PLUMAS BANCORP

Previous wording

The following discussion and analysis sets forth certain statistical information relating to the Company as of March 31, 2025 and December 31, 2024 and for the three-month periods ended March 31, 2025 and 2024. This discussion should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto included in Plumas Bancorp’s Annual Report filed on Form 10-K for the year ended December 31, 2024.

Current wording

The following discussion and analysis sets forth certain statistical information relating to the Company as of June 30, 2025 and December 31, 2024 and for the three and six-month periods ended June 30, 2025 and 2024. This discussion should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto included in Plumas Bancorp’s Annual Report filed on Form 10-K for the year ended December 31, 2024.

Previous wording

**Net Income.**The Company recorded net income of $7.2 million for the three months ended March 31, 2025, up from net income of $6.3 million for the three months ended March 31, 2024. Increases of $1.1 million in net interest income and $1.1 million in non-interest income and a decline of $571,000 in the provision for credit losses were partially offset by increases of $1.1 million in non-interest expense and $731,000 in the provision for income tax expense. The annualized return on average assets was 1.79% for the three months ended March 31, 2025, up from 1.55% for the three months ended March 31, 2024. The annualized return on average equity decreased from 16.4% during the first quarter of 2024 to 16.0% during the current quarter.

Current wording

**Net Income.**The Company recorded net income of $13.5 million for the six months ended June 30, 2025, up from net income of $13.0 million for the six months ended June 30, 2024. Increases of $860 thousand in net interest income and $1.2 million in non-interest income and a decline of $636 thousand in the provision for credit losses were partially offset by increases of $1.7 million in non-interest expense and $583 thousand in the provision for income tax expense. The annualized return on average assets was 1.67% for the six months ended June 30, 2025, up from 1.61% for the six months ended June 30, 2024. The annualized return on average equity decreased from 16.7% during the six months ended June 30, 2024, to 14.7% during the current period.

Previous wording

Non-interest income increased by $1.1 million from $2.1 million during the three months ended March 31, 2024 to $3.2 million during the first quarter of 2025 related to a legal settlement totaling $1.1 million. This settlement related to the Dixie Fire in August of 2021 which swept through the town of Greenville, California. The fire caused severe damage to the Greenville area, including the telecommunications infrastructure which adversely affected our ability to service our customers in this area during the last few years.

Current wording

Non-interest income increased by $1.2 million from $4.3 million during the six months ended June 30, 2024 to $5.5 million during the first half of 2025 mostly related to a legal settlement totaling $1.1 million received in the first quarter of 2025. This settlement related to the Dixie Fire in August of 2021 which swept through the town of Greenville, California. The fire caused severe damage to the Greenville area, including the telecommunications infrastructure which adversely affected our ability to service our customers in this area during the last few years.

Previous wording

Non-interest expense increased by $1.1 million from $10.4 million during the first quarter of 2024 to $11.5 million during the current quarter. Of this amount $569 thousand relates to costs associated with our pending acquisition of Cornerstone Community Bancorp. We signed a definitive agreement to acquire Cornerstone Community Bancorp on January 28, 2025. Merger transaction costs that facilitate the merger are not deductible for income tax purposes. Of the $569 thousand in merger related costs, $562 thousand is estimated to be not deductible for state and federal income tax.

Current wording

Non-interest expense increased by $1.7 million from $20.8 million during the first half of 2024 to $22.5 million during the current six-month period. Of this amount $1.1 million relates to costs associated with our acquisition of Cornerstone Community Bancorp. We signed a definitive agreement to acquire Cornerstone Community Bancorp on January 28, 2025, and completed the acquisition on July 1, 2025. Merger transaction costs that facilitate the merger are not deductible for income tax purposes. Of the $1.1 million in merger related costs, $801 thousand is estimated to be not deductible for state and federal income tax.

Previous wording

Net interest income before provision for credit losses. Driven mostly by growth in the loan portfolio and the repayment of the Bank Term Funding Program (BTFP) borrowings, net interest income increased by $1.1 million from $17.4 million during the three months ended March 31, 2024, to $18.5 million for the three months ended March 31, 2025. The increase in net interest income includes an increase of $564 thousand in interest income and a decline of $518 thousand in interest expense.

Current wording

Net interest income before provision for credit losses. Driven mostly by growth in the loan portfolio and the repayment of Bank Term Funding Program (BTFP) borrowings, net interest income increased by $860 thousand from $35.9 million during the six months ended June 30, 2024, to $36.7 million for the six months ended June 30, 2025. The increase in net interest income includes an increase of $36 thousand in interest income and a decline of $824 thousand in interest expense. See "Short-term Borrowing Arrangements" for a discussion of BTFP borrowing activity.

Previous wording

Interest on investment securities increased by $114 thousand related to an increase in yield on investment securities of 44 basis points to 4.12%. The increase in investment yields is consistent with the partial restructuring of the investment portfolio during the first quarter of 2024. The effect of this increase in yield was mostly offset by a decline of $36 million in average investment securities.

Current wording

Interest on investment securities increased by $84 thousand related to an increase in yield of 21 basis points to 4.10% partially offset by a decline in average balance. The increase in investment yields is consistent with the increase in market rates and the restructuring of the investment portfolio in February of 2024. Average investment securities declined from $462 million during the six months ended June 30, 2024 to $443 million during the current period.

Previous wording

Net interest margin for the three months ended March 31, 2025, increased 33 basis points to 4.95%, up from 4.62% for the same period in 2024.

Current wording

Net interest margin for the six months ended June 30, 2025 increased 13 basis points to 4.89%, up from 4.76% for the same period in 2024.

Previous wording

**Provision for credit losses.**During the first quarter of 2025 we recorded a provision for credit losses of $250,000 consisting of a provision for credit losses on loans of $250,000. This compares to a provision for credit losses of $821,000 consisting of a provision for credit losses on loans of $900,000 and a decrease in the reserve for unfunded commitments of $79,000 during the first quarter of 2024. See “Analysis of Asset Quality and Allowance for Loan Losses” for a discussion of loan quality trends and the provision for credit losses.

Current wording

**Provision for credit losses.**During the first half of 2025 we recorded a provision for credit losses of $1,110,000 consisting of a provision for credit losses on loans of $1,150,000 and a decrease in the reserve for unfunded commitments of $40,000. This compares to a provision for credit losses of $1,746,000 consisting of a provision for credit losses on loans of $1,825,000 and a decrease in the reserve for unfunded commitments of $79,000 during the first half of 2024. See “Analysis of Asset Quality and Allowance for Loan Losses” for a discussion of loan quality trends and the provision for credit losses.

Previous wording

**Non-interest income.**During the three months ended March 31, 2025, non-interest income totaled $3.2 million, an increase of $1.1 million from the three months ended March 31, 2024. The largest component of this increase was the $1.1 million settlement related to the Dixie Fire as discussed earlier. This settlement is included in Other in the following table.

Current wording

**Non-interest income.**During the six months ended June 30, 2025, non-interest income totaled $5.6 million, an increase of $1.2 million from the six months ended June 30, 2024. The largest component of this increase was a legal settlement totaling $1.1 million related to the Dixie Fire in August of 2021. This settlement is included in Other in the following table.

Previous wording

Net-interest income increased by $1.1 million from $17.4 million during the three months ending March 31, 2024, to $18.5 million during the current quarter. The provision for credit losses decreased from $821 thousand during the first quarter of 2024 to $250 thousand during the current quarter.

Current wording

Net interest income decreased by $222 thousand from $18.4 million during the three months ended June 30, 2024, to $18.2 million during the current quarter. The provision for credit losses decreased from $925 thousand during the second quarter of 2024 to $860 thousand during the current quarter.

Previous wording

Interest and fees on loans increased by $804 thousand related both to an increase in average balance and an increase in yield. Average loan balances increased by $48 million, while the average yield on loans increased by 8 basis points from 6.09% during the first quarter of 2024 to 6.17% during the current quarter. The average prime interest rate decreased from 8.5% during the first quarter of 2024 to 7.5% during the current quarter. Approximately 16% of the Company's loans are tied to the prime interest rate and most of these reprice within one to three months with a change in prime. The negative effect of the decrease in prime was offset by an increase in average yield on the bank’s fixed rate portfolio which includes growth in fixed rate SBA loans which totaled $74 million at March 31, 2025, and $42 million at March 31, 2024. The weighted average rate earned on this portfolio at March 31, 2025, was 8.3%.

Current wording

Average loan balances increased by $39 million, while the average yield on these loans decreased by 18 basis points from 6.32% during the second quarter of 2024 to 6.14% during the current quarter. Of the 18 basis points decrease, 13 basis points relate to the reversal of $344 thousand in interest income related to fifteen loans which were placed on nonaccrual status during the current quarter. The average prime interest rate decreased from 8.5% during the second quarter of 2024 to 7.5% during the current quarter. Approximately 16% of the Company's loans are tied to the prime interest rate, and most of these reprice within one to three months with a change in prime. Additionally, during the second quarter of 2024, we recovered $316 thousand in interest on loans that were classified as nonaccrual and which were paid off in full during the quarter which elevated loan yield during the 2024 quarter. The effect of these items was partially offset by an increase in average yield on the bank’s fixed rate portfolio which includes growth in fixed rate SBA loans which totaled $75 million at June 30, 2025, and $62 million at June 30, 2024. The weighted average rate earned on this portfolio at June 30, 2025, was 8.3%. The Bank is also benefiting from the repricing of a portion of our Commercial Real Estate loans. Most of these loans are indexed to the 5-year Treasury note and reprice every five years.

Previous wording

Interest on cash balances decreased by $354 thousand related to a decline in average balance of $14 million and a decrease in average rate paid on cash balances of 105 basis points from 5.57% during the first quarter of 2024 to 4.52% during the current quarter. This decline in yield was mostly related to a decline in rate paid on balances held at the Federal Reserve Bank (FRB). The average rate earned on FRB balances decreased from 5.40% during the first quarter of 2024 to 4.40% during the current quarter.

Current wording

Interest on cash balances decreased by $697 thousand related to a decline in average balance of $42 million and a decrease in average rate paid on cash balances of 104 basis points from 5.51% during the second quarter of 2024 to 4.47% during the current quarter. This decline in yield was mostly related to a decline in rate paid on balances held at the FRB. The average rate earned on FRB balances decreased from 5.40% during the second quarter of 2024 to 4.40% during the current quarter.

Previous wording

Interest expense decreased by $518 thousand, mostly related to the repayment of the BTFP borrowings. See “Short-term Borrowing Arrangements” for a discussion additional discussion related to the BTFP. The average rate paid on interest bearing liabilities decreased from 1.33% during the 2024 quarter to 1.14% in 2025 related mainly to the decrease in these borrowings.

Current wording

Interest expense decreased by $305 thousand, related to the repayment of the BTFP borrowings. The average rate paid on interest bearing liabilities decreased from 1.44% during the 2024 quarter to 1.33% in 2025 related to the decrease in these borrowings.

Previous wording

Interest paid on deposits increased by $710 thousand and is broken down by product type as follows: money market accounts - $770 thousand and savings deposits - $26 thousand. The increase in interest paid on money market accounts mostly relates to an increase in public entity balances. Interest on time deposits declined by $86 thousand related to a decline in average balance of $3 million and a decline in rate paid of 27 basis points. During the second half of 2024 and continuing into 2025, we have offered a premium rate on large balances of public entities in our service area, matching the rate they could earn from the California local agency investment fund. This has led to a significant increase in these balances and an increase in the overall rate paid on money market accounts. The average rate paid on interest-bearing deposits increased from 0.75% during the first quarter of 2024 to 1.11% during the current quarter.

Current wording

Interest paid on deposits increased by $968 thousand and is broken down as follows: money market accounts - $815 thousand, savings deposits - $83 thousand and time deposits - $70 thousand. The increase in interest paid on money market accounts mostly relates to an increase in public entity balances and the rate earned on these balances. During the second half of 2024 and continuing into 2025, we have offered a premium money market rate on large balances of public entities in our service area, matching the rate they could earn from the California local agency investment fund. This has led to the significant increase in balances and rate paid on money market accounts. The average balance of money market accounts during the current quarter was $288 million, an increase of $72 million from $216 million during the three months ended June 30, 2024. The average rate paid on money market accounts increased 92 basis points to 1.79%. The increase in interest on savings accounts was driven by an increase in the average rate paid of 12 basis points to 34 basis points. The increase in interest on time deposits includes an increase in average balance of $23 million partially offset by a decline in average rate paid of 33 basis points to 2.53% as promotional time deposits issued in 2024 matured. Many of these promotional time deposits were renewed at lower rates. The average rate paid on interest-bearing deposits increased from 0.84% during the second quarter of 2024 to 1.30% during the current quarter. The average balance of interest-bearing deposits increased from $633 million during the three months ended June 30, 2024 to $705 million during the quarter.

Previous wording

**Non-interest expense.**Non-interest expense increased by $1.1 million from $10.4 million during the first quarter of 2024 to $11.5 million during the current quarter. Of this amount $569,000 relates to costs associated with our pending acquisition of Cornerstone Community Bancorp. We signed a definitive agreement to acquire Cornerstone Community Bancorp on January 28, 2025. Merger transaction costs that facilitate the merger are not deductible for income tax purposes. Of the $569,000 in merger related costs, $562,000 is estimated to be not deductible for state and federal income tax. Salary and benefit expense increased by $514,000 which includes an increase in salary expense of $269,000 related primarily to merit and promotional salary increases. Related mostly to an increase in pre-tax income, bonus expense increased by $216,000. A decrease in deferred loan origination fees of $97,000 was offset by a decline in commission expense of $137,000. Both items mostly relate to a decline in SBA loan production during the comparison quarters. Occupancy and equipment expense increased by $324,000 from $1.7 million during the first quarter of 2024 to $2.0 million during the current quarter related to an increase of $338,000 in rent expense related to the February 2024 sales/leaseback transaction.

Current wording

**Non-interest expense.**During the three months ended June 30, 2025, total non-interest expense increased by $616 thousand from $10.4 million during the second quarter of 2024 to $11.0 million during the current quarter. The largest components of this increase were merger related expenses of $481 thousand and salary and benefit expense of $270 thousand. The increase in salary and benefit expense includes an increase in salary expense of $216 thousand related primarily to merit and promotional salary increases. A decrease in deferred loan origination fees of $144 thousand was offset by a decline in commission expense of $180 thousand. Both items mostly relate to a decline in SBA loan production during the comparison quarters.

Previous wording

**Provision for income taxes.**The Company recorded an income tax provision of $2.9 million, or 28.5% of pre-tax income, for the three months ended March 31, 2025. This compares to an income tax provision of $2.1 million, or 25.4% of pre-tax income, for the three months ended March 31, 2024. The percentages for 2025 and 2024 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. While non-deductible merger transaction costs incurred during the current quarter effectively increase taxable income.

Current wording

**Provision for income taxes.**The provision for income taxes decreased by $149 thousand from $2.5 million, or 26.9% of pre-tax income, during the three months ended June 30, 2024 to $2.4 million, or 27.1% of pre-tax income, during the current quarter. The percentages for 2025 and 2024 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 while non-deductible merger transaction costs incurred during the current quarter effectively increase taxable income.

Previous wording

Total assets on March 31, 2025, were $1.6 billion, an increase of $10 million from December 31, 2024. The largest components of this increase were increases in investment securities of $9.6 million and $5.3 million in cash equivalents. These increases were partially offset by a decrease of $4.7 million in net loans. Deposits increased by $2.0 million and totaled $1.4 billion at March 31, 2025. Accrued interest payable and other liabilities increased by $1.9 million to $14.4 million. The largest decline in liabilities was a decrease in repurchase agreements of $3.3 million. Total liabilities were $1.4 billion on March 31, 2025, and December 31, 2024. Shareholders’ equity increased by $9.7 million from $177.9 million on December 31, 2024, to $187.6 million on March 31, 2025. A detailed discussion of each of these changes follows.

Current wording

Total assets on June 30, 2025, were $1.6 billion, an increase of $5 million from December 31, 2024. The largest components of this increase were increases in accrued interest receivable and other assets of $5.1 million, investment securities of $1.9 million and net loans of $1.5 million. These increases were partially offset by a decrease of $2.7 million in cash equivalents. Accrued interest payable and other liabilities increased by $1.4 million and shareholders’ equity increased by $15.2 million from $177.9 million on December 31, 2024, to $193.1 million on June 30, 2025. The largest declines in liabilities were decreases in repurchase agreements of $7.1 million and total deposits which decreased by $4.3 million and totaled $1.4 billion on June 30, 2025. A detailed discussion of each of these changes follows.

Previous wording

**Loan Portfolio.**Gross loans decreased by approximately $4.7 million, or 0.5%, and totaled $1.0 billion on March 31, 2025, and December 31, 2024. The largest increases in loans were $14.5 million in commercial real estate loans and $746,000 in equity lines of credit. These were offset by declines of $6.8 million in agricultural loans, $6.8 million in construction and land development loans and $6.4 million in auto 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.

Current wording

**Loan Portfolio.**Gross loans increased by approximately $2.4 million, or 0.2%, and totaled $1.0 billion on June 30, 2025, and December 31, 2024. The largest increases in loans were $26.7 million in commercial real estate loans, $3.7 million in commercial loans and $3.7 million in equity lines of credit. These were offset by declines of $12.7 million in construction and land development loans, $13.2 million in auto loans, $5.0 million in agricultural loans and $0.8 million in all other 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

Commercial real estate loans (“CRE”), which comprised 65% of the lending portfolio at March 31, 2025, included 27% investor-owned, 29% owner-occupied, and 9% multi-family. Concentrations by real estate type within the CRE portfolio, excluding multi-family, were 13% Mixed Commercial Real Estate, 13% Retail, 12% Office, 8% Hospitality, 8% Gas Stations, 8% Special Purpose, 7% Industrial, 6% Mini Storage Facilities, 6% Residential, and 5% Mixed Commercial and Residential, with all remaining concentrations below 5%. There were no rent-controlled properties within the multi-family category. Office facilities are typically small and located in more rural areas. 28% of CRE loans were located in northern Nevada and 48% were located in northern California. Of the $3.7 million in non-accrual balances at March 31, 2025, approximately 29% were CRE. Of the $21.5 million in substandard balances at March 31, 2025 approximately 23% were CRE.

Current wording

Commercial real estate loans (“CRE”) comprised 66% of the lending portfolio at June 30, 2025. CRE loans were 40% investor-owned, 44% owner-occupied, and 16% multi-family. Concentrations by real estate type within the CRE portfolio, excluding multi-family, were 13% Retail, 13% Mixed Commercial Real Estate, 12% Office, 8% Hospitality, 8% Special Purpose, 8% Gas Stations, 8% Industrial, 6% Mini Storage Facilities, 6% Residential, 5% Senior Care Facilities, and 5% Mixed Commercial and Residential, with all remaining concentrations below 5%. There were no rent-controlled properties within the multi-family category. Office facilities are typically small and located in more rural areas. 29% of CRE loans were located in northern Nevada and 49% were located in northern California. Of the $13.7 million in non-accrual balances at June 30, 2025, approximately 9% were CRE. Of the $22.0 million in substandard balances at June 30, 2025 approximately 24% were CRE.

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 March 31, 2025, and December 31, 2024, approximately 77% 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 variable rate loan portfolio on March 31, 2025; 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 77% 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

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 June 30, 2025, and December 31, 2024, approximately 78% and 77%, 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 June 30, 2025; 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

Nonperforming assets as a percentage of total assets were 0.23% at March 31, 2025 and 0.27% at December 31, 2024.

Current wording

Nonperforming assets (which are comprised of nonperforming loans, other real estate owned (“OREO”) and repossessed vehicle holdings) at June 30, 2025, were $13.7 million, up from $4.3 million at December 31, 2024. Nonperforming assets as a percentage of total assets increased to 0.84% at June 30, 2025, up from 0.27% at December 31, 2024. OREO totaled $91 thousand at June 30, 2025, and December 31, 2024. Nonperforming loans were $13.7 million at June 30, 2025 and $4.1 million at December 31, 2024. Nonperforming loans as a percentage of total loans increased to 1.34% at June 30, 2025, up from 0.40% at December 31, 2024. The increase in nonperforming loans is related to one agricultural loan relationship of 15 loans totaling $9.9 million. The borrower on these loans was unable to meet his commitments under modified loan agreements, and therefore during the quarter, we placed the loans on nonaccrual status. Interest reversed on these loans during the current quarter totaled $344 thousand and specific loan loss reserves totaling $931 thousand were applied against the loans.

Previous wording

The following table provides a summary of the change in the number and balance of OREO properties for the three months ended March 31, 2025 and 2024 (dollars in thousands):

Current wording

The following table provides a summary of the change in the number and balance of OREO properties for the six months ended June 30, 2025 and 2024 (dollars in thousands):

Previous wording

**Investment Portfolio and Federal Reserve Balances.**Total investment securities were $447.3 million as of March 31, 2025, and $437.7 million at December 31, 2024. Unrealized losses on available-for-sale investment securities totaling $30.2 million were recorded, net of $8.9 million in tax benefits, as accumulated other comprehensive loss within shareholders' equity at March 31, 2025. 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 the three months ended March 31, 2025.

Current wording

**Investment Portfolio and Federal Reserve Balances.**Total investment securities were $439.7 million as of June 30, 2025, and $437.7 million at December 31, 2024. Unrealized losses on available-for-sale investment securities totaling $29.4 million were recorded, net of $8.7 million in tax benefits, as accumulated other comprehensive loss within shareholders' equity at June 30, 2025. 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. During the three and six-months ending June 30, 2025 we sold $1.2 million in available for sale investment securities recording a net gain on sale of $3 thousand.

Previous wording

The investment portfolio at March 31, 2025, consisted of $360.3 million in securities of U.S. Government-sponsored agencies and U.S. Government agencies, and 170 municipal securities totaling $87.0 million. 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.

Current wording

The investment portfolio at June 30, 2025, consisted of $351.8 million in securities of U.S. Government-sponsored agencies and U.S. Government agencies, and 169 municipal securities totaling $87.9 million. 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.

Previous wording

There were no Federal funds sold at March 31 2025, and December 31, 2024; however, the Bank maintained interest earning balances at the Federal Reserve Bank totaling $53.2 million at March 31, 2025, and $47.2 million at December 31, 2024. The balance, on March 31, 2025, earns interest at the rate of 4.40%.

Current wording

There were no Federal funds sold at June 30 2025, and December 31, 2024; however, the Bank maintained interest earning balances at the Federal Reserve Bank totaling $41.1 million at June 30, 2025, and $47.2 million at December 31, 2024. The balance, on June 30, 2025, earns interest at the rate of 4.40%.

Previous wording

**Deposits.**Deposits totaled $1.4 billion on March 31, 2025, an increase of $2 million from December 31, 2024. The increase in deposits includes increases of $ $22.5 million in money market accounts and $13.6 million in savings deposits. Partially offsetting these increases were declines of $22.9 million in demand deposits, and $11.2 million in time deposits. At March 31, 2025, 49% of the Company’s deposits were in the form of non-interest-bearing demand deposits. The Company has no brokered deposits.

Current wording

**Deposits.**Deposits totaled $1.4 billion on June 30, 2025, a decrease of $4 million from December 31, 2024. The decrease in deposits includes decreases of $19.5 million in savings accounts and $31.3 million in demand deposits mostly offset by increases of $13.9 in money market accounts and $32.6 million in time deposits. At June 30, 2025, 49% of the Company’s deposits were in the form of non-interest-bearing demand deposits. The Company has no brokered deposits.

Previous wording

The Company estimates that it has approximately $510 million in uninsured deposits which includes uninsured deposits of Plumas Bancorp. Of this amount, $190 million represents deposits that are collateralized such as deposits of states, municipalities and tribal accounts. Uninsured amounts are estimated based on the portion of the account balances in excess of FDIC insurance limits.

Current wording

The Company estimates that it has approximately $516 million in uninsured deposits which includes uninsured deposits of Plumas Bancorp. Of this amount, $206 million represents deposits that are collateralized such as deposits of states, municipalities and tribal accounts. Uninsured amounts are estimated based on the portion of the account balances in excess of FDIC insurance limits.

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 $251 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $441 million. The Company is also eligible to borrow at the FRB Discount Window. At March 31, 2025 the Company could borrow up to $115 million at the Discount Window secured by investment securities with a fair value of $119 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 March 31, 2025, and December 31, 2024.

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 $255 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $439 million. The Company is also eligible to borrow at the Federal Reserve Bank (FRB) Discount Window. At June 30, 2025, the Company could borrow up to $98 million at the Discount Window secured by investment securities with a fair value of $101 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 June 30, 2025 and 2024.

Previous wording

The Federal Reserve Board, on March 12, 2023, announced the creation of the BTFP. At March 31, 2024, the Company had outstanding borrowings under the BTFP totaling $105 million. All BTFP borrowings were paid off during 2024. Interest expense recognized on the BTFP borrowings for the three months ended March 31, 2024, was $1.2 million.

Current wording

The Federal Reserve Board, on March 12, 2023, announced the creation of the BTFP. At June 30, 2024, the Company had outstanding borrowings under the BTFP totaling $105 million. All BTFP borrowings were paid off during 2024. Interest expense recognized on the BTFP borrowings for the three and six-months ended June 30, 2024, was $1.3 million and $2.5 million, respectively.

Previous wording

Note Payable. The Company's borrowing at March 31, 2025, and December 31, 2024, consist of a Term Note entered into on January 25, 2022, which matures on January 25, 2035, and can be prepaid at any time. 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 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. The Company was in compliance with all covenants related to the Term Note at March 31, 2025. Interest expense recognized on the Term Note for the three months ended March 31, 2025 and 2024 totaled $145,000 and $151,000, respectively.

Current wording

Note Payable. The Company's borrowing at June 30, 2025, and December 31, 2024, consist of a Term Note entered into on January 25, 2022, which matures on January 25, 2035, and can be prepaid at any time. 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 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. The Company was in compliance with all covenants related to the Term Note at June 30, 2025. Interest expense recognized on the Term Note for the six-months ended June 30, 2025 and 2024 totaled $290,000 and $313,000, 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 $18.7 million and $22.1 million at March 31, 2025, and December 31, 2024, respectively, are secured by U.S. Government agency securities with a carrying amount of $38.8 million and $38.5 million at March 31, 2025, and December 31, 2024, 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. Interest expense recognized on repurchase agreements for the three months ended March 31, 2025 and 2024 totaled $10,000 during both periods.

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 $14.9 million and $22.1 million at June 30, 2025, and December 31, 2024, respectively, are secured by U.S. Government agency securities with a carrying amount of $38.5 million at June 30, 2025, and December 31, 2024. 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. Interest expense recognized on repurchase agreements for the six-months ended June 30, 2025 and 2024 totaled $30 thousand and $18 thousand, respectively.

Previous wording

Shareholders’ Equity. Shareholders’ equity increased by $9.7 million from $177.9 million at December 31, 2024 to $187.6 million at March 31, 2025. The $9.7 million increase was related to net income during the current quarter of $7.2 million, a decline in accumulated other comprehensive loss of $3.9 million and stock option and restricted stock activity of $411,000 partially offset by shareholder dividends of $1.8 million.

Current wording

Shareholders’ Equity. Shareholders’ equity increased by $15.2 million from $177.9 million at December 31, 2024 to $193.1 million at June 30, 2025. The $15.2 million increase was related to net income during the current period of $13.5 million, a decline in accumulated other comprehensive loss of $4.5 million and stock option and restricted stock activity of $760 thousand partially offset by shareholder dividends of $3.5 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 $0.30 per share on February 17, 2025 and a quarterly cash dividend of $0.27 per share on February 15, 2024, May 15, 2024, August 15, 2024, and November 15, 2024.

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 $0.30 per share on May 15, 2025 and February 17, 2025 and a quarterly cash dividend of $0.27 per share on February 15, 2024, May 15, 2024, August 15, 2024, and November 15, 2024.

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 March 31, 2025, the Company had $157.9 million in unfunded loan commitments and no letters of credit. This compares to $155.4 million in unfunded loan commitments at December 31, 2024. Of the $157.9 million in unfunded loan commitments, $94.1 million and $63.8 million represent commitments to commercial and consumer customers, respectively. Of the total unfunded commitments at March 31, 2025, $87.9 million were secured by real estate, of which $32.9 million was secured by commercial real estate and $55.0 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 June 30, 2025, the Company had $152.2 million in unfunded loan commitments and no letters of credit. This compares to $155.4 million in unfunded loan commitments at December 31, 2024. Of the $152.2 million in unfunded loan commitments, $89.7 million and $62.5 million represent commitments to commercial and consumer customers, respectively. Of the total unfunded commitments at June 30, 2025, $82.5 million were secured by real estate, of which $28.6 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’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 two 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 three months ended March 31, 2025, and 2024 was $852,000 and $514,000, 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 one administrative office 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 six months ended June 30, 2025, and 2024 was $1,723,000 and $1,349,000, respectively.

Previous wording

The Company is a member of the FHLB and can borrow up to $251 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $441 million. The Company is also eligible to borrow at the FRB Discount Window. At March 31, 2025 the Company could borrow up to $115 million at the Discount Window secured by investment securities with a fair value of $119 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 March 31, 2025, and December 31, 2024.

Current wording

The Company is a member of the Federal Home Loan Bank of San Francisco (FHLB) and can borrow up to $255 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $439 million. The Company is also eligible to borrow at the FRB Discount Window. At June 30, 2025, the Company could borrow up to $98 million at the Discount Window secured by investment securities with a fair value of $101 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 June 30, 2025, and December 31, 2024.

Previous wording

Customer deposits are the Company’s primary source of funds. Deposits totaled $1.4 billion on March 31, 2025, an increase of $2 million from December 31, 2024. Deposits are held in various forms with varying maturities. The Company estimates that it has approximately $510 million in uninsured deposits which includes uninsured deposits of Plumas Bancorp. Of this amount, $190 million represents deposits that are collateralized such as deposits of states, municipalities and tribal accounts. Uninsured amounts are estimated based on the portion of the account balances in excess of FDIC insurance limits.

Current wording

Deposits represent the Bank's primary source of funds. Deposits are primarily core deposits in that they are demand, savings and time deposits generated from local businesses and individuals. These sources are considered to be relatively stable, long- term relationships thereby enhancing steady growth of the deposit base without major fluctuations in overall deposit balances. The Company experiences, to a small degree, some seasonality with the slower growth period between November through April, and the higher growth period from May through October. The Company estimates that it has approximately $516 million in uninsured deposits which includes uninsured deposits of Plumas Bancorp. Of this amount, $206 million represents deposits that are collateralized such as deposits of states, municipalities and tribal accounts. Uninsured amounts are estimated based on the portion of the account balances in excess of FDIC insurance limits.