FIRST NORTHERN COMMUNITY BANCORP

Previous wording

Significant results and developments during the third quarter and year-to-date 2025 included:

Current wording

Significant results and developments during the first quarter and year-to-date 2026 included:

Previous wording

The Company recorded net income of $15,150,000 for the nine months ended September 30, 2025, representing an increase of $962,000, or 6.8%, from net income of $14,188,000 for the same period in 2024. The Company recorded net income of $6,013,000 for the three months ended September 30, 2025, representing an increase of $525,000, or 9.6%, from net income of $5,488,000 for the same period in 2024.

Current wording

The Company recorded net income of $5,906,000 for the three months ended March 31, 2026, representing an increase of $2,235,000, or 60.9%, from net income of $3,671,000 for the same period in 2025.

Previous wording

The following tables present a summary of the results for the three and nine months ended September 30, 2025 and 2024, and a summary of financial condition at September 30, 2025 and December 31, 2024.

Current wording

The following tables present a summary of the results for the three months ended March 31, 2026 and 2025, and a summary of financial condition at March 31, 2026 and December 31, 2025.

Previous wording

Following is an analysis of changes in interest income and expense (dollars in thousands) for the three months ended September 30, 2025 over the three months ended September 30, 2024, the nine months ended September 30, 2025 over the nine months ended September 30, 2024, and the three months ended September 30, 2025 over the three months ended June 30, 2025. Changes not solely due to interest rate or volume have been allocated proportionately to interest rate and volume.

Current wording

Following is an analysis of changes in interest income and expense (dollars in thousands) for the three months ended March 31, 2026 over the three months ended March 31, 2025 and the three months ended March 31, 2026 over the three months ended December 31, 2025. Changes not solely due to interest rate or volume have been allocated proportionately to interest rate and volume.

Previous wording

The assets of the Company set forth in the Unaudited Condensed Consolidated Balance Sheets reflect a $30,062,000, or 25.2%, increase in cash and cash equivalents, a $3,184,000, or 19.8%, decrease in certificates of deposit, a $32,351,000, or 5.1%, decrease in investment securities available-for-sale, a $9,119,000, or 0.9%, increase in net loans held-for-investment, and a $12,521,000, or 23.9%, increase in interest receivable and other assets from December 31, 2024 to September 30, 2025. The increase in cash and cash equivalents was primarily due to a decrease in investment securities due to net proceeds from calls, maturities, and sales of available-for-sale securities and principal repayments on available-for-sale securities, which was partially offset by an increase in loans due to net loan originations coupled with a decrease in deposit balances. The decrease in certificates of deposits was due to net maturities and repayments of certificates of deposit. The increase in loans held-for-investment was primarily due to net originations of commercial loans, which was partially offset by net payoffs of commercial real estate and residential mortgage loans. The increase in interest receivable and other assets was primarily due to an increase in current tax receivable associated with the purchase of investment tax credits during the third quarter of 2025.

Current wording

The assets of the Company set forth in the Unaudited Condensed Consolidated Balance Sheets reflect a $5,970,000, or 4.1%, decrease in cash and cash equivalents, a $6,039,000, or 1.0%, increase in investment securities available-for-sale, and a $14,149,000, or 1.3%, increase in net loans held-for-investment from December 31, 2025 to March 31, 2026. The decrease in cash and cash equivalents was primarily due to an increase in investment securities due to purchases of investment securities and an increase in loans due to net loan originations, which was partially offset by an increase in deposit balances. The increase in investment securities was due to purchases of available-for-sale securities, which was partially offset by paydowns and maturities of available-for-sale securities. The increase in net loans held-for-investment was primarily due to net originations of commercial loans, which was partially offset by net payoffs of commercial real estate, agriculture, residential mortgage and consumer loans.

Previous wording

The liabilities of the Company set forth in the Unaudited Condensed Consolidated Balance Sheets reflect a decrease in total deposits of $13,673,000, or 0.8%, from December 31, 2024 to September 30, 2025. The overall decrease in total deposits was primarily due to seasonal fluctuations due to changes in market conditions and monetary policy coupled with the payoff of brokered CDs.

Current wording

The liabilities of the Company set forth in the Unaudited Condensed Consolidated Balance Sheets reflect an increase in total deposits of $15,555,000, or 0.9%, from December 31, 2025 to March 31, 2026. The overall increase in total deposits was primarily due to seasonal fluctuations due to changes in market conditions and monetary policy.

Previous wording

The Federal Open Market Committee decreased the Federal Reserve's benchmark rate by 25 basis points to a range of 4.00% to 4.25% during the nine months ended September 30, 2025.

Current wording

The Federal Open Market Committee kept the Federal Reserve's benchmark rate range at 3.50% to 3.75% during the three months ended March 31, 2026.

Previous wording

Interest income on loans for the nine months ended September 30, 2025 was up 2.9% from the same period in 2024, increasing from $41,620,000 to $42,820,000 and was up 1.9% for the three months ended September 30, 2025 over the same period in 2024, increasing from $14,315,000 to $14,589,000. The increase in interest income on loans for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 14 basis point increase in yield on loans coupled with an increase in average balance of loans. The increase in interest income on loans for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 5 basis point increase in yield on loans coupled with an increase in average balance of loans.

Current wording

Interest income on loans for the three months ended March 31, 2026 was up 5.3% from the same period in 2025, increasing from $13,602,000 to $14,322,000. The increase in interest income on loans for the three months ended March 31, 2026 as compared to the same period a year ago was primarily due to a 27 basis point increase in yield on loans coupled with an increase in average balance of loans.

Previous wording

Interest income on certificates of deposit for the nine months ended September 30, 2025 was down 13.3% from the same period in 2024, decreasing from $542,000 to $470,000, and was down 19.1% for the three months ended September 30, 2025 over the same period in 2024, decreasing from $188,000 to $152,000. The decrease in interest income on certificates of deposit for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a decrease in average balances of certificates of deposit, which was partially offset by a 12 basis point increase in yield on certificates of deposit. The decrease in interest income on certificates of deposit for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to a decrease in average balances of certificates of deposit, which was partially offset by a 7 basis point increase in yield on certificates of deposit.

Current wording

Interest income on certificates of deposit for the three months ended March 31, 2026 was down 34.2% from the same period in 2025, decreasing from $161,000 to $106,000. The decrease in interest income on certificates of deposit for the three months ended March 31, 2026 as compared to the same period a year ago was primarily due to a decrease in average balances of certificates of deposit coupled with a 4 basis point decrease in yield on certificates of deposit.

Previous wording

Interest income on interest-bearing due from banks for the nine months ended September 30, 2025 was down 44.7% from the same period in 2024, decreasing from $5,077,000 to $2,808,000, and was down 34.4% for the three months ended September 30, 2025 over the same period in 2024, decreasing from $1,632,000 to $1,071,000. The decrease in interest income on interest-bearing due from banks for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a decrease in average balances of interest-bearing due from banks, coupled with a 104 basis point decrease in yield on interest-bearing due from banks. The decrease in interest income on interest-bearing due from banks for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to a decrease in average balances of interest-bearing due from banks, coupled with a 109 basis point decrease in yield on interest-bearing due from banks.

Current wording

Interest income on interest-bearing due from banks for the three months ended March 31, 2026 was up 51.0% from the same period in 2025, increasing from $727,000 to $1,098,000. The increase in interest income on interest-bearing due from banks for the three months ended March 31, 2026 as compared to the same period a year ago was primarily due to an increase in average balances of interest-bearing due from banks, which was partially offset by a 62 basis point decrease in yield on interest-bearing due from banks.

Previous wording

Interest income on investment securities available-for-sale for the nine months ended September 30, 2025 was up 33.0% from the same period in 2024, increasing from $10,344,000 to $13,756,000, and was up 15.1% for the three months ended September 30, 2025 over the same period in 2024, increasing from $3,898,000 to $4,487,000. The increase in interest income on investment securities for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to an increase in average investment securities, coupled with a 57 basis point increase in investment yields. The increase in interest income on investment securities for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to an increase in average investment securities, coupled with a 37 basis point increase in investment yields.

Current wording

Interest income on investment securities available-for-sale for the three months ended March 31, 2026 was up 3.0% from the same period in 2025, increasing from $4,741,000 to $4,881,000. The increase in interest income on investment securities for the three months ended March 31, 2026 as compared to the same period a year ago was primarily due to a 13 basis point increase in investment yields, which was partially offset by a decrease in average investment securities.

Previous wording

Interest income on other earning assets for the nine months ended September 30, 2025 was down 2.2% from the same period in 2024, decreasing from $784,000 to $767,000, and was down 6.1% for the three months ended September 30, 2025 over the same period in 2024, decreasing from $261,000 to $245,000. This income is primarily derived from dividends received from the Federal Home Loan Bank. The decrease in interest income on other earning assets for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 41 basis point decrease in yield on other earning assets, which was partially offset by an increase in average balances of other earning assets. The decrease in interest income on other earning assets for the three months ended September 30, 2025 as compared to the same period a year ago was due to a 93 basis point decrease in yield on other earning assets, which was partially offset by an increase in average balances of other earning assets.

Current wording

Interest income on other earning assets for the three months ended March 31, 2026 was up 104.0% from the same period in 2025, increasing from $272,000 to $555,000. This income is primarily derived from dividends received from the Federal Home Loan Bank. The increase in interest income on other earning assets for the three months ended March 31, 2026 as compared to the same period a year ago was primarily due to a special cash dividend issued by the Federal Home Loan Bank during the three months ended March 31, 2026.

Previous wording

The Company had no Federal Funds sold balances during the three and nine months ended September 30, 2025 and September 30, 2024.

Current wording

The Company had no Federal Funds sold balances during the three months ended March 31, 2026 and March 31, 2025.

Previous wording

Interest expense on interest-bearing liabilities for the nine months ended September 30, 2025 was up 3.3% from the same period in 2024, increasing from $10,531,000 to $10,878,000, and was down 2.7% for the three months ended September 30, 2025 over the same period in 2024, decreasing from $3,798,000 to $3,697,000. The increase in interest expense for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 1 basis point increase in average interest-bearing liabilities yield, coupled with an increase in average balance of interest-bearing liabilities. The decrease in interest expense for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 7 basis point decrease in average interest-bearing deposit yield, which was partially offset by an increase in average balance of interest-bearing liabilities.

Current wording

Interest expense on interest-bearing liabilities for the three months ended March 31, 2026 was up 5.6% from the same period in 2025, increasing from $3,560,000 to $3,758,000. The increase in interest expense for the three months ended March 31, 2026 as compared to the same period a year ago was primarily due to an increase in average balance of interest-bearing liabilities coupled with a 3 basis point increase in average interest-bearing deposit yield.

Previous wording

Total non-interest expenses were up 9.0% for the three months ended September 30, 2025 from the same period in 2024, increasing from $10,934,000 to $11,923,000. The increase was primarily due to increases in salaries and employee benefits, occupancy and equipment, data processing and other expenses. The increase in salaries and employee benefits is primarily due to an increase in full-time equivalent employees. The increase in occupancy and equipment was primarily due to an increase in service contracts related to maintaining facilities. The increase in data processing was primarily due to an increase in costs of service contracts. The increase in other expenses was primarily due to increases in contributions and loan origination expense.

Current wording

Total non-interest expenses were down 4.8% for the three months ended March 31, 2026 from the same period in 2025, decreasing from $11,590,000 to $11,032,000. The decrease was primarily due to decreases in occupancy and equipment expense and other expenses, which was partially offset by increases in salaries and employee benefits and amortization of intangible assets. The decrease in occupancy and equipment expense was primarily due to the prior year upgrades to facilities which were not repeated in the current year. The decrease in other expenses was primarily due to decreases in consulting fees and loan collection expense. The increase in salaries and employee benefits was primarily due to an increase in full-time equivalent employees. The increase in amortization of intangible assets was due to the acquisition of a customer-related intangible asset during the fourth quarter of 2025.

Previous wording

The following table sets forth other non-interest expenses by category for the three and nine months ended September 30, 2025 and 2024.

Current wording

The following table sets forth other non-interest expenses by category for the three months ended March 31, 2026 and 2025.

Previous wording

The Company’s tax rate, the Company’s income before taxes and the amount of tax relief provided by non-taxable earnings affect the Company’s provision for income taxes. Provision for income taxes decreased 27.8% for the nine months ended September 30, 2025 from the same period in 2024, decreasing from $5,517,000 to $3,985,000, and decreased 73.7% for the three months ended September 30, 2025 from the same period in 2024, decreasing from $2,162,000 to $569,000. The effective tax rate was 20.8% and 28.0% for the nine months ended September 30, 2025 and September 30, 2024, respectively. The effective tax rate was 8.6% and 28.3% for the three months ended September 30, 2025 and September 30, 2024, respectively. The reduction in provision for income taxes and effective tax rate for the three and nine months ended September 30, 2025 as compared to the same periods a year ago was due to the execution of a tax planning strategy that involved purchasing investment tax credits tied to alternative energy projects. The investment tax credits were acquired at a discount and recognized as a reduction to income tax expense in the quarter ended September 30, 2025.

Current wording

The Company’s tax rate, the Company’s income before taxes and the amount of tax relief provided by non-taxable earnings affect the Company’s provision for income taxes. Provision for income taxes increased 32.8% for the three months ended March 31, 2026 from the same period in 2025, increasing from $1,285,000 to $1,706,000. The effective tax rate was 22.4% and 25.9% for the three months ended March 31, 2026 and March 31, 2025, respectively. The increase in provision for income taxes for the three months ended March 31, 2026 as compared to the same period a year ago was primarily due to an increase in pre-tax income. The decrease in the effective tax rate was primarily due to the execution of a tax planning strategy that involved purchasing investment tax credits tied to alternative energy projects. The investment tax credits were acquired at a discount and the majority was recognized as a reduction to income tax expense in the third quarter of 2025, with the remaining credits recognized in the first quarter of 2026.

Previous wording

The reserve for unfunded lending commitments amounted to $1,050,000 and $700,000 as of September 30, 2025 and December 31, 2024, respectively. The reserve for unfunded lending commitments is included in other liabilities on the Condensed Consolidated Balance Sheets. See Note 7 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q, "Commitments and Contingencies," for additional information.

Current wording

The reserve for unfunded lending commitments amounted to $1,100,000 and $1,200,000 as of March 31, 2026 and December 31, 2025, respectively. The reserve for unfunded lending commitments is included in other liabilities on the Condensed Consolidated Balance Sheets. See Note 7 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q, "Commitments and Contingencies," for additional information.

Previous wording

Non-accrual loans amounted to $6,803,000 at September 30, 2025 and were comprised of two commercial loans totaling $401,000, one commercial real estate loan totaling $672,000, four agriculture loans totaling $4,942,000, three residential mortgage loans totaling $180,000 and four consumer loans totaling $608,000. Non-accrual loans amounted to $11,212,000 at December 31, 2024 and were comprised of one commercial loan totaling $139,000, one commercial real estate loan totaling $7,993,000, two agriculture loans totaling $2,336,000, three residential mortgage loans totaling $202,000 and four consumer loans totaling $642,000.

Current wording

Non-accrual loans amounted to $4,918,000 at March 31, 2026 and were comprised of one commercial loan totaling $139,000, two commercial real estate loans totaling $909,000, four agriculture loans totaling $3,212,000, three residential mortgage loans totaling $162,000 and four consumer loans totaling $496,000. Non-accrual loans amounted to $6,030,000 at December 31, 2025 and were comprised of one commercial loan totaling $139,000, one commercial real estate loan totaling $657,000, four agriculture loans totaling $4,423,000, three residential mortgage loans totaling $174,000 and five consumer loans totaling $637,000.

Previous wording

As the following table illustrates, total non-performing assets, net of guarantees of the State of California and U.S. Government, including its agencies and its government-sponsored agencies, decreased $4,255,000, or 38.4%, to $6,818,000 during the first nine months of 2025. Non-performing assets, net of guarantees, represented 0.4% of total assets at September 30, 2025.

Current wording

As the following table illustrates, total non-performing assets, net of guarantees of the State of California and U.S. Government, including its agencies and its government-sponsored agencies, decreased $1,096,000, or 17.3%, to $5,227,000 during the first three months of 2026. Non-performing assets, net of guarantees, represented 0.3% of total assets at March 31, 2026.

Previous wording

Excluding non-performing loans, loans totaling $18,533,000 and $11,643,000 were classified as substandard or doubtful loans, representing potential problem loans at September 30, 2025 and December 31, 2024, respectively. Management believes that the allowance for credit losses at September 30, 2025 and December 31, 2024 appropriately reflected expected credit losses in the loan portfolio at that date. The ratio of the allowance for credit losses to total loans was 1.47% at each of the periods ended September 30, 2025 and December 31, 2024.

Current wording

Excluding non-performing loans, loans totaling $18,447,000 and $18,259,000 were classified as substandard or doubtful loans, representing potential problem loans at March 31, 2026 and December 31, 2025, respectively. Management believes that the allowance for credit losses at March 31, 2026 and December 31, 2025 appropriately reflected expected credit losses in the loan portfolio at that date. The ratio of the allowance for credit losses to total loans was 1.37% and 1.36% at March 31, 2026 and December 31, 2025, respectively.

Previous wording

Other real estate owned (“OREO”) consists of property that the Company has acquired by deed in lieu of foreclosure or through foreclosure proceedings, and property that the Company does not hold title to but is in actual control of, known as in-substance foreclosure. OREO also consists of property held by the Company that is no longer intended for future development. The estimated fair value of the property is determined prior to transferring the balance to OREO. The balance transferred to OREO during the nine months ended September 30, 2025 was transferred at the lower of the carrying amount of the property as compared to the fair value less costs to sell. The Company had OREO totaling $1,241,000 and $0 as of September 30, 2025 and December 31, 2024, respectively. OREO as of September 30, 2025 represented land, transferred from premises and equipment, that the Company determined is no longer intended for future development and is currently under contract for a sales price in excess of carrying value and is expected to close in 2026.

Current wording

Other real estate owned (“OREO”) consists of property that the Company has acquired by deed in lieu of foreclosure or through foreclosure proceedings, and property that the Company does not hold title to but is in actual control of, known as in-substance foreclosure. OREO can also consist of Company owned properties that the Company has determined are no longer intended for use or future development. The estimated fair value of the property is determined prior to transferring the balance to OREO. The balance transferred to OREO is the estimated fair value of the property less estimated cost to sell. Impairment may be deemed necessary to bring the book value of the loan equal to the appraised value. Appraisals or loan officer evaluations are then conducted periodically thereafter charging any additional impairment to the appropriate expense account. The Company had OREO totaling $1,241,000 for each of the periods ended March 31, 2026 and December 31, 2025. As of March 31, 2026 and December 31, 2025, OREO represented land, transferred from premises and equipment, that the Company determined is no longer intended for future development and is actively marketing for sale.

Previous wording

The following table summarizes the ACL of the Company during the nine months ended September 30, 2025 and 2024, and for the year ended December 31, 2024:

Current wording

The following table summarizes the ACL of the Company during the three months ended March 31, 2026 and 2025, and for the year ended December 31, 2025:

Previous wording

Approximately 42% and 40% of our deposits were uninsured as of September 30, 2025 and December 31, 2024, respectively.

Current wording

Approximately 43% and 40% of our deposits were uninsured as of March 31, 2026 and December 31, 2025, respectively.

Previous wording

Asset liquidity sources consist of the repayments and maturities of loans, selling of loans, short-term money market investments, maturities of securities and sales of securities from the available-for-sale portfolio. These activities are generally summarized as investing activities in the Condensed Consolidated Statements of Cash Flows. For the nine months ended September 30, 2025, net liquidity provided by investing activities totaled $47,693,000.

Current wording

Asset liquidity sources consist of the repayments and maturities of loans, selling of loans, short-term money market investments, maturities of securities and sales of securities from the available-for-sale portfolio. These activities are generally summarized as investing activities in the Condensed Consolidated Statements of Cash Flows. For the three months ended March 31, 2026, net liquidity used in investing activities totaled $24,617,000.

Previous wording

The Company’s available-for-sale investment securities plus cash and cash equivalents in excess of reserve requirements and certificates of deposit totaled $763,902,000 on September 30, 2025, which was 40.0% of assets at that date. This was a decrease of $5,473,000 from $769,375,000 and 40.7% of assets as of December 31, 2024. The Company’s investment securities are generally shorter term in nature to provide ongoing cash flows for liquidity needs and/or reinvestment for interest rate risk management. On September 30, 2025, the effective duration of our investment securities was 3.10 with projected principal cashflow of $46,442,000 for the remainder of 2025 available for reinvestment or liquidity needs. The Company had no held-to-maturity securities as of September 30, 2025 and December 31, 2024.

Current wording

The Company’s available-for-sale investment securities plus cash and cash equivalents in excess of reserve requirements and certificates of deposit totaled $773,038,000 on March 31, 2026, which was 40.2% of assets at that date. This was a decrease of $61,000 from $772,977,000 and 40.4% of assets as of December 31, 2025. The Company’s investment securities are generally shorter term in nature to provide ongoing cash flows for liquidity needs and/or reinvestment for interest rate risk management. On March 31, 2026, the effective duration of our investment securities was 3.11 with projected principal cashflow of $116,255,000 for the remainder of 2026 available for reinvestment or liquidity needs. The Company had no held-to-maturity securities as of March 31, 2026 and December 31, 2025.

Previous wording

Liquidity may also be impacted from liabilities through changes in deposits and borrowings outstanding. These activities are included under financing activities in the Condensed Consolidated Statements of Cash Flows. As of September 30, 2025, the Company had $0 in borrowings outstanding. For the nine months ended September 30, 2025, net liquidity used in financing activities totaled $16,951,000, primarily due to a net decrease in deposits and repurchases of common stock. While these sources of funds are expected to continue to provide significant amounts of funds in the future, their mix, as well as the possible use of other sources, will depend on future economic and market conditions.

Current wording

Liquidity may also be impacted from liabilities through changes in deposits and borrowings outstanding. These activities are included under financing activities in the Condensed Consolidated Statements of Cash Flows. As of March 31, 2026, the Company had $0 in borrowings outstanding. For the three months ended March 31, 2026, net liquidity provided by financing activities totaled $14,393,000, primarily due to a net increase in deposits. While these sources of funds are expected to continue to provide significant amounts of funds in the future, their mix, as well as the possible use of other sources, will depend on future economic and market conditions.

Previous wording

Liquidity is also provided or used through the results of operating activities. For the nine months ended September 30, 2025, net cash used in operating activities totaled $680,000, primarily as a result of an increase in other assets due to the increase in current tax receivable associated with the tax planning strategy implemented in the third quarter of 2025.

Current wording

Liquidity is also provided or used through the results of operating activities. For the three months ended March 31, 2026, net cash provided by operating activities totaled $4,254,000, primarily as a result of net income during the three months ended March 31, 2026.

Previous wording

Liquidity is measured by various ratios, in management’s opinion, the most common being the ratio of net loans to deposits (including loans held-for-sale). This ratio was 62.6% and 61.6% as of September 30, 2025 and December 31, 2024, respectively.

Current wording

Liquidity is measured by various ratios, in management’s opinion, the most common being the ratio of net loans to deposits (including loans held-for-sale). This ratio was 62.8% and 62.6% as of March 31, 2026 and December 31, 2025, respectively.

Previous wording

To meet unanticipated funding requirements, the Company maintains short-term unsecured lines of credit with other banks which totaled $130,000,000 at September 30, 2025. Additionally, the Company has a line of credit with the FHLB, with a remaining borrowing capacity at September 30, 2025 of $393,040,000; credit availability is subject to certain collateral requirements.

Current wording

To meet unanticipated funding requirements, the Company maintains short-term unsecured lines of credit with other banks which totaled $130,000,000 at March 31, 2026. Additionally, the Company has a line of credit with the FHLB, with a remaining borrowing capacity at March 31, 2026 of $354,702,000; credit availability is subject to certain collateral requirements.

Previous wording

In August of 2020, the Federal banking agencies adopted the final version of the community bank leverage ratio framework rule (the “CBLR”), implementing two interim final rules adopted in April of 2020. The rule provides an optional, simplified measure of capital adequacy. Under the optional CBLR framework, the CBLR was 8.5% through calendar year 2021 and is 9% thereafter. The rule is applicable to all non-advanced approaches FDIC-supervised institutions with less than $10 billion in total consolidated assets. Banks not electing the CBLR framework will continue to be subject to the generally applicable risk-based capital rule. At the present time, the Company and the Bank do not intend to elect to use the CBLR framework.

Current wording

In August of 2020, the Federal banking agencies adopted the final version of the community bank leverage ratio framework rule (the “CBLR”), implementing two interim final rules adopted in April of 2020. The rule provides an optional, simplified measure of capital adequacy. Under the optional CBLR framework, the CBLR was 8.5% through calendar year 2021 and is 9% thereafter. The rule is applicable to all non-advanced approaches FDIC-supervised institutions with less than $10 billion in total consolidated assets. Banks not electing the CBLR framework will continue to be subject to the generally applicable risk-based capital rule. On April 23, 2026, the US federal banking regulators issued a final rule implementing changes to the CBLR framework intended to encourage additional community banks to opt into the CBLR framework. The final rule, which is effective July 1, 2026, reduces the CBLR requirement from 9% to 8% and extends the grace period for qualifying institutions that fall below the 8% ratio to return to compliance from the current two quarters to four quarters (subject to a limit of eight quarters in the previous five-year period). At the present time, the Company and the Bank do not intend to elect to use the CBLR framework.