreciation in the first nine months of 2025.

Current wording

Net premises and equipment decreased by $0.5 million during the first three months of 2026, to $14.4 million. This decline was mostly a result of the sale of a bank owned real estate property and depreciation in the first three months of 2026.

Previous wording

Goodwill was $27.4 million at September 30, 2025, unchanged during the first nine months of 2025. Goodwill is tested for impairment annually, unless events and circumstances exist which indicate that an impairment test should be performed. The annual goodwill impairment test was last performed on October 1, 2025, and it was determined that no impairment existed. Management continues to evaluate whether or not a triggering event occurs, or circumstances change

Current wording

Goodwill was $27.4 million at March 31, 2026, unchanged during the first three months of 2026. Goodwill is tested for impairment annually, unless events and circumstances exist which indicate that an impairment test should be performed. The annual goodwill impairment test was last performed on October 1, 2025, and it was determined that no impairment existed. Management continues to evaluate whether or not a triggering event occurs, or circumstances change that would more likely than not reduce the fair value of the Company below its carrying amount before the next annual test in 2026.

Previous wording

Bank-owned life insurance, with a balance of $68.7 million at September 30, 2025, increased $15.6 million during the first nine months of 2025, primarily due to the purchase of additional life insurance policies. Additional details are discussed above in the “Noninterest Income and Noninterest Expense” section.

Current wording

Bank-owned life insurance, with a balance of $68.7 million at March 31, 2026, decreased $0.6 million during the first three months of 2026. Additional details are discussed above in the “Noninterest Income and Noninterest Expense” section.

Previous wording

Overall uninsured deposits are estimated to be $748.1 million, or 26% of total deposit balances, excluding public agency deposits that are subject to collateralization through a letter of credit issued by the FHLB. In addition, uninsured deposits of the bank’s customers are eligible for FDIC pass-through insurance if the customer opens an IntraFi Insured Cash Sweep account or a reciprocal time deposit through the Certificate of Deposit Account Registry System (CDARS). IntraFi allows for up to $285 million of combined pass-through FDIC insurance which would more than cover each of the Bank’s deposit customers if a customer desired to have such pass-through insurance. The Bank maintains a diversified deposit base with no significant customer concentrations and does not bank any cryptocurrency companies. At September 30, 2025, the

Current wording

Overall uninsured deposits are estimated to be $710.0 million, or 24% of total deposit balances, excluding public agency deposits that are subject to collateralization through a letter of credit issued by the FHLB. In addition, uninsured deposits of the bank’s customers are eligible for FDIC pass-through insurance if the customer opens an IntraFi Insured Cash Sweep account or a reciprocal time deposit through the Certificate of Deposit Account Registry System (CDARS). IntraFi allows for up to $285 million of combined pass-through FDIC insurance which would more than cover each of the Bank’s deposit customers if a customer desired to have such pass-through insurance. The Bank maintains a diversified deposit base with no significant customer concentrations and does not bank any cryptocurrency companies. At March 31, 2026, the Company had approximately 116,000 accounts, and the 25 largest deposit balance customers had balances of approximately 10% of overall deposits*.* During the first quarter of 2026, except for seasonal fluctuations in the normal course of business, there have been no material changes in the composition of our 25 largest deposit balance customers.

Previous wording

Customer repurchase agreements were $125.7 million at September 30, 2025, as compared to $108.9 million at December 31, 2024. Customer repurchase agreements allow customers to sweep excess deposit balances over the FDIC insurance limit each day into a separate repurchase agreement account. Monies in that account are used daily by the customer to purchase specific government debt securities from the Company under an agreement from the Company to repurchase the same securities from the customer on the next business day. These accounts are not deposits and are not FDIC insured. However, the repurchase agreement provides a customer with a larger account balance to have their account effectively secured with US government securities.

Current wording

Customer repurchase agreements were $127.8 million at March 31, 2026, as compared to $130.9 million at December 31, 2025. Customer repurchase agreements allow customers to sweep excess deposit balances over the FDIC insurance limit each day into a separate repurchase agreement account. Monies in that account are used daily by the customer to purchase specific government debt securities from the Company under an agreement from the Company to repurchase the same securities from the customer on the next business day. These accounts are not deposits and are not FDIC insured. However, the repurchase agreement provides a customer with a larger account balance to have their account effectively secured with US government securities.

Previous wording

At September 30, 2025 the Company had $55.0 million in overnight borrowings, and $80.0 million of term FHLB borrowings, as compared to $80.0 million of term FHLB borrowings on December 31, 2024.

Current wording

At March 31, 2026, the Company had $130.0 million in overnight borrowings and $55.0 million of term FHLB borrowings, as compared to $222.7 million in overnight borrowings and $80.0 million of term FHLB borrowings at December 31, 2025.

Previous wording

Long-term debt at September 30, 2025, consisted of $49.5 million of subordinated debt. This remained relatively unchanged from December 31, 2024. Subordinated debentures related to $36.0 million of trust preferred securities at September 30, 2025, was $0.1 million higher than at December 31, 2024. The small increase resulted from the amortization of the discount on junior subordinated debentures that were part of the Company’s acquisition of Coast Bancorp in 2016. Trust preferred securities are variable rate instruments benchmarked against the Secured Overnight Financing Rate (SOFR).

Current wording

Long-term debt at March 31, 2026, consisted of $49.5 million of subordinated debt. This remained relatively unchanged from December 31, 2025. Subordinated debentures related to $36.1 million of trust preferred securities at March 31, 2026, were $0.1 million higher than at December 31, 2025. The small increase resulted from the amortization of the discount on junior subordinated debentures that were part of the Company’s acquisition of Coast Bancorp in 2016. Trust preferred securities are variable rate instruments benchmarked against the Secured Overnight Financing Rate (SOFR).

Previous wording

Other liabilities are principally comprised of operating lease right-of-use liabilities, accrued interest payable, other accrued but unpaid expenses, and certain clearing amounts. The Company’s balance of other liabilities was $69.6 million at September 30, 2025, as compared to $90.5 million at December 31, 2024, a decrease of $20.9 million or 23%. The decrease was primarily driven by investment security purchases in process that settled, ICS transactions in process that settled, funds advanced on low-income housing tax credit investments, and a decrease in accrued interest on time deposits.

Current wording

Other liabilities are principally comprised of operating lease right-of-use liabilities, accrued interest payable, other accrued but unpaid expenses, and certain clearing amounts. The Company’s balance of other liabilities was $65.9 million at March 31, 2026, as compared to $68.2 million at December 31, 2025, a decrease of $2.3 million or 3%.

Previous wording

The Company continues to have substantial liquidity through unencumbered assets and available borrowings. In addition, the Company’s loan-to-deposit ratio was 85% at September 30, 2025, and 81% at December 31, 2024, compared to an internal policy guideline of less than 90%.

Current wording

The Company continues to have substantial liquidity through unencumbered assets and available borrowings. In addition, the Company’s loan-to-deposit ratio was 84% at March 31, 2026, and 89% at December 31, 2025, compared to an internal policy guideline of less than 90%.

Previous wording

Available funding sources, detailed above, of $2.2 billion represented 75% of total deposits and 293% of estimated uninsured and/or uncollateralized deposits as of September 30, 2025. Unpledged investment securities include $71.9 million of CLOs. As CLO rates reset every 90 days to current rates, the volatility of pricing of these securities is limited and the Company could sell such securities for liquidity at a significantly lower loss than selling lower-rate fixed term securities such as US government bonds or municipal bonds.

Current wording

Available funding sources, detailed above, of $2.1 billion represented 73% of total deposits and 302% of estimated uninsured and/or uncollateralized deposits as of March 31, 2026. Unpledged investment securities include $136.7 million of CLOs. As CLO rates reset every 90 days to current rates, the volatility of pricing of these securities is limited and the Company could sell such securities for liquidity at a significantly lower loss than selling lower-rate fixed term securities such as US government bonds or municipal bonds.

Previous wording

The Company’s primary liquidity ratio was 18% at September 30, 2025, as compared to an internal policy guideline of “greater than 15%” Ratios and sub-limits for the various components comprising wholesale funding, which were all well within policy guidelines at September 30, 2025, are also periodically reviewed by Management and the Board. The Company has been able to maintain a robust liquidity position in recent periods, but no assurance can be provided that the liquidity position will continue at current strong levels.

Current wording

The Company’s primary liquidity ratio was 20% at March 31, 2026, as compared to an internal policy guideline of “greater than 15%” Ratios and sub-limits for the various components comprising wholesale funding, which were all well within policy guidelines at March 31, 2026, are also periodically reviewed by Management and the Board. The Company has been able to maintain a robust liquidity position in recent periods, but no assurance can be provided that the liquidity position will continue at current strong levels.

Previous wording

The holding company’s primary uses of funds include operating expenses incurred in the normal course of business, interest on trust preferred securities and subordinated debt, shareholder dividends, and share repurchases. Its primary source of funds is dividends from the Bank since the holding company does not conduct regular banking operations. As of September 30, 2025, the holding company maintained a cash balance of $8.4 million. Management anticipates that the holding company has sufficient liquidity to meet its funding requirements for the foreseeable future. Both the holding company and the Bank are subject to legal and regulatory limitations on dividend payments, as outlined in Item 5(c) Dividends in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC.

Current wording

The holding company’s primary uses of funds include operating expenses incurred in the normal course of business, interest on trust preferred securities and subordinated debt, shareholder dividends, and share repurchases. Its primary source of funds is dividends from the Bank since the holding company does not conduct regular banking operations. As of March 31, 2026, the holding company maintained a cash balance of $7.1 million. Management anticipates that the holding company has sufficient liquidity to meet its funding requirements for the foreseeable future. Both the holding company and the Bank are subject to legal and regulatory limitations on dividend payments, as outlined in Item 5(c) Dividends in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC.

Previous wording

Market risk arises from changes in interest rates, exchange rates, commodity prices and equity prices. The Company does not engage in the trading of financial instruments, nor does it have exposure to currency exchange rates. The Company’s market risk exposure is primarily that of interest rate risk and has established policies and procedures to monitor and limit earnings and balance sheet exposure to changes in interest rates. The principal objective of interest rate risk management

Current wording

Market risk arises from changes in interest rates, exchange rates, commodity prices and equity prices. The Company does not engage in the trading of financial instruments, nor does it have exposure to currency exchange rates. The Company’s market risk exposure is primarily that of interest rate risk and has established policies and procedures to monitor and limit earnings and balance sheet exposure to changes in interest rates. The principal objective of interest rate risk management is to manage the financial components of the Company’s balance sheet in a manner that will optimize the risk/reward equation for earnings and capital under a variety of interest rate scenarios.

Previous wording

The Company had total shareholders’ equity of $360.1 million at September 30, 2025, comprised of $104.0 million in common stock, $5.1 million in additional paid-in capital, $276.2 million in retained earnings, and accumulated other comprehensive loss of $25.2 million. At the end of 2024, total shareholders’ equity was $357.3 million.

Current wording

The Company had total shareholders’ equity of $363.7 million at March 31, 2026, comprised of $103.0 million in common stock, $4.2 million in additional paid-in capital, $281.4 million in retained earnings, and accumulated other comprehensive loss of $24.9 million. At the end of 2025, total shareholders’ equity was $364.9 million.

Previous wording

The $2.8 million, or 1%, increase in equity during the first nine months of 2025 was due to the addition of $29.4 million in net income, a $6.1 million favorable change in accumulated other comprehensive loss, due principally to changes in investment securities’ fair value, partially offset by $24.3 million in share repurchases, and $10.3 million in dividends paid. The remaining difference is related to the impact of equity compensation.

Current wording

The $1.1 million, or 0.3%, decrease in equity during the three months of 2026 was due to $9.5 million in share repurchases, a $3.4 million dividend paid to shareholders, and $1.8 million unfavorable swing in other comprehensive income/loss due principally to changes in investment securities’ fair value. These changes were partially offset by $12.5 million in net income recorded during the quarter. The remaining difference was related to stock option and restricted stock activity during the year.

Previous wording

At September 30, 2025, the Company had a 2024 Share Repurchase Plan authorizing 1,000,000 shares of common stock, with an expiration date of October 31, 2025. At September 30, 2025, there were no shares of common stock remaining available for repurchase under the 2024 Share Repurchase plan.

Current wording

At March 31, 2026, the Company had a 2025 Share Repurchase Plan authorizing 1,000,000 shares of common stock, with an expiration date of October 31, 2026. At March 31, 2026, there were 514,329 shares of common stock remaining available for repurchase under the 2025 Share Repurchase plan.

Previous wording

subsidiary maintains a leverage ratio greater than 9%, it will be considered to have met the minimum capital requirements, the capital ratio requirements for the well capitalized category under the Prompt Corrective Action framework, and any other capital or leverage requirements to which the qualifying banking organization is subject. A qualifying community banking organization with a leverage ratio of greater than 9% may opt into the community bank leverage ratio framework if has average consolidated total assets of less than $10 billion, has off-balance-sheet exposures of 25% or less of total consolidated assets, and has total trading assets and trading liabilities of 5% or less of total consolidated assets. Further, the bank must not be an advanced approaches banking organization.

Current wording

The federal banking agencies provide a simplified measure of capital adequacy for qualifying community banking organizations by allowing such banking organizations to opt into the community bank leverage ratio framework. The Company’s subsidiary has opted into the community bank leverage ratio framework. This means that if the Company’s subsidiary maintains a leverage ratio greater than 9%, it will be considered to have met the minimum capital requirements, the capital ratio requirements for the well capitalized category under the Prompt Corrective Action framework, and any other capital or leverage requirements to which the qualifying banking organization is subject. A qualifying community banking organization with a leverage ratio of greater than 9% may opt into the community bank leverage ratio framework if has average consolidated total assets of less than $10 billion, has off-balance-sheet exposures of 25% or less of total consolidated assets, and has total trading assets and trading liabilities of 5% or less of total consolidated assets. Further, the bank must not be an advanced approaches banking organization.