PLUMAS BANCORP

Previous wording

Plumas Bancorp is a bank holding company for Plumas Bank, a California state-chartered commercial bank. We derive our income primarily from interest received on real estate related, commercial, automobile and consumer loans and, to a lesser extent, interest on investment securities and cash balances, fees received in connection with servicing deposit and loan customers and gains from the sale of government guaranteed loans. Our major operating expenses are the interest we pay on deposits and borrowings and general operating expenses. We rely on locally-generated deposits to provide us with funds for making loans.

Current wording

Plumas Bancorp is a bank holding company for Plumas Bank, a California state-chartered commercial bank. We derive our income primarily from interest received on real estate related, commercial, automobile and consumer loans and, to a lesser extent, interest on investment securities and cash balances and fees received in connection with servicing deposit and loan customers. Our major operating expenses are the interest we pay on deposits and borrowings and general operating expenses. We rely on locally-generated deposits to provide us with funds for making loans.

Previous wording

One Sale Agreement provides for the sale to Mountainseed of up to nine properties owned and operated by the Bank as branches (the “Branches”) for an aggregate cash purchase price of approximately $25.7 million, assuming all of the Branches are sold. The second Sale Agreement provides for the sale to Mountainseed of up to three properties operated as non-branch administrative offices (the “Non-Branch Offices”) for an aggregate cash purchase price of $7.9 million, assuming all of the Non-Branch Offices are sold. The closing date on the Non-Branch Offices has been extended to September 16, 2024.

Current wording

On January 19, 2024, Plumas Bank entered into two agreements for the purchase and sale of real property (the “Sale Agreements”). One Sale Agreement provided for the sale to MountainSeed of nine properties owned and operated by Plumas Bank as branches for an aggregate cash purchase price of approximately $25.7 million. The branch portion of the sale was completed on February 14, 2024 resulting in a net gain on sale of $19.9 million, recording of right-of-use assets totaling $22.3 million and recording a lease liability of $22.3 million. The second Sale Agreement provided for the sale to MountainSeed of up to three properties operated as non-branch administrative offices (the “Non-Branch Offices”). This agreement was terminated in August 2024. We continue to review opportunities for the sale of the Non- Branch Offices.

Previous wording

Under the Sale Agreements, the parties have agreed, concurrently with the closing of the sale of the Properties, to enter into triple net lease agreements (the “Lease Agreements”) pursuant to which the Bank will lease each of the Properties sold. Each Lease Agreement will have an initial term of fifteen years with one 15-year renewal option. The Lease Agreements will provide for an annual rent of approximately $3.1 million in the aggregate for all Properties; increased by two percent (2%) per annum for each year during the initial Term. During the renewal term, the initial rent will be the basic rent during the last year of the initial term, increased by two percent (2%) per annum for each year during the renewal term.

Current wording

Concurrently with the closing of the sale of the branch properties, we entered into triple net lease agreements (the “Lease Agreements”) pursuant to which Plumas Bank leased back each of the properties sold. Each Lease Agreement has an initial term of fifteen years with one 15-year renewal option. The Lease Agreements provide for an annual rent of approximately $2.4 million in the aggregate for the nine properties increased by two percent (2%) per annum for each year during the initial Term. During the renewal term, the initial rent will be the basic rent during the last year of the initial term, increased by two percent (2%) per annum for each year during the renewal term.

Previous wording

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 loan grade and borrower repayment performance have been statistically correlated with historical credit losses and various economic metrics, including California unemployment rates, California housing prices, and California gross domestic product. 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. At both January 1, 2023, the adoption and implementation date of ASC Topic 326, and December 31, 2023, the Company utilized a reasonable and supportable forecast period of approximately four quarters and obtained the forecast data from publicly available sources. 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. Management believes that the allowance for credit losses at December 31, 2023, appropriately reflected expected credit losses inherent in the loan portfolio at that date.

Current wording

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 loan grade and borrower repayment performance have been statistically correlated with historical credit losses and various economic metrics, including California unemployment rates, California housing prices, and California gross domestic product. 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. At both January 1, 2023, the adoption and implementation date of ASC Topic 326, and December 31, 2024, the Company utilized a reasonable and supportable forecast period of approximately four quarters and obtained the forecast data from publicly available sources. The Company also considered the impact of portfolio concentrations, changes in underwriting practices, and other risk factors that might influence its loss estimation process. Management believes that the allowance for credit losses at December 31, 2024, appropriately reflected expected credit losses inherent in the loan portfolio at that date.

Previous wording

In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. The Company's policy is that loans designated as nonaccrual no longer share risk characteristics similar to other loans evaluated collectively and as such, all nonaccrual loans are individually evaluated for reserves. As of December 31, 2023 the Bank's nonaccrual loans comprised the entire population of loans individually evaluated. The Company's policy is that nonaccrual loans also represent the subset of loans where borrowers are experiencing financial difficulty where an evaluation of the source of repayment is required to determine if the nonaccrual loans should be categorized as collateral dependent.

Current wording

In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. The Company's policy is that loans designated as nonaccrual no longer share risk characteristics similar to other loans evaluated collectively and as such, all nonaccrual loans, in excess of $100,000, are individually evaluated for reserves. As of December 31, 2024 the Bank's nonaccrual loans comprised the entire population of loans individually evaluated. The Company's policy is that nonaccrual loans in excess of $100,000, also represent the subset of loans where borrowers are experiencing financial difficulty where an evaluation of the source of repayment is required to determine if the nonaccrual loans should be categorized as collateral dependent.

Previous wording

The Company recorded net income of $29.8 million for the year ended December 31, 2023, an increase of $3.4 million or 13% from net income of $26.4 million during the year ended December 31, 2022. Pretax income increased by $4.5 million, or 13%, to $40.2 million in 2023 from $35.7 million during the year ended December 31, 2022. Net interest income increased by $11.3 million to $69.8 million during 2023 from $58.5 million for the year ended ​December 31, 2022. This increase in net interest income resulted from an increase in interest income of $14.8 million partially offset by an increase in interest expense of $3.5 million. Interest and fees on loans, including loans held for sale, increased by $9.3 million; interest on investment securities increased by $6.0 million. These components of the increase in interest income were partially offset by a decline in interest on other interest earning assets of $0.5 million. The provision for credit losses increased from $1.3 million during the twelve months ended December 31, 2022 to $2.8 million during 2023.

Current wording

The Company recorded net income of $28.6 million for the year ended December 31, 2024, a decrease of $1.2 million or 4% from net income of $29.8 million during the year ended December 31, 2023. Pretax income decreased by $1.2 million, or 3%, to $39.0 million in 2024 from $40.2 million during the year ended December 31, 2023. Net interest income increased by $3.9 million to $73.7 million during 2024 from $69.8 million for the year ended ​December 31, 2023. This increase in net interest income resulted from an increase in interest income of $9.7 million partially offset by an increase in interest expense of $5.8 million. Interest and fees on loans increased by $6.4 million; interest on investment securities increased by $2.7 million and interest on other interest earning assets increased by $0.6 million. The provision for credit losses decreased from $2.8 million during the twelve months ended December 31, 2023 to $1.2 million during 2024.

Previous wording

During the year ended December 31, 2023, non-interest income totaled $10.7 million, a decrease of $0.3 million from the $11.0 million earned during 2022. This decrease included a reduction in gain on sale of SBA loans of $2.5 million, partially offset by a gain of $1.7 million on termination of our interest rate swaps during the first quarter of 2023. Non-interest expense increased by $4.9 million from $32.6 million during 2022 to $37.5 million during the twelve months ending December 31, 2023. The provision for income taxes increased by $1.2 million from $9.2 million in 2022 to $10.4 million during the year ended December 31, 2023.

Current wording

During the year ended December 31, 2024, non-interest income totaled $8.8 million, a decrease of $1.9 million from the $10.7 million earned during 2023. Non-interest income in 2023 included a nonrecurring gain of $1.7 million on termination of our interest rate swaps during the first quarter of 2023. Non-interest expense increased by $4.8 million from $37.5 million during 2023 to $42.3 million during the twelve months ending December 31, 2024. The provision for income taxes totaled $10.4 million a decrease of $53 thousand from 2023.

Previous wording

Total assets at December 31, 2023 were $1.6 billion, a decrease of $11 million from December 31, 2022. The largest component of this decrease was a decline in cash and due from banks of $98 million. This was mostly offset by increases of $45 million in net loans and $45 million in investment securities.

Current wording

Total assets at December 31, 2024 were $1.6 billion, an increase of $13 million from December 31, 2023. The largest component of this increase was an increase in net loans of $56.8 million. This was mostly offset by a decrease of $51 million in investment securities.

Previous wording

Shareholders’ equity increased by $28.3 million from $119.0 million at December 31, 2022 to $147.3 million at December 31, 2023. The $28.3 million increase was related to net income during 2023, of $29.8 million, a decline in accumulated other comprehensive loss of $4.3 million and stock option and restricted stock activity of $661,000 partially offset by shareholder dividends of $5.9 million and $554,000 related to the cumulative change from adoption of ASU 2016-13.

Current wording

Shareholders’ equity increased by $30.6 million from $147.3 million at December 31, 2023 to $177.9 million at December 31, 2024. The $30.6 million increase was related to net income during 2024, of $28.6 million, a decline in accumulated other comprehensive loss of $7.3 million and stock option and restricted stock activity of $1.0 million partially offset by shareholder dividends of $6.3 million.

Previous wording

Return on average assets was 1.88% during the twelve months ended December 31, 2023, up from 1.61% during 2022. Return on average equity increased to 23.4% for the twelve months ended December 31, 2023, up from 21.9% during 2022.

Current wording

The return on average assets was 1.74% for the twelve months ended December 31, 2024, down from 1.88% for the twelve months ended December 31, 2023. The return on average equity decreased from 23.4% during 2023 to 17.2% during 2024.

Previous wording

**2023 compared to 2022.Net interest income is the difference between interest income and interest expense. **Net interest income for the year ended December 31, 2023 was $69.8 million, an increase of $11.3 million from the $58.5 million earned during 2022. The increase in net interest income includes an increase of $14.8 million in interest income partially offset by an increase of $3.5 million in interest expense. Interest and fees on loans, including loans held for sale, increased by $9.3 million related to growth in the loan portfolio and an increase in yield on the portfolio. Net loan fees/costs declined from net fees of $234,000 during 2022 to net costs of $1.3 million during 2023. This decline is mostly related to a decline in fees earned on PPP loans. The average yield on loans, including loans held for sale, increased by 61 basis points from 5.28% during 2022 to 5.89% during 2023. The average prime rate increased from 4.86% in 2022 to 8.20% in 2023.

Current wording

2023 compared to 2022. Net interest income for the year ended December 31, 2023 was $69.8 million, an increase of $11.3 million from the $58.5 million earned during 2022. The increase in net interest income includes an increase of $14.8 million in interest income partially offset by an increase of $3.5 million in interest expense. Interest and fees on loans, including loans held for sale, increased by $9.3 million related to growth in the loan portfolio and an increase in yield on the portfolio. Net loan fees/costs declined from net fees of $234,000 during 2022 to net costs of $1.3 million during 2023. This decline is mostly related to a decline in fees earned on PPP loans. The average yield on loans, including loans held for sale, increased by 61 basis points from 5.28% during 2022 to 5.89% during 2023. The average prime rate increased from 4.86% in 2022 to 8.20% in 2023.

Previous wording

Provision for credit losses. On January 1, 2023, the Company adopted ASU 2016-03Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology, referred to as the current expected credit loss (CECL) methodology. Upon adoption of CECL we recorded an increase in the allowance for credit losses of $529,000 and an increase in the reserve for unfunded commitments of $258,000. During 2023 we recorded a provision for credit losses of $2,775,000 an increase of $1,475,000 from $1,300,000 during 2022. The provision for credit losses during the current period consisted of a provision for credit losses-loans of $2,575,000 and an increase in the reserve for unfunded commitments of $200,000. The increase in the reserves includes growth in the loan portfolio, an increase in qualitative reserves related to the continuation of increases in market interest rates and a reduction in economic activity. As time progresses the results of economic conditions will require CECL model assumption inputs to change and further refinements to the estimation process may also be identified. See “Analysis of Asset Quality and Allowance for Credit Losses” for a discussion of loan quality trends and the provision for credit losses.

Current wording

Provision for credit losses. During 2024 we recorded a provision for credit losses of $1.2 million consisting of a provision for credit losses on loans of $1.4 million and a decrease in the reserve for unfunded commitments of $179 thousand. On January 1, 2023, the Company adopted ASU 2016-03Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology, referred to as the current expected credit loss (CECL) methodology. Upon adoption of CECL we recorded an increase in the allowance for credit losses of $529,000 and an increase in the reserve for unfunded commitments of $258,000. During 2023 we recorded a provision for credit losses of $2,775,000 an increase of $1,475,000 from $1,300,000 during 2022. As time progresses the results of economic conditions will require CECL model assumption inputs to change and further refinements to the estimation process may also be identified. See “Analysis of Asset Quality and Allowance for Credit Losses” for a discussion of loan quality trends and the provision for credit losses.

Previous wording

During the fourth quarter of 2022 and continuing into 2023 we experienced a significant decline in premiums received on the sale of SBA loans; in response we chose to portfolio SBA 7(a) loans which do not meet a minimum premium on sale. During the current period we chose not to sell $4.1 million in salable guaranteed portions of SBA 7(a) loans as they did not meet our minimum premium on sale. Additionally, the SBA 7(a) loan product that is salable in the open market is variable rate tied to prime and we have seen a significant decline in interest in this product given the recent increases in the prime rate. While we continue to produce SBA 7(a) loans for sale at a greatly reduced rate, we have had success in funding fixed rate SBA 7(a) loans which we portfolio. At December 31, 2023, fixed rate SBA 7(a) loans totaled $23 million.

Current wording

During the fourth quarter of 2022 and continuing into 2023 we experienced a significant decline in premiums received on the sale of SBA loans; in response we chose to portfolio SBA 7(a) loans which do not meet a minimum premium on sale. During 2023 we chose not to sell $4.1 million in salable guaranteed portions of SBA 7(a) loans as they did not meet our minimum premium on sale. Additionally, the SBA 7(a) loan product that is salable in the open market is variable rate tied to prime and we have seen a significant decline in interest in this product given the recent increases in the prime rate. While we continue to produce SBA 7(a) loans for sale at a greatly reduced rate, we have had success in funding fixed rate SBA 7(a) loans which we portfolio. At December 31, 2023, fixed rate SBA 7(a) loans totaled $23 million.

Previous wording

**Provision for Income Taxes.**The Company recorded an income tax provision of $10.4 million, or 26.0% of pre-tax income for the year ended December 31, 2023. This compares to an income tax provision of $9.2 million, or 25.9% of pre-tax income during 2022. The percentages for 2023 and 2022 differ from statutory rates as tax exempt items of income such as earnings on Bank owned life insurance and municipal securities interest decrease taxable income.

Current wording

**Provision for Income Taxes.**The Company recorded an income tax provision of $10.4 million, or 26.6% of pre-tax income for the year ended December 31, 2024. This compares to an income tax provision of $10.4 million, or 26.0% of pre-tax income during 2023. The percentages for 2024 and 2023 differ from statutory rates as tax exempt items of income such as earnings on Bank owned life insurance and municipal securities interest decrease taxable income.

Previous wording

**Loan Portfolio.**Gross loans, excluding loans held for sale, increased by $47 million, or 5%, from $912 million at December 31, 2022, to $959 million at December 31, 2023. Increases in loans included $28 million in commercial real estate loans, $14 million in construction loans, $7 million in agricultural loans, $2 million in equity lines of credit, and $1 million in automobile loans; these items were partially offset by decreases of $3 million in residential real estate loans and $2 million in commercial loans. Although the Company offers a broad array of financing options, it continues to concentrate its focus on small to medium sized commercial businesses. These loans offer diversification as to industries and types of businesses, thus limiting material exposure in any industry concentrations. The Company offers both fixed and floating rate loans and obtains collateral in the form of real property, business assets and deposit accounts, but looks to business and personal cash flows as its primary source of repayment. In the fourth quarter of 2023 we terminated our indirect auto loan program. Ending this program, which was our lowest yielding loan segment, also improved our loan loss risk profile since this program had historically higher charge-off rates. Terminating this program also improved our consumer compliance risk profile.

Current wording

**Loan Portfolio.**Gross loans increased by approximately $57 million, or 6%, from $959 million at December 31, 2023, to $1.0 billion at December 31, 2024. Increases in loans included $102 million in commercial real estate loans and $3 million in commercial loans. These items were partially offset by decreases of $33 million in auto loans, $11 million in agricultural loans and $4 million in construction loans. Although the Company offers a broad array of financing options, it continues to concentrate its focus on small to medium sized commercial businesses. These loans offer diversification as to industries and types of businesses, thus limiting material exposure in any industry concentrations. The Company offers both fixed and floating rate loans and obtains collateral in the form of real property, business assets and deposit accounts, but looks to business and personal cash flows as its primary source of repayment. In the fourth quarter of 2023 we terminated our indirect automobile loan program. Ending this program, which was our lowest yielding loan segment, also improved our loan loss risk profile since this program had historically higher charge-off rates. Terminating this program also improved our consumer compliance risk profile.

Previous wording

The Company’s real estate related loans, including real estate mortgage loans, real estate construction and land development loans, consumer equity lines of credit, and agricultural loans secured by real estate, comprised 77% of the total loan portfolio at December 31, 2023. Moreover, the business activities of the Company currently are focused in the California counties of Butte, Lassen, Modoc, Nevada, Placer, Plumas, Shasta and Sutter and in Washoe and Carson City Counties in Northern Nevada. Consequently, the results of operations and financial condition of the Company are dependent upon the general trends in these economies and, in particular, the commercial real estate markets. In addition, the concentration of the Company's operations in these areas of Northeastern California and Northwestern Nevada exposes it to greater risk than other banking companies with a wider geographic base in the event of catastrophes, such as earthquakes, fires and floods in these regions.

Current wording

The Company’s real estate related loans, including real estate mortgage loans, real estate construction and land development loans, consumer equity lines of credit, and agricultural loans secured by real estate, comprised 82% of the total loan portfolio at December 31, 2024. Moreover, the business activities of the Company currently are focused in the California counties of Butte, Lassen, Modoc, Nevada, Placer, Plumas, Shasta and Sutter and in Washoe and Carson City Counties in Northern Nevada. Consequently, the results of operations and financial condition of the Company are dependent upon the general trends in these economies and, in particular, the commercial real estate markets. In addition, the concentration of the Company's operations in these areas of Northeastern California and Northwestern Nevada exposes it to greater risk than other banking companies with a wider geographic base in the event of catastrophes, such as earthquakes, fires and floods in these regions.

Previous wording

The rates of interest charged on variable rate loans are set at specific increments in relation to the Company's lending rate or other indexes such as the published prime interest rate or U.S. Treasury rates and vary with changes in these indexes. The frequency in which variable rate loans reprice can vary from one day to several years. At December 31, 2023 and December 31, 2022, approximately 78% and 80% respectively, of the Company's loan portfolio was comprised of variable rate loans. Loans indexed to the prime interest rate were approximately 20% of the Company’s loan portfolio; these loans reprice within one day to three months of a change in the prime rate. The remainder of the Company's variable rate loans mostly consist of commercial real estate loans tied to U.S. Treasury rates and reprice every five years. While real estate mortgage, agricultural, commercial and consumer lending remain the foundation of the Company's historical loan mix, some changes in the mix have occurred due to the changing economic environment and the resulting change in demand for certain loan types.

Current wording

The rates of interest charged on variable rate loans are set at specific increments in relation to the Company's lending rate or other indexes such as the published prime interest rate or U.S. Treasury rates and vary with changes in these indexes. The frequency in which variable rate loans reprice can vary from one day to several years. At December 31, 2024 and December 31, 2023, approximately 77% and 78%, respectively, of the Company's loan portfolio was comprised of variable rate loans. Loans indexed to the prime interest rate were approximately 21% of the Company’s variable rate loan portfolio on December 31, 2024; these loans reprice within one day to three months of a change in the prime rate. The remainder of the Company's variable rate loans mostly consist of commercial real estate loans tied to U.S. Treasury rates and reprice every five years. Approximately 76% of the variable rate loans are indexed to the five-year T-Bill rate and reprice every five years. While real estate mortgage, agricultural, commercial and consumer lending remain the foundation of the Company's historical loan mix, some changes in the mix have occurred due to the changing economic environment and the resulting change in demand for certain loan types.

Previous wording

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 loan grade and borrower repayment performance have been statistically correlated with historical credit losses and various economic metrics including California unemployment rates, California Housing Prices and California gross domestic product. 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. At both January 1, 2023, the adoption and implementation date of ASC Topic 326, and December 31, 2023, the Company utilized a reasonable and supportable forecast period of approximately four quarters and obtained the forecast data from publicly available sources. 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. Management believes that the allowance for credit losses at December 31, 2023, appropriately reflected expected credit losses inherent in the loan portfolio at that date.

Current wording

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 loan grade and borrower repayment performance have been statistically correlated with historical credit losses and various economic metrics including California unemployment rates, California Housing Prices and California gross domestic product. 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. At both December 31, 2024, and December 31, 2023, the Company utilized a reasonable and supportable forecast period of approximately four quarters and obtained the forecast data from publicly available sources. The Company also considered the impact of portfolio concentrations, changes in underwriting practices and other risk factors that might influence its loss estimation process. Management believes that the allowance for credit losses at December 31, 2024, appropriately reflected expected credit losses inherent in the loan portfolio at that date.

Previous wording

In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. The Company's policy is that loans designated as nonaccrual no longer share risk characteristics similar to other loans evaluated collectively and as such, all nonaccrual loans are individually evaluated for reserves. As of December 31, 2023, the Bank's nonaccrual loans comprised the entire population of loans individually evaluated. The Company's policy is that nonaccrual loans also represent the subset of loans in which borrowers are experiencing financial difficulty such that an evaluation of the source of repayment is required to determine if the nonaccrual loans should be categorized as collateral dependent.

Current wording

In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. The Company's policy is that loans designated as nonaccrual no longer share risk characteristics similar to other loans evaluated collectively and as such, all nonaccrual loans are individually evaluated for reserves. As of December 31, 2024, the Bank's nonaccrual loans in excess of $100,000 comprised the entire population of loans individually evaluated. The Company's policy is that nonaccrual loans also represent the subset of loans in which borrowers are experiencing financial difficulty such that an evaluation of the source of repayment is required to determine if the nonaccrual loans should be categorized as collateral dependent.

Previous wording

The allowance for credit losses totaled $12.9 million at December 31, 2023, and $10.7 million at December 31, 2022. At least quarterly, the Company evaluates each specific reserve and if it determines that the loss represented by the specific reserve is uncollectable it records a charge-off for the uncollectable portion. Specific reserves related to collateral dependent loans totaled $28,000 on December 31, 2023. There were no specific reserves related to collateral dependent loans on December 31, 2022. The allowance for credit losses as a percentage of total loans was 1.34% on December 31, 2023 and 1.18% on December 31, 2022.

Current wording

The allowance for credit losses totaled $13.2 million at December 31, 2024, and $12.9 million at December 31, 2023. At least quarterly, the Company evaluates each specific reserve and if it determines that the loss represented by the specific reserve is uncollectable it records a charge-off for the uncollectable portion. Specific reserves related to collateral dependent loans totaled $29,000 and $28,000 at December 31, 2024, and December 31, 2023, respectively. The allowance for credit losses as a percentage of total loans was 1.30% on December 31, 2024, and 1.34% on December 31, 2023.

Previous wording

A substandard loan is not adequately protected by the current sound worth and paying capacity of the borrower or the value of the collateral pledged, if any. Total substandard loans increased by $18.3 million from $3.4 million on December 31, 2022 to $21.7 million on December 31, 2023. Loans classified as special mention decreased by $13.5 million from $22.8 million on December 31, 2022 to $9.3 million on December 31, 2023. The increase in substandard loans is primarily related to agricultural loans to one borrower. At December 31, 2023 the loans to this borrower are on accrual status; however, they could move to nonaccrual if the borrower's financial condition worsens, the Bank's collateral position in respect to these loans deteriorates, or if the borrower is unable to meet their payment obligations.

Current wording

A substandard loan is not adequately protected by the current sound worth and paying capacity of the borrower or the value of the collateral pledged, if any. Total substandard loans increased by $1.3 million from $21.7 million on December 31, 2023, to $23.0 million on December 31, 2024. Loans classified as special mention increased by $2.7 million from $9.3 million on December 31, 2023, to $12.0 million on December 31, 2024.

Previous wording

OREO represents real property acquired by the Bank either through foreclosure or through a deed in lieu thereof from the borrower. Repossessed assets include vehicles and other commercial assets acquired under agreements with delinquent borrowers. OREO holdings represented one property totaling $357 thousand at December 31, 2023. There were no OREO holdings at December 31, 2022. Nonperforming assets as a percentage of total assets were 0.33% at December 31, 2023 and 0.07% at December 31, 2022.

Current wording

OREO represent real property acquired by the Bank either through foreclosure or through a deed in lieu thereof from the borrower. Repossessed assets include vehicles and other commercial assets acquired under agreements with delinquent borrowers. OREO holdings represented one property totaling $91,000 on December 31, 2024, and one property totaling $357,000 at December 31, 2023.

Previous wording

**Investment Portfolio and Federal Reserve Balances.**Total investment securities were $489.2 million as of December 31, 2023 and $444.7 million as of December 31, 2022. Net unrealized losses on available-for-sale investment securities totaling $46.1 million were recorded, net of $13.6 million in tax benefit, as accumulated other comprehensive loss within shareholders' equity at December 31, 2023. Net unrealized losses on available-for-sale investment securities totaling $54.2 million were recorded, net of $16.0 million in tax benefit, as accumulated other comprehensive income within shareholders' equity at December 31, 2022. No securities were sold during the twelve months ended December 31, 2023 and 2022.

Current wording

**Investment Portfolio and Federal Reserve Balances.**Total investment securities were $437.7 million as of December 31, 2024, and $489.2 million at December 31, 2023. Unrealized losses on available-for-sale investment securities totaling $35.7 million were recorded, net of $10.6 million in tax benefits, as accumulated other comprehensive loss within shareholders' equity at December 31, 2024. During the first quarter of 2024 we sold $116 million in investment securities having a weighted average tax equivalent yield of 2.24% recording a $19.8 million loss on sale. Beginning in December 2023 and ending on March 27, 2024 we purchased $120 million in investment securities having a weighted average tax equivalent yield of 5.25%. These sales and purchases were made as part of the investment restructure described earlier. No securities were sold during 2023.

Previous wording

The investment portfolio at December 31, 2023 consisted of $6.9 million in U.S. Treasury securities, $235.9 million in securities of U.S. Government-sponsored agencies, $116.0 million in securities of U.S. Government-agencies and 244 municipal securities totaling $130.4 million. The investment portfolio at December 31, 2022 consisted of $9.7 million in U.S. Treasury securities, $214.4 million in securities of U.S. Government-sponsored agencies, $99.6 million in securities of U.S. Government-agencies and 239 municipal securities totaling $121.0 million.

Current wording

The investment portfolio at December 31, 2024, consisted of $350.2 million in securities of U.S. Government-sponsored agencies and U.S. Government agencies, and 170 municipal securities totaling $87.5 million. The investment portfolio at December 31, 2023 consisted of $6.9 million in U.S. Treasury securities, $351.9 million in securities of U.S. Government-sponsored agencies and U.S. Government agencies and 244 municipal securities totaling $130.4 million.

Previous wording

There were no Federal funds sold at December 31, 2023 and December 31, 2022; however, the Bank maintained interest earning balances at the Federal Reserve Bank totaling $52.9 million at December 31, 2023 and $154.4 million at December 31, 2022. The balance, on December 31, 2023, earns interest at the rate of 5.40%.

Current wording

There were no Federal funds sold at December 31, 2024, and December 31, 2023; however, the Bank maintained interest earning balances at the Federal Reserve Bank totaling $47.2 million at December 31, 2024 and $52.9 million at December 31, 2023. The balance, on December 31, 2024, earns interest at the rate of 4.40%.

Previous wording

Total deposits decreased by $124 million to $1.3 billion at December 31, 2023. The decrease in deposits includes decreases of $74 million in demand deposits, $69 million in savings, and $24 million in money market accounts deposits. Partially offsetting these decreases was an increase in time deposit of $43 million. On December 31, 2023, 52% of the Company’s deposits were in the form of non-interest-bearing demand deposits.

Current wording

**Deposits.**Deposits totaled $1.4 billion on December 31, 2024, an increase of $37 million from December 31, 2023. The increase in deposits includes increases of $7 million in demand deposits, $53 million in money market accounts and $2 million in time deposits. Partially offsetting these increases was a $25 million decrease in savings deposits. At December 31, 2024, 51% of the Company’s deposits were in the form of non-interest-bearing demand deposits. The Company has no brokered deposits.

Previous wording

Short-term Borrowing Arrangements. The Company is a member of the Federal Home Loan Bank of San Francisco (FHLB) and can borrow up to $215 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $396 million. The Company is required to hold FHLB stock as a condition of membership. At December 31, 2023, the Company held $6.2 million of FHLB stock which is recorded as a component of other assets.

Current wording

Short-term Borrowing Arrangements. The Company is a member of the Federal Home Loan Bank of San Francisco (FHLB) and can borrow up to $248 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $433 million. The Company is required to hold FHLB stock as a condition of membership. At December 31, 2024, the Company held $6.2 million of FHLB stock which is recorded as a component of other assets. The Company is also eligible to borrow at the FRB Discount Window. At December 31, 2024 the Company could borrow up to $116 million at the Discount Window secured by investment securities with a fair value of $120 million. In addition to its FHLB borrowing line and the Discount Window, the Company has unsecured short-term borrowing agreements with two of its correspondent banks in the amounts of $50 million and $20 million. There were no outstanding borrowings to the FHLB, FRB Discount Window or the correspondent banks at December 31, 2024, and December 31, 2023.

Previous wording

Borrowings increased by $90 million. There were no borrowings outstanding at December 31, 2022; however, there were $10 million in junior subordinated deferrable interest debentures which were redeemed in 2023. The Company is eligible to participate in the Bank Term Funding Program (BTFP). The Federal Reserve Board, on March 12, 2023, announced the creation of a new BTFP. The BTFP offers loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets are valued at par. At December 31, 2023, the Company had outstanding borrowings under the BTFP totaling $80 million, secured by $107 million in par value of securities pledged as collateral under the BTFP.

Current wording

The Federal Reserve Board, on March 12, 2023, announced the creation of the Bank Term Funding Program (BTFP). The BTFP offered loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets where valued at par. At December 31, 2023, the Company had outstanding borrowings under the Bank Term Funding Program (BTFP) totaling $80 million. In January 2024, the Company borrowed an additional $25 million under the BTFP. During September 2024 we made a $45 million payment resulting in a balance of $60 million and in November 2024 we paid off the $60 million balance. Interest expense recognized on the BTFP borrowings for the twelve months ended December 31, 2024, and 2023 totaled $4.0 million and $527,000, respectively.

Previous wording

Note Payable. On January 25, 2022 the Company replaced its existing $15 million line of credit facility with a $15 million Loan Agreement (the “Loan Agreement”) and Promissory Note (the “Term Note”). The Term Note matures on January 25, 2035 and can be prepaid at any time. During the initial three years of the Loan Agreement the Term Note functions as an interest only revolving line of credit. Beginning on year four the Term Note converts into a term loan requiring semi-annual principal and interest payments and no further advances can be made. The proceeds of this lending facility shall be used by the Company for general corporation purposes, and to provide capital injections into the Bank. The Term Note bears interest at a fixed rate of 3.85% for the first 5 years and then at a floating interest rate linked to WSJ Prime Rate for the remaining eight year term. The Loan Agreement provides for a $187,500 loan fee. The Note is secured by the common stock of the Bank. The Loan Agreement contains certain financial and non-financial covenants, which include, but are not limited to, a minimum leverage ratio at the Bank, a minimum total risk-based capital ratio at the Bank, a maximum Texas Ratio at the Bank, a minimum level of Tier 1 capital at the Bank and a return on average assets needed to generate a 1.25X debt service coverage ratio. The Loan Agreement also contains customary events of default, including, but not limited to, failure to pay principal or interest, the commencement of certain bankruptcy proceedings, and certain adverse regulatory events affecting the Company or the Bank. Upon the occurrence of an event of default under the Loan Agreement, the Company’s obligations under the Loan Agreement may be accelerated. In March 2023 the Company borrowed $10 million on this note and used the proceeds to redeem its Trust Preferred securities as described below. The Company was in compliance with all covenants related to the Term Note at December 31, 2023. Interest expense recognized on the Term Note for the twelve months ended December 31, 2023, totaled $369 thousand. There were no borrowings on the Term Note during 2022.

Current wording

Note Payable. On January 25, 2022 the Company replaced its $15 million line of credit facility with a $15 million Loan Agreement (the “Loan Agreement”) and Promissory Note (the “Term Note”). The Term Note matures on January 25, 2035 and can be prepaid at any time. During the initial three years of the Loan Agreement the Term Note functions as an interest only revolving line of credit. Beginning on year four the Term Note converts into a term loan requiring semi-annual principal and interest payments and no further advances can be made. The proceeds of this lending facility shall be used by the Company for general corporation purposes, and to provide capital injections into the Bank. The Term Note bears interest at a fixed rate of 3.85% for the first 5 years and then at a floating interest rate linked to WSJ Prime Rate for the remaining eight year term. The Loan Agreement provides for a $187,500 loan fee. The Note is secured by the common stock of the Bank. The Loan Agreement contains certain financial and non-financial covenants, which include, but are not limited to, a minimum leverage ratio at the Bank, a minimum total risk-based capital ratio at the Bank, a maximum Texas Ratio at the Bank, a minimum level of Tier 1 capital at the Bank and a return on average assets needed to generate a 1.25X debt service coverage ratio. The Loan Agreement also contains customary events of default, including, but not limited to, failure to pay principal or interest, the commencement of certain bankruptcy proceedings, and certain adverse regulatory events affecting the Company or the Bank. Upon the occurrence of an event of default under the Loan Agreement, the Company’s obligations under the Loan Agreement may be accelerated. In March 2023 the Company borrowed $10 million on this note and used the proceeds to redeem its Trust Preferred securities as described below. During January of 2024 the Company borrowed an additional $5 million under this note for general corporate purposes. The Company was in compliance with all covenants related to the Term Note at December 31, 2024. Interest expense recognized on the Term Note for the twelve months ended December 31, 2024 and 2023 totaled $641 thousand and $369 thousand, respectively.

Previous wording

**Repurchase Agreements.**The Bank offers a repurchase agreement product for its larger customers which use securities sold under agreements to repurchase as an alternative to interest-bearing deposits. Securities sold under agreements to repurchase totaling $23.1 million and $18.6 million at December 31, 2023, and December 31, 2022, respectively are secured by U.S. Government agency securities with a carrying amount of $34.1 million and $29.6 million at December 31, 2023, and December 31, 2022, respectively. Interest paid on this product is similar to, but less than, that which is paid on the Bank’s money market accounts; however, these are not deposits and are not FDIC insured.

Current wording

**Repurchase Agreements.**The Bank offers a repurchase agreement product for its larger customers which use securities sold under agreements to repurchase as an alternative to interest-bearing deposits. Securities sold under agreements to repurchase totaling $22.1 million and $23.1 million at December 31, 2024 and December 31, 2023, respectively, are secured by U.S. Government agency securities with a carrying amount of $38.5 million and $34.1 million at December 31, 2024 and December 31, 2023, respectively. Interest paid on this product is similar to, but less than, that which is paid on the Bank’s money market accounts; however, these are not deposits and are not FDIC insured.

Previous wording

**Junior Subordinated Deferrable Interest Debentures.**During 2002, Plumas Statutory Trust I issued 6,000 Floating Rate Capital Trust Pass-Through Securities ("Trust Preferred Securities"), with a liquidation value of $1,000 per security, for gross proceeds of $6,000,000. During 2005, Plumas Statutory Trust II issued 4,000 Trust Preferred Securities with a liquidation value of $1,000 per security, for gross proceeds of $4,000,000. The entire proceeds were invested by Trust I in the amount of $6,186,000 and Trust II in the amount of $4,124,000 in Floating Rate Junior Subordinated Deferrable Interest Debentures (the "Subordinated Debentures") issued by the Company, with identical maturity, repricing and payment terms as the Trust Preferred Securities. The Subordinated Debentures represent the sole assets of Trusts I and II.

Current wording

**Junior Subordinated Deferrable Interest Debentures.**During 2002, Plumas Statutory Trust I issued 6,000 Floating Rate Capital Trust Pass-Through Securities ("Trust Preferred Securities"), with a liquidation value of $1,000 per security, for gross proceeds of $6,000,000. During 2005, Plumas Statutory Trust II issued 4,000 Trust Preferred Securities with a liquidation value of $1,000 per security, for gross proceeds of $4,000,000. The entire proceeds were invested by Trust I in the amount of $6,186,000 and Trust II in the amount of $4,124,000 in Floating Rate Junior Subordinated Deferrable Interest Debentures (the "Subordinated Debentures") issued by the Company, with identical maturity, repricing and payment terms as the Trust Preferred Securities. The Subordinated Debentures represented the sole assets of Trusts I and II.

Previous wording

Interest expense, net of the effect of interest rate swaps, recognized by the Company for the years ended December 31, 2023, 2022 and 2021 related to the subordinated debentures was $141,000, $359,000 and $348,000, respectively. See the following paragraph for a description of the swaps.

Current wording

Interest expense, net of the effect of interest rate swaps, recognized by the Company for the years ended December 31, 2023 and 2022 related to the subordinated debentures was $141,000 and $359,000, respectively.

Previous wording

Interest Rate Swaps. On May 26, 2020 we entered into two separate interest rate swap agreements with notional amounts totaling $10 million, effectively converting the $10 million in Subordinated Debentures to fixed obligations. The swaps have a 10 year maturity and fix the labor rate on the Subordinated Debentures at approximately 75 basis points. These agreements have been designated and qualify as cash flow hedging instruments and, as such, changes in the fair value are recorded in accumulated other comprehensive income/loss to the extent the agreements are effective hedges. The swaps were determined to be fully effective during all periods presented. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other assets with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. In January, 2023 we terminated the swap agreements receiving $1.7 million in proceeds on termination.

Current wording

Interest Rate Swaps. On May 26, 2020 we entered into two separate interest rate swap agreements with notional amounts totaling $10 million, effectively converting the $10 million in Subordinated Debentures to fixed obligations. The swaps had a 10-year maturity and fix the libor rate on the Subordinated Debentures at approximately 75 basis points. These agreements had been designated and qualify as cash flow hedging instruments and, as such, changes in the fair value are recorded in accumulated other comprehensive income/loss to the extent the agreements are effective hedges. The swaps were determined to be fully effective during all periods presented. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other assets with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. In January 2023 we terminated the swap agreements receiving $1.7 million in proceeds on termination.

Previous wording

Shareholders’ equity increased by $28.3 million from $119.0 million at December 31, 2022 to $147.3 million at December 31, 2023. The $28.3 million increase was related to net income during 2023, of $29.8 million, a decline in accumulated other comprehensive loss of $4.3 million and stock option and restricted stock activity of $661,000 partially offset by shareholder dividends of $5.9 million and $554,000 related to the cumulative change from adoption of ASU 2016-13.

Current wording

Shareholders’ equity increased by $30.6 million from $147.3 million at December 31, 2023 to $177.9 million at December 31, 2024. The $30.6 million increase was related to net income during 2024 of $28.6 million, a decline in accumulated other comprehensive loss of $7.3 million and stock option and restricted stock activity of $1.0 million partially offset by shareholder dividends of $6.3 million.

Previous wording

It is the policy of the Company to periodically distribute excess retained earnings to the shareholders through the payment of cash dividends. Such dividends help promote shareholder value and capital adequacy by enhancing the marketability of the Company’s stock. All authority to provide a return to the shareholders in the form of a cash or stock dividend or split rests with the Board of Directors. The Board will periodically, but on no regular schedule, review the appropriateness of a cash dividend payment. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. The Company paid a quarterly cash dividend of $0.25 per share on November 15, 2023, August 15, 2023, May 15, 2023 and February 15, 2023 and a quarterly cash dividend of $0.16 per share on February 15, 2022, May 16, 2022, August 15, 2022, and November 15, 2022, and a quarterly cash dividend of 14 cents per share on February 15, 2021, May 17, 2021, August 16, 2021, and November 15, 2021.

Current wording

It is the policy of the Company to periodically distribute excess retained earnings to the shareholders through the payment of cash dividends. Such dividends help promote shareholder value and capital adequacy by enhancing the marketability of the Company’s stock. All authority to provide a return to the shareholders in the form of a cash or stock dividend or split rests with the Board of Directors. The Board will periodically, but on no regular schedule, review the appropriateness of a cash dividend payment. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. The Company paid a quarterly cash dividend of $0.27 per share on November 15, 2024, August 15, 2024, May 15, 2024 and February 15, 2024, and a quarterly cash dividend of $0.25 per share on November 15, 2023, August 15, 2023, May 15, 2023, and February 15, 2023.

Previous wording

**Loan Commitments.**In the normal course of business, there are various commitments outstanding to extend credits that are not reflected in the financial statements. Commitments to extend credit and letters of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Annual review of commercial credit lines, letters of credit and ongoing monitoring of outstanding balances reduces the risk of loss associated with these commitments. As of December 31, 2023, the Company had $174.6 million in unfunded loan commitments and $108 thousand in letters of credit. This compares to $178.7 million in unfunded loan commitments and no letters of credit at December 31, 2022. Of the $174.6 million in unfunded loan commitments, $111.2 million and $63.4 million represented commitments to commercial and consumer customers, respectively. Of the total unfunded commitments at December 31, 2023, $114.3 million were secured by real estate, of which $60.2 million was secured by commercial real estate and $54.1 million was secured by residential real estate mostly in the form of equity lines of credit. The commercial loan commitments not secured by real estate primarily represent business lines of credit, while the consumer loan commitments not secured by real estate primarily represent revolving credit card lines and overdraft protection lines. Since some of the commitments are expected to expire without being drawn upon the total commitment amounts do not necessarily represent future cash requirements.

Current wording

**Loan Commitments.**In the normal course of business, there are various commitments outstanding to extend credits that are not reflected in the financial statements. Commitments to extend credit and letters of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Annual review of commercial credit lines, letters of credit and ongoing monitoring of outstanding balances reduces the risk of loss associated with these commitments. As of December 31, 2024, the Company had $155.4 million in unfunded loan commitments and no letters of credit. This compares to $174.6 million in unfunded loan commitments and $108,000 in letters of credit at December 31, 2023. Of the $155.4 million in unfunded loan commitments, $92.7 million and $62.7 million represent commitments to commercial and consumer customers, respectively. Of the total unfunded commitments at December 31, 2024, $91.7 million were secured by real estate, of which $37.8 million was secured by commercial real estate and $53.9 million was secured by residential real estate mostly in the form of equity lines of credit. The commercial loan commitments not secured by real estate primarily represent business lines of credit, while the consumer loan commitments not secured by real estate primarily represent revolving credit card lines and overdraft protection lines. Since some of the commitments are expected to expire without being drawn upon the total commitment amounts do not necessarily represent future cash requirements.

Previous wording

Operating Leases. The Company leases two lending offices, two branch offices, the land under our Yuba City branch, three administrative offices and two standalone ATM locations. The expiration dates of the leases vary, with the first such lease expiring during 2024 and the last such lease expiring during 2044. Including variable lease expense, total rent expense for the years ended December 31, 2023, 2022 and 2021 was $635,000, $611,000 and $507,000, respectively.

Current wording

Operating Leases. The Company’s leases eleven branches. Our Yuba City branch is classified as owned; however, it is subject to a long-term land lease. The Company also leases two lending offices and four administrative offices and owns three administrative facilities. The expiration dates of the leases vary, with the first such lease expiring during 2025 and the last such lease expiring during 2044. Including variable lease expense, total rent expense for the years ended December 31, 2024, 2023 and 2022 was $3.1 million, $635 thousand and $611 thousand, respectively.

Previous wording

The Company is a member of the Federal Home Loan Bank of San Francisco (FHLB) and can borrow up to $215 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $396 million. The Company is also eligible to participate in the Bank Term Lending Program. At December 31, 2023, the Company had outstanding borrowings under the BTFP totaling $80 million, secured by $107 million in par value of securities pledged as collateral under the BTFP. In addition to its FHLB borrowing line and the BTFP, the Company has unsecured short-term borrowing agreements with two of its correspondent banks in the amounts of $50 million and $20 million. There were no outstanding borrowings to the FHLB, or the correspondent banks at December 31, 2023, and December 31, 2022.

Current wording

The Company is a member of the Federal Home Loan Bank of San Francisco (FHLB) and can borrow up to $248 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $433 million. The Company is also eligible to borrow at the FRB Discount Window. At December 31, 2024 the Company could borrow up to $116 million at the Discount Window secured by investment securities with a fair value of $120 million. In addition to its FHLB borrowing line and the Discount Window, the Company has unsecured short-term borrowing agreements with two of its correspondent banks in the amounts of $50 million and $20 million. There were no outstanding borrowings to the FHLB, FRB Discount Window or the correspondent banks at December 31, 2024, and December 31, 2023.

Previous wording

Customer deposits are the Company’s primary source of funds. Total deposits decreased by $124 million from $1.5 billion at December 31, 2022, to $1.3 billion at December 31, 2023. Deposits are held in various forms with varying maturities. The Company estimates that it has approximately $416 million in uninsured deposits. Of this amount, $85 million represents deposits that are collateralized such as deposits of states, municipalities and tribal accounts.

Current wording

Customer deposits are the Company’s primary source of funds. Total deposits increased by $37 million from $1.3 billion at December 31, 2023 to $1.4 billion at December 31, 2024. Deposits are held in various forms with varying maturities. The Company estimates that it has approximately $496 million in uninsured deposits which includes uninsured deposits of Plumas Bancorp. Of this amount, $128 million represents deposits that are collateralized such as deposits of states, municipalities and tribal accounts.

Previous wording

The Company’s securities portfolio, Federal funds sold, FHLB advances, and cash and due from banks serve as the primary sources of liquidity, providing adequate funding for loans during periods of high loan demand. During periods of decreased lending, funds obtained from the maturing or sale of investments, loan payments, and new deposits are invested in short-term earning assets, such as cash held at the FRB, Federal funds sold and investment securities, to serve as a source of funding for future loan growth. Management believes that the Company’s available sources of funds, including borrowings, will provide adequate liquidity for its operations in the foreseeable future.

Current wording

The Company’s securities portfolio, Discount Window advances, FHLB advances, and cash and due from banks serve as the primary sources of liquidity, providing adequate funding for loans during periods of high loan demand. During periods of decreased lending, funds obtained from the maturing or sale of investments, loan payments, and new deposits are invested in short-term earning assets, such as cash held at the FRB and investment securities, to serve as a source of funding for future loan growth. Management believes that the Company’s available sources of funds, including borrowings, will provide adequate liquidity for its operations in the foreseeable future.