SIERRA BANCORP

Previous wording

First quarter 2025 net income was $9.1 million, and $0.65 per diluted share as compared to $9.3 million, and $0.64 per diluted share in the first quarter of 2024. The Company’s annualized return on average equity was 10.44% and annualized return on average assets was 1.02% for the quarter ended March 31, 2025, compared to 11.09% and 1.06%, respectively, for the same quarter in 2024. The primary drivers behind the variance in first quarter net income are as follows:

Current wording

Second quarter 2025 net income was $10.6 million, and $0.78 per diluted share as compared to $10.3 million, and $0.71 per diluted share in the second quarter of 2024. The Company’s annualized return on average equity was 12.08% and annualized return on average assets was 1.16% for the quarter ended June 30, 2025, compared to 11.95% and 1.14%, respectively, for the same quarter in 2024. The primary drivers behind the variance in first quarter net income are as follows:

Previous wording

The Company’s assets totaled $3.6 billion at March 31, 2025, a decrease of $8.1 million, or 0.2% from December 31, 2024. The following provides a summary of key balance sheet changes during the first three months of 2025:

Current wording

The Company’s assets totaled $3.8 billion at June 30, 2025, an increase of $156.0 million, or 4.0% from December 31, 2024. The following provides a summary of key balance sheet changes during the first six months of 2025:

Previous wording

The Company had $1.3 billion in adjustable and variable rate loans and $339.9 million in floating rate bonds, as compared to $251.5 million in floating rate CDs and $35.9 million in floating rate trust preferred securities at March 31, 2025. The adjustable-rate loans have repricing frequencies ranging from 30-days to 10-years. Of the $1.3 billion in adjustable and variable rate loans, $696.1 million of such adjustable and variable rate loans reprice or mature in the next twelve months. In addition, there are $618.3 million of fixed-term deposits that reprice or mature within twelve months. Based on current rates, of the $696.1 million in adjustable and variable rate loans that reprice or mature over the next twelve months, $303.5 million, or 44%, have a current pricing index rate that is higher than the current index, while $24.8 million, or 4%, have lower pricing index rates as compared to the current index. The remaining balance of $367.8 million are priced at the current index rate or are expected to mature.

Current wording

The Company had $1.7 billion in adjustable and variable rate loans and $359.7 million in floating rate bonds, as compared to $255.3 million in floating rate CDs and $35.9 million in floating rate trust preferred securities at June 30, 2025. The adjustable-rate loans have repricing frequencies ranging from 30-days to 10-years. Of the $1.7 billion in adjustable and variable rate loans, $751.8 million of such adjustable and variable rate loans reprice or mature in the next twelve months. In addition, there are $710.2 million of fixed-term deposits that reprice or mature within twelve months. Based on current rates, of the $751.8 million in adjustable and variable rate loans that reprice or mature over the next twelve months, $263.1 million, or 35%, have a pricing index rate higher than the current index, while $14.3 million, or 2%, have a pricing index rate lower than the current index. The remaining balance of $474.5 million are priced at the current index rate or are expected to mature.

Previous wording

The volume variance calculated for the first quarter of 2025 relative to the first quarter of 2024 was a favorable $2.6 million; this is primarily from a favorable loan volume variance of $4.4 million augmented by a favorable reduction in other borrowed funds. There was an unfavorable rate variance of $0.3 million from the comparative quarter primarily driven from an unfavorable rate variance on investment securities, partially offset by favorable rate variances in loans and interest bearing liabilities. There was an unfavorable mix variance of $1.0 million primarily from an increase in mortgage

Current wording

The volume variance calculated for the second quarter of 2025 relative to the second quarter of 2024 was a favorable $0.5 million; this is primarily from the net impact of a favorable loan volume variance of $3.1 million augmented by a favorable rate reduction in interest bearing liabilities. There was an overall unfavorable rate and volume variance on investment securities, which mostly came from the variable rate investments, in the form of CLOs, partially offsetting the favorable variances in loans and interest-bearing liabilities. There was a modest favorable mix variance of $0.1 million. The

Previous wording

Average interest earning cash balances for the quarterly comparisons have increased and have a positive impact on the net interest margin since cash balances have been earning approximately 4.4%. Average cash and due from banks was $54.6 million, an increase of $37.6 million for the first quarter of 2025 as compared to the same period last year.

Current wording

Average interest earning cash balances for the quarterly comparisons have decreased and have a positive impact on the net interest margin since cash balances have been earning approximately 4.7% and have been deployed into mortgage warehouse line advances yielding 7.01%. Average interest-earning cash and due from banks was $18.1 million, a decrease of $25.3 million for the second quarter of 2025 as compared to the same period last year.

Previous wording

Overall average investment securities decreased by $205.4 million for the first quarter of 2025, as compared to the same period in 2024, as paydowns and maturities, exceeded purchases, with the excess used to partially offset brokered deposit maturities. The overall investment portfolio had a tax-equivalent yield of 4.52% at March 31, 2025, with an average life of 5.88 years and average effective duration of 2.1 years for available-for-sale securities. Approximately $266.7 million of the investment securities reprice every 90 days and $74.6 million are subordinated debt with an initial fixed rate period of 5 years and floating thereafter.

Current wording

Overall average investment securities decreased by $99.4 million for the second quarter of 2025, as compared to the same period in 2024, as paydowns and maturities, exceeded purchases, with the excess used to partially offset brokered deposit maturities. The overall investment portfolio had a tax-equivalent yield of 4.68% at June 30, 2025, with an average life of 5.99 years and average effective duration of 2.09 years for available-for-sale securities. Approximately $320.4 million of the investment securities reprice every 90 days and $80.1 million are subordinated debt with an initial fixed rate period of 5 years and floating thereafter.

Previous wording

Credit risk is inherent in the business of making loans. The Company sets aside an allowance for credit losses on loans, a contra-asset account, through periodic charges to earnings which are reflected in the income statement as the provision for credit losses on loans. Specifically identifiable and quantifiable loan losses are immediately charged off against the allowance, with subsequent recoveries reflected as an increase to the allowance. The Company recorded a provision for credit losses of $2.0 million in the first quarter of 2025, as compared to $0.1 million in the first quarter of 2024. The increased provision for credit losses in the first quarter of 2025 over the first quarter of 2024, was primarily due to an increased specific reserve on an individually evaluated loan related to a single loan relationship of a wine grape grower. The allowance for credit losses on loans is at a level that, in Management’s judgment, is adequate to absorb probable credit losses on loans related to individually identified loans as well as probable credit losses in the remaining loan portfolio.

Current wording

Credit risk is inherent in the business of making loans. The Company sets aside an allowance for credit losses on loans, a contra-asset account, through periodic charges to earnings, which are reflected in the income statement as the provision for credit losses on loans. Specifically identifiable and quantifiable loan losses are immediately charged off against the allowance, with subsequent recoveries reflected as an increase to the allowance. The Company recorded a provision for credit losses of $1.2 million in the second quarter of 2025, as compared to $0.9 million in the second quarter of 2024. The increase in net charge-offs in the second quarter of 2025, as compared to the second quarter of 2024, was primarily related to the $5.3 million prior allowance on an individually-evaluated agricultural production loan. The allowance for credit losses on loans is at a level that, in Management’s judgment, is adequate to absorb probable credit losses on loans related to individually-identified loans as well as probable credit losses in the remaining loan portfolio.

Previous wording

Within noninterest income and noninterest expense are mostly offsetting amounts related to bank owned life insurance and non-qualified deferred compensation. This created a year-over-year unfavorable variance of $1.5 million within noninterest income and a favorable year-over-year $1.5 million variance for noninterest expense. The Company maintains a non-qualified deferred compensation plan for officers and directors, which allows the participant to defer a portion of their earnings tax-free. Participants are allowed to choose different hypothetical investment alternatives to determine their individualized return on their deferred compensation. The Company has chosen to offset the cost of this liability with BOLI which is funded based on deferral elections from the participants. Although the BOLI is not directly tied to the deferred compensation plan, the BOLI is invested in similar fund types as those selected by the participants. There is some inefficiency in net earnings of the BOLI asset as compared to the deferred compensation liability created by the cost of insurance, differences in balances, and differences in individual fund performance. During the first quarter of 2025, reversal of earnings from the BOLI was $0.3 million, while reversal of expense from the related deferred compensation liability was $0.4 million. Most of such expense is reported as professional fees under directors’ fees as such expense is related to deferral of past directors’ fees. Specifically, $0.4 million for the quarterly comparison is reflected as a reversal of directors’ fees as part of the overall professional fees expense line item.

Current wording

Within noninterest income and noninterest expense are mostly offsetting amounts related to bank owned life insurance and non-qualified deferred compensation. This created a year-over-year unfavorable variance of $0.8 million within noninterest income and a favorable year-over-year $0.8 million variance for noninterest expense. The Company maintains a non-qualified deferred compensation plan for officers and directors, which allows the participant to defer a portion of their earnings tax-free. Participants are allowed to choose different hypothetical investment alternatives to determine their individualized return on their deferred compensation. The Company has chosen to offset the cost of this liability with BOLI which is funded based on deferral elections from the participants. Although the BOLI is not directly tied to the deferred compensation plan, the BOLI is invested in similar fund types as those selected by the participants. There is some inefficiency in net earnings of the BOLI asset, as compared to the deferred compensation liability, created by the cost of insurance, differences in balances, and differences in individual fund performance.

Previous wording

Service charges and fees on customer deposit accounts declined by $0.1 million, or 3%, to $5.6 million in the first quarter of 2025 as compared to the first quarter of 2024. Lower returned check charges was the primary driver of the unfavorable variance.

Current wording

Service charges and fees on customer deposit accounts declined by $0.3 million, or 5%, to $5.9 million in the second quarter of 2025 as compared to the second quarter of 2024, and declined by $0.5 million, or 4% for the year-to-date comparison. Lower analysis fees, returned check charges, and interchange on debit cards were the primary drivers of the unfavorable variance in both the quarterly and year-to-date variances.

Previous wording

In the “other” category of noninterest income there was a $0.5 million increase in the first quarter of 2025 as compared to the first quarter of 2024. Life insurance proceeds and a 2024 first quarter loss on the valuation of equity securities account accounted for most of the favorable variance.

Current wording

In the “other” category of noninterest income there was a $0.5 million increase in the second quarter of 2025 as compared to the second quarter of 2024, and a $1.0 million increase for the first six months of 2025 as compared to the same period in 2024. Life insurance proceeds accounted for most of the favorable variance for both the quarterly and year-to-date comparisons.

Previous wording

Occupancy expense was mostly unchanged for the first quarter of 2025 as compared to the same quarter last year.

Current wording

Occupancy expenses were mostly unchanged for the second quarter and the first half of 2025, as compared to the same periods in 2024.

Previous wording

The Company sets aside a provision for income taxes on a monthly basis. The amount of that provision is deter­mined by first applying the Company’s statutory income tax rates to estimated taxable income, which is pre-tax book income adjusted for permanent dif­ferences, and then subtracting available tax credits. Permanent differences include but are not limited to tax-exempt interest income, BOLI income, and certain book expenses that are not allowed as tax deductions. Tax credits consist primarily of those generated by investments in low-income housing tax credit funds. The Company's provision for income taxes was 25.8% of pre-tax income in the first quarter of 2025, relative to 26.3% in the first quarter of 2024. The variance in the effective tax rate, is due to fluctuations in tax credits and related amortization, as well as tax-exempt income as a percentage of total taxable income.

Current wording

The Company sets aside a provision for income taxes on a monthly basis. The amount of that provision is deter­mined by first applying the Company’s statutory income tax rates to estimated taxable income, which is pre-tax book income adjusted for permanent dif­ferences, and then subtracting available tax credits. Permanent differences include, but are not limited to, tax-exempt interest income, BOLI income, and certain book expenses that are not allowed as tax deductions. Tax credits consist primarily of those generated by investments in low-income housing tax credit funds. The Company's provision for income taxes was 25.3% of pre-tax income in the second quarter of 2025, relative to 27.8% in the second quarter of 2024, and 25.5% of pre-tax income for the first half of 2025 relative to 27.1% for the same period in 2024.

Previous wording

The investment portfolio is reflected on the balance sheet as investment securities and totaled $922.4 million, or 26% of total assets at March 31, 2025, and $1.0 billion, or 27% of total assets at December 31, 2024. The decrease was due to maturities and paydowns, partially used to offset brokered deposit maturities.

Current wording

The investment portfolio is reflected on the balance sheet as investment securities and totaled $967.3 million, or 26% of total assets at June 30, 2025, and $961.5 million, or 27% of total assets at December 31, 2024. The decrease was due to maturities and paydowns, partially used to offset brokered deposit maturities.

Previous wording

The Company carries “available-for-sale” investments at their fair market values and “held-to-maturity” investments at amortized cost, net of allowance for credit losses. The Company currently has the intent and ability to hold investment securities to maturity, but the securities are all marketable. The expected effective duration was 2.1 years for available-for-sale investments and 6.2 years for held-to-maturity investments at March 31, 2025, as compared to 1.5 years for available-for-sale investments and 6.0 years for held-to-maturity investments at December 31, 2024.

Current wording

The Company carries “available-for-sale” investments at their fair market values and “held-to-maturity” investments at amortized cost, net of allowance for credit losses. The Company currently has the intent and ability to hold investment securities to maturity, but the securities are all marketable. The expected effective duration was 2.1 years for available-for-sale investments and 6.1 years for held-to-maturity investments at June 30, 2025, as compared to 1.5 years for available-for-sale investments and 6.0 years for held-to-maturity investments at December 31, 2024.

Previous wording

Investment securities that were pledged as collateral for borrowings and/or potential borrowings from the FHLB and the FRB, customer repurchase agreements, and other purposes as required or permitted by law totaled $353.0 million at March 31, 2025, and $403.4 million at December 31, 2024, leaving $569.4 million in unpledged debt securities at March 31, 2025, and $558.1 million at December 31, 2024. Securities that were pledged in excess of actual pledging needs and were thus available for liquidity purposes, if needed, totaled $181.0 million at March 31, 2025, and $242.2 million at December 31, 2024.

Current wording

Investment securities pledged as collateral for borrowings and/or potential borrowings from the FHLB and the FRB, customer repurchase agreements, and other purposes as required or permitted by law totaled $433.8 million at June 30, 2025, and $403.4 million at December 31, 2024, leaving $533.5 million in unpledged debt securities at June 30, 2025, and $558.1 million at December 31, 2024. Securities pledged in excess of actual pledging needs and thus available for liquidity purposes, if needed, totaled $253.4 million at June 30, 2025, and $242.2 million at December 31, 2024.

Previous wording

The allowance for credit losses on AFS investment securities, a contra-asset, is established through periodic provisions for credit losses on AFS investment securities. It is maintained at a level that is considered adequate to measure expected losses across the classes of major investment security types related to fluctuations in market conditions, primarily interest rates, and not reflective of a deterioration in credit value. The Company maintains that it has intent and ability to hold these securities until the amortized cost basis of each security is recovered and likewise concluded as of both March 31, 2025 and December 31, 2024 that it was not more likely than not that any of the securities in an unrealized loss position would be required to be sold. The following bullets outline additional support for Management’s conclusion that no amount of the unrealized loss of the securities in an unrealized loss position as of March 31, 2025 and December 31, 2024, was attributable to credit deterioration and a risk of loss, requiring an allowance for credit losses.

Current wording

The allowance for credit losses on AFS investment securities, a contra-asset, is established through periodic provisions for credit losses on AFS investment securities. It is maintained at a level that is considered adequate to measure expected losses across the classes of major investment security types related to fluctuations in market conditions, primarily interest rates, and not reflective of a deterioration in credit value. The Company maintains it has intent and ability to hold these securities until the amortized cost basis of each security is recovered and likewise concluded as of both June 30, 2025 and December 31, 2024, that it was not more likely than not that any of the securities in an unrealized loss position would be required to be sold. The following bullets outline additional support for Management’s conclusion that no amount of the unrealized loss of the securities in an unrealized loss position as of June 30, 2025, and December 31, 2024, was attributable to credit deterioration and a risk of loss, requiring an allowance for credit losses.

Previous wording

annual reviews of the underlying municipal issuers financial statements in order to evaluate stability and repayment capacity and has noted no concerns with any of the bonds in the Company’s State and Local portfolio. As of both March 31, 2025 and December 31, 2024 management concluded that no allowance for credit losses was warranted on any of the Company’s municipal securities and the unrealized loss position of each of the securities reflected fluctuations in market conditions, primarily interest rates, since the time of purchase.

Current wording

repayment capacity and has noted no concerns with any of the bonds in the Company’s state and local portfolio. As of both June 30, 2025 and December 31, 2024 Management concluded that no allowance for credit losses was warranted on any of the Company’s municipal securities and the unrealized loss position of each of the securities reflected fluctuations in market conditions, primarily interest rates, since the time of purchase.

Previous wording

Gross loan balances at $2.3 billion, decreased $24.6 million, or 1%, during the first quarter of 2025. Organic loan growth contributed to a $22.5 million increase in commercial real estate loans, a $2.3 million increase in other construction loans and a $3.4 million increase in commercial loans. Consumer loans had a modest decline, while residential real estate loans decreased $4.9 million, and farmland loans decreased $4.3 million. Mortgage warehouse line utilization decreased $43.2

Current wording

Gross loan balances at $2.4 billion, increased $103.3 million, or 4%, during the first half of 2025. Organic loan growth contributed to increases of $34.1 million in commercial real estate loans, $6.3 million in construction loan balances, and $8.4 million in other commercial loans. Mortgage warehouse line utilization increased $75.5 million, or 23%. Consumer loans had a modest decline, while residential real estate loans decreased $11.1 million, and farmland loans decreased $9.6 million.

Previous wording

As indicated in the loan rollforward below, new credit extended for the first quarter of 2025 decreased $13.6 million over the linked quarter comparison and increased $31.4 million over the same period in 2024. For the first three months ended 2025, we had $32.7 million in loan paydowns and maturities, along with a $12.1 million decrease in line of credit utilization, and a $46.1 million decrease in mortgage warehouse utilization.

Current wording

As indicated in the loan rollforward below, new credit extended for the second quarter of 2025 decreased $18.2 million over the linked quarter comparison and increased $7.8 million over the same period in 2024. For the six months ended June 30, 2025, new credit extended increased $39.2 million, or 52% over the same period in 2024. For the first six months ended 2025, we had $77.2 million in loan paydowns and maturities, along with a $9.5 million decrease in line of credit utilization, partially offset by a $75.5 million increase in mortgage warehouse utilization for the first half of 2025.

Previous wording

At March 31, 2025, the total regulatory CRE concentration ratio of total CRE over Tier 1 Capital plus allowance was 237.1% as compared to 236.3% at December 31, 2024, and 248.4% at March 31, 2024. Further, the overall level of construction and land development lending had declined to 1% of regulatory capital plus allowance for credit losses at March 31, 2025. At March 31, 2025, non-owner occupied commercial real estate includes $301.4 million of retail; $150.7 million of warehouse/industrial; $155.4 million of office; and $218.2 million of hospitality. Approximately $29.5 million, or $19% of the office real estate matures in less than two years.

Current wording

At June 30, 2025, the total regulatory CRE concentration ratio of total CRE over Tier 1 Capital plus allowance was 243.6% as compared to 236.3% at December 31, 2024, and 241.1% at June 30, 2024. The overall level of construction and land development lending is 2.6% of regulatory capital plus allowance for credit losses at June 30, 2025. At June 30, 2025, non-owner occupied commercial real estate includes $306.5 million of retail; $145.6 million of warehouse/industrial; $155.5 million of office; and $222.0 million of hospitality. Approximately $35.8 million, or 23% of the office real estate matures in less than two years.

Previous wording

Nonperforming assets currently is comprised of loans for which the Company is no longer accruing interest but can include OREO and other foreclosed assets, when applicable.

Current wording

Nonperforming assets is currently comprised of loans for which the Company is no longer accruing interest but can include OREO and other foreclosed assets, when applicable.

Previous wording

Total nonperforming assets, comprised of non-accrual loans, decreased by $1.5 million, or 7%, during the first quarter of 2025. The decrease in non-accrual loans, was from the successful payoff and paydown of a couple of loans secured by farmland. The Company's ratio of nonperforming assets to loans plus foreclosed assets decreased to 0.79% at March 31, 2025, from 0.84% at December 31, 2024. All the Company's nonperforming assets are individually evaluated for credit loss quarterly and management believes the established allowance for credit loss on such loans is appropriate.

Current wording

Total nonperforming assets, comprised of nonaccrual loans and foreclosed assets, decreased by $4.7 million to $15.0 million for the first half of 2025. The Company's ratio of nonperforming loans to gross loans decreased to 0.62% at June 30, 2025, from 0.84% at December 31, 2024. The decrease resulted from a decrease in non-accrual loan balances, due to the partial charge-off of one agricultural production loan. All the Company's nonperforming assets are individually evaluated for credit loss quarterly and Management believes the established allowance for credit loss on such loans is appropriate.

Previous wording

The Company had $3.1 million in loans past due 30-89 days and still accruing at March 31, 2025. This is an increase of $1.7 million over the balance at December 31, 2024. All of these past due loans are under management supervision and every effort is being taken to assist the borrowers and manage credit risk in this regard.

Current wording

The Company had $3.0 million in loans past due 30-89 days and still accruing at June 30, 2025. This is an increase of $1.7 million over the balance at December 31, 2024. All of these past due loans are under Management supervision and every effort is being taken to assist the borrowers and manage credit risk in this regard.

Previous wording

The allowance for credit losses on loans, a contra-asset, is established through periodic provisions for credit losses on loans. It is maintained at a level that is considered adequate to measure expected losses on individually identified loans, as well as expected losses inherent in the remaining loan portfolio. Specifically identifiable and quantifiable losses are

Current wording

The allowance for credit losses on loans, a contra-asset, is established through periodic provisions for credit losses on loans. It is maintained at a level that is considered adequate to measure expected losses on individually identified loans, as well as expected losses inherent in the remaining loan portfolio. Specifically identifiable and quantifiable losses are immediately charged off against the allowance; recoveries are generally recorded only when sufficient cash payments are received subsequent to the charge-off.

Previous wording

The Company's allowance for credit losses on loans was $27.1 million at March 31, 2025, as compared to $24.8 million at December 31, 2024, and $23.1 million at March 31, 2024. The increase is primarily attributable to an increase in the allowance for loans individually evaluated and was specifically related to a $11.9 million single loan relationship of a wine grape grower. The allowance was 1.17% of total loans at March 31, 2025, 1.07% of total loans at December 31, 2024, and 1.07% of total loans at March 31, 2024. Management's detailed analysis indicates that the Company's allowance for credit losses on loans should be sufficient to cover credit losses for the life of the loans outstanding as of March 31, 2025, but no assurance can be given that the Company will not experience substantial future losses relative to the size of the credit loss allowance for loans. The total allowance for credit losses on loans of $27.1 million at March 31, 2025, included $0.3 million of allowance related to $283.2 million of mortgage warehouse lines. A separate allowance of $0.8 million for potential credit losses inherent in unused commitments is included in other liabilities at March 31, 2025, an increase of $0.1 million, from December 31, 2024.

Current wording

The Company's allowance for credit losses on loans was $21.7 million at June 30, 2025, as compared to $24.8 million at December 31, 2024, and $21.6 million at June 30, 2024. The decrease for the first half of 2025 is primarily attributable to a decrease in the allowance for loans individually evaluated and was specifically related to the partial charge-off of one agricultural production loan, reflected in the other commercial category in the table below. The allowance as a percentage of gross loans was 0.89%, 1.07%, and 0.97%, at June 30, 2025, December 31, 2024, and June 30, 2024, respectively. Management's detailed analysis indicates that the Company's allowance for credit losses on loans should be sufficient to cover credit losses for the life of the loans outstanding as of June 30, 2025, but no assurance can be given that the Company will not experience substantial future losses relative to the size of the credit loss allowance for loans. The total allowance for credit losses on loans of $21.7 million at June 30, 2025, included $0.5 million of allowance related to $401.9 million of mortgage warehouse lines. A separate allowance of $0.8 million for potential credit losses inherent in unused commitments is included in other liabilities at June 30, 2025, an increase of $0.1 million, from December 31, 2024.

Previous wording

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

Current wording

The Company maintains commitments to extend credit in the normal course of business, as long as there are no violations of conditions established in the outstanding contractual arrangements. It is unlikely that all unused commitments will ultimately be drawn down. Unused commitments to extend credit, which included standby letters of credit, totaled $671.4 million at June 30, 2025, and $641.5 million at December 31, 2024, representing approximately 28% of gross loans outstanding at both June 30, 2025, and December 31, 2024. Included in unused commitments are mortgage warehouse

Previous wording

ultimately be drawn down. Unused commitments to extend credit, which included standby letters of credit, totaled $754.4 million at March 31, 2025, and $641.5 million at December 31, 2024, representing approximately 33% of gross loans outstanding at March 31, 2025, and 28% at December 31, 2024. Included in unused commitments are mortgage warehouse lines which are mostly in the form of repurchase lines and are unconditionally cancellable. Unused commitments on mortgage warehouse lines were $414.8 million at March 31, 2025, and $311.6 million at December 31, 2024, while utilization was 41% and 51%, respectively.

Current wording

lines, which are mostly in the form of repurchase lines and are unconditionally cancellable. Unused commitments on mortgage warehouse lines were $334.6 million at June 30, 2025, and $311.6 million at December 31, 2024, while mortgage warehouse utilization was 55% and 51%, respectively.

Previous wording

The decrease in utilization during the first three months of 2025 was due to new customers in the mortgage warehouse product that had not yet ramped up their utilization as well as two large mortgage warehouse line paydowns during the final week of the quarter. Unused commitments exclusive of mortgage warehouse lines and overdraft lines of credit, were nearly flat at 57% at December 31, 2024 and 56% at March 31, 2025. The Company also had undrawn letters of credit issued to customers totaling $5.2 million at March 31, 2025, and $5.0 million at December 31, 2024. The effect on the Company’s revenues, expenses, cash flows and liquidity from the unused portion of commitments to provide credit cannot be reasonably predicted because there is no guarantee that the lines of credit will ever be used. However, the “Liquidity” section in this Form 10-Q outlines resources available to draw upon should the Company be required to fund a significant portion of unused commitments.

Current wording

The Company also had undrawn letters of credit issued to customers totaling $5.3 million at June 30, 2025, and $5.0 million at December 31, 2024. The effect on the Company’s revenues, expenses, cash flows and liquidity from the unused portion of commitments to provide credit cannot be reasonably predicted because there is no guarantee that the lines of credit will ever be used. However, the “Liquidity” section in this Form 10-Q outlines resources available to draw upon should the Company be required to fund a significant portion of unused commitments.

Previous wording

In addition to unused commitments to provide credit, the Company is utilizing a $125 million letter of credit issued by the FHLB on the Company’s behalf as security for certain local agency deposits which totaled $83.4 million at March 31, 2025. That letter of credit is backed by loans that are pledged to the FHLB by the Company. For more information on the Company’s off-balance sheet arrangements, see Note 7 to the consolidated financial statements located elsewhere herein.

Current wording

In addition to unused commitments to provide credit, the Company is utilizing a $125 million letter of credit issued by the FHLB on the Company’s behalf as security for certain local agency deposits which totaled $112.2 million at June 30, 2025. That letter of credit is backed by loans pledged to the FHLB by the Company. For more information on the Company’s off-balance sheet arrangements, see Note 7 to the consolidated financial statements located elsewhere herein.

Previous wording

Interest-earning cash balances were discussed above in the “Investments” section, but the Company also maintains a certain level of cash on hand in the normal course of business as well as non-earning deposits at other financial institutions. The Company’s balance of cash and due from banks depends on the timing of collection of outstanding cash items (checks), the amount of cash held in the branches, and the reserve requirement among other things, and it is subject to significant fluctuations in the normal course of business. While cash flows are normally predictable within limits, those limits are fairly broad and the Company manages its short-term cash position through the utilization of overnight loans to, and borrowings from, correspondent banks, including the FRB and the FHLB. Should a large “short” overnight position persist for any length of time, the Company typically raises money through focused retail deposit gathering efforts or by adding brokered time deposits. If a “long” position is prevalent, the Company could let brokered deposits or other wholesale borrowings roll off as they mature, or invest excess liquidity into investments or loans, subject to the Company’s risk tolerances. The Company’s balance of non-earning cash and due from banks was $80.4 million at March 31, 2025, relative to $79.6 million at December 31, 2024.

Current wording

Interest-earning cash balances were discussed above in the “Investments” section, but the Company also maintains a certain level of cash on hand in the normal course of business, as well as non-earning deposits at other financial institutions. The Company’s balance of cash and due from banks depends on the timing of collection of outstanding cash items (checks), the amount of cash held in the branches, and the reserve requirement among other things, and it is subject to significant fluctuations in the normal course of business. While cash flows are normally predictable within limits, those limits are fairly broad and the Company manages its short-term cash position through the utilization of overnight loans to, and borrowings from, correspondent banks, including the FRB and the FHLB. Should a large “short” overnight position persist for any length of time, the Company typically raises money through focused retail deposit gathering efforts or by adding brokered time deposits. If a “long” position is prevalent, the Company could let brokered deposits or other wholesale borrowings roll off as they mature, or invest excess liquidity into investments or loans, subject to the Company’s risk tolerances. The Company’s balance of non-earning cash and due from banks was $112.9 million at June 30, 2025, relative to $79.6 million at December 31, 2024.

Previous wording

Net premises and equipment decreased by $0.1 million during the first three months of 2025, to $15.3 million. This decline was mostly a result of depreciation in the first quarter of 2025.

Current wording

Net premises and equipment decreased by $0.1 million during the first half of 2025, to $15.3 million. This decline was mostly a result of depreciation in the first half of 2025.

Previous wording

Goodwill was $27.4 million at March 31, 2025, unchanged during the first three months of 2025. Goodwill is tested for impairment annually, unless events and circumstances exist which indicate that an impairment test should be performed. The annual goodwill impairment test was last performed on October 1, 2024, and it was determined that no impairment existed. Management continues to evaluate whether or not a triggering event occurs, or circumstances change that would more likely than not reduce the fair value of the Company below its carrying amount before the next annual test in 2025.

Current wording

Goodwill was $27.4 million at June 30, 2025, unchanged during the first half of 2025. Goodwill is tested for impairment annually, unless events and circumstances exist which indicate that an impairment test should be performed. The annual goodwill impairment test was last performed on October 1, 2024, and it was determined that no impairment existed. Management continues to evaluate whether or not a triggering event occurs, or circumstances change that would more likely than not reduce the fair value of the Company below its carrying amount before the next annual test in 2025.

Previous wording

Bank-owned life insurance, with a balance of $52.7 million at March 31, 2025, is discussed in detail above in the “Noninterest Income and Noninterest Expense” section.

Current wording

Bank-owned life insurance, with a balance of $67.7 million at June 30, 2025, increased $14.5 million during the first half of 2025, primarily due to the purchase of additional life insurance policies. Additional details are discussed above in the “Noninterest Income and Noninterest Expense” section.

Previous wording

Deposits represent another key balance sheet category impacting the Company’s net interest income and profitability metrics. Deposits provide liquidity to fund growth in earning assets, and the Company’s net interest margin is improved to the extent that growth in deposits is concentrated in less volatile and typically less costly non-maturity accounts such as demand deposit accounts, NOW accounts, savings accounts, and money market demand accounts. Information concerning average balances and rates paid by deposit type is included in the Average Balances and Rates tables appearing above, in the section titled “Net Interest Income and Net Interest Margin.” A distribution of the Company’s deposits by type, showing the period-end balance and percentage of total deposits, is presented as of the dates indicated in the following table.

Current wording

Deposits represent a key balance sheet category impacting the Company’s profitability metrics. Deposits provide liquidity to fund growth in earning assets, and the Company’s net interest margin is improved to the extent that growth in deposits is concentrated in less volatile and typically less costly non-maturity accounts, such as demand deposit accounts, NOW accounts, savings accounts, and money market demand accounts. Information concerning average balances and rates paid by deposit type is included in the Average Balances and Rates tables appearing above, in the section titled “Net Interest Income and Net Interest Margin.” A distribution of the Company’s deposits by type, showing the period-end balance and percentage of total deposits, is presented as of the dates indicated in the following table.

Previous wording

Deposit balances declined by $41.8 million, or 1%, during the first three months of 2025 to $2.8 billion at March 31, 2025 due mostly to an $85.0 million reduction in brokered deposits. Core non-maturity deposits increased $52.6 million, or 3%, for the first three months of 2025, while customer time deposits decreased by $9.4 million. Brokered deposits decreased significantly during the quarter, as the Company utilized some paydowns in the investment portfolio and changes in mortgage warehouse line utilization to offset recent brokered deposit maturities. Noninterest-bearing deposits as a percent of total deposits increased to 36.4% at March 31, 2025, compared to 34.8% at December 31, 2024, and from 34.0% at March 31, 2024.

Current wording

Deposit balances increased by $82.8 million, or 3%, during the first half of 2025 to $3.0 billion at June 30, 2025. Core non-maturity deposits increased $86.8 million, or 4%, for the first half of 2025, while customer time deposits decreased by $19.0 million. Brokered deposits increased $15.0 million to fund mortgage warehouse lines. Noninterest-bearing deposits as a percent of total deposits increased to 35.8% at June 30, 2025, compared to 34.8% at December 31, 2024, and from 33.5% at June 30, 2024.

Previous wording

Overall uninsured deposits are estimated to be $788.6 million, or 28% of total deposit balances, excluding public agency deposits that are subject to collateralization through a letter of credit issued by the FHLB. In addition, uninsured deposits of the bank’s customers are eligible for FDIC pass-through insurance if the customer opens an IntraFi Insured Cash Sweep account or a reciprocal time deposit through the Certificate of Deposit Account Registry System (CDARS). IntraFi allows for up to $275 million of combined pass-through FDIC insurance which would more than cover each of the Bank’s deposit customers if such customer desired to have such pass-through insurance. The Bank maintains a diversified deposit base with no significant customer concentrations and does not bank any cryptocurrency companies. At March 31, 2025, the Company had approximately 119,000 accounts and the 25 largest deposit balance customers had balances of less than 10% of overall deposits*.* Other interest-bearing liabilities of $198.8 million on March 31, 2025, consist of $118.8 million in customer repurchase agreements and $80.0 million of term FHLB borrowings, as compared to $108.9 million in customer repurchase agreements, and $80.0 million of term FHLB borrowings on December 31, 2024.

Current wording

Overall uninsured deposits are estimated to be $751.1 million, or 26% of total deposit balances, excluding public agency deposits that are subject to collateralization through a letter of credit issued by the FHLB. In addition, uninsured deposits of the bank’s customers are eligible for FDIC pass-through insurance if the customer opens an IntraFi Insured Cash Sweep account or a reciprocal time deposit through the Certificate of Deposit Account Registry System (CDARS). IntraFi allows for up to $285 million of combined pass-through FDIC insurance which would more than cover each of the Bank’s deposit customers if a customer desired to have such pass-through insurance. The Bank maintains a diversified deposit base with no significant customer concentrations and does not bank any cryptocurrency companies. At June 30, 2025, the Company had approximately 118,000 accounts, and the 25 largest deposit balance customers had balances of approximately 11% of overall deposits*.*

Previous wording

Customer repurchase agreements were $118.8 million at March 31, 2025, as compared to $108.9 million at December 31, 2024. Customer repurchase agreements provide collateral for customers that sweep excess deposit balances each day into a separate repurchase agreement account where the Company sells certain government bonds to customers daily under an agreement to repurchases the same bonds on the next business day. Although these accounts are not deposits and are not FDIC insured, they provide customers with larger account balances the ability to have their account effectively secured with collateral.

Current wording

Customer repurchase agreements were $126.5 million at June 30, 2025, as compared to $108.9 million at December 31, 2024. Customer repurchase agreements allow customers to sweep excess deposit balances over the FDIC insurance limit each day into a separate repurchase agreement account. Monies in that account are used daily by the customer to purchase specific government debt securities from the Company under an agreement from the Company to repurchase the same

Previous wording

The Company’s non-deposit borrowings may, at any given time, include fed funds purchased from correspondent banks, borrowings from the FHLB, advances from the FRB, securities sold under agreements to repurchase, subordinated notes and/or junior subordinated debentures. The Company uses short-term FHLB advances and fed funds purchased on unsecured lines to support liquidity needs created by seasonal deposit flows, to temporarily satisfy funding needs from

Current wording

The Company’s non-deposit borrowings may, at any given time, include fed funds purchased from correspondent banks, borrowings from the FHLB, advances from the FRB, securities sold under agreements to repurchase, subordinated notes and/or junior subordinated debentures. The Company uses short-term FHLB advances and fed funds purchased on unsecured lines to support liquidity needs created by seasonal deposit flows, to temporarily satisfy funding needs from increased loan demand, and for other short-term purposes. The FHLB line consists of both a secured and unsecured component. The secured component depends on the level of pledged collateral.

Previous wording

Other liabilities are principally comprised of operating lease right-of-use liabilities, accrued interest payable, other accrued but unpaid expenses, and certain clearing amounts. The Company’s balance of other liabilities was $119.7 million at March 31, 2025, as compared to $90.5 million at December 31, 2024, an increase of $29.2 million or 32%. The increase was primarily driven by investment security purchases that as of March 31, 2025, had not settled .

Current wording

Other liabilities are principally comprised of operating lease right-of-use liabilities, accrued interest payable, other accrued but unpaid expenses, and certain clearing amounts. The Company’s balance of other liabilities was $73.0 million at June 30, 2025, as compared to $90.5 million at December 31, 2024, a decrease of $17.5 million or 19%. The decrease was primarily driven by investment security purchases in process that settled, ICS transactions in process that settled, funds advanced on low-income housing tax credit investments, and a decrease in accrued interest on time deposits.

Previous wording

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

Current wording

The Company continues to have substantial liquidity through unencumbered assets and available borrowings. In addition, the Company’s loan-to-deposit ratio was 82% at June 30, 2025, and 81% at December 31, 2024, compared to an internal policy guideline of less than 90%.