How did Sierra Bancorp (BSRR) earnings per share change in the first half of 2026?

First-half 2026 basic EPS was $1.74 and diluted EPS was $1.72 , compared with $1.44 basic and $1.43 diluted in 2025. The improvement came despite relatively flat net interest income and higher credit loss expense in Q2.

Sierra Bancorp (NASDAQ: BSRR) grows first-half 2026 profit to $22.4M

Q: What were Sierra Bancorp (BSRR) earnings for Q2 2026?

Sierra Bancorp earned $9,919 thousand in net income for Q2 2026, compared with $10,633 thousand a year earlier. For the first six months of 2026, net income was $22,439 thousand and diluted EPS was $1.72.

Q: What were Sierra Bancorp (BSRR) total assets and deposits at June 30, 2026?

At June 30, 2026, Sierra Bancorp reported total assets of $3.7 billion and deposit balances of $2.9 billion . Loans held for investment totaled 2,456,206 thousand in gross balances, supported by an allowance for credit losses on loans of 23,600 thousand.

Q: How did Sierra Bancorp (BSRR) credit quality look at mid‑2026?

Nonaccrual loans were $10,544 thousand at June 30, 2026, down from $13,231 thousand at December 31, 2025. The allowance for credit losses on loans increased to $23,600 thousand , and there were no loans past due 90 days and still accruing interest.

Q: Did Sierra Bancorp (BSRR) repurchase shares or pay dividends in the first half of 2026?

Yes. Sierra Bancorp used $14,908 thousand to repurchase common stock and paid cash dividends of $6,832 thousand in the first six months of 2026. Shares outstanding declined to 12,963,397, including 173,492 unvested restricted shares.

Q: What was Sierra Bancorp (BSRR) funding and borrowing position at June 30, 2026?

Total deposits were $2,930,991 thousand , while other borrowings stood at $155,000 thousand , down from 302,700 thousand at year-end 2025. Repurchase agreements were 122,364 thousand and subordinated debentures 36,106 thousand, supporting overall funding.

Filing Impact

(Moderate)

Filing Sentiment

(Neutral)

Form Type

10-Q

Rhea-AI Filing Summary

Sierra Bancorp, holding company for Bank of the Sierra, reported Q2 2026 net income of $9,919 thousand versus $10,633 thousand a year earlier, and first‑half net income of $22,439 thousand compared with $19,734 thousand. Basic EPS was $0.77 for the quarter and $1.74 year‑to‑date; diluted EPS was $1.72 for the first half. Net interest income was $30,412 thousand for Q2 and $61,020 thousand for six months, while credit loss expense on loans was $2,283 thousand for the quarter and $2,360 thousand year‑to‑date. Noninterest income was $8,570 thousand in Q2, and noninterest expense was $23,510 thousand.

Total assets were $3.7 billion at June 30, 2026, with total deposits of $2.9 billion. Loans held for investment totaled $2,456,206 thousand in gross balances, with an allowance for credit losses on loans of $23,600 thousand. Nonaccrual loans were $10,544 thousand, down from $13,231 thousand at year‑end 2025.

Other borrowings declined to $155,000 thousand from $302,700 thousand at December 31, 2025, and total shareholders’ equity increased to $366,897 thousand. Operating cash flow was $16,547 thousand, investing activities provided $112,408 thousand, and financing activities used $121,888 thousand, including $14,908 thousand of share repurchases and $6,832 thousand of dividends, leaving cash and cash equivalents at $142,695 thousand.

Positive

First-half 2026 net income of $22,439 thousand exceeded $19,734 thousand in 2025, with diluted EPS rising to $1.72 from $1.43.
Other borrowings decreased to $155,000 thousand from $302,700 thousand at December 31, 2025, materially reducing outstanding wholesale debt.
Nonaccrual loans fell to $10,544 thousand from $13,231 thousand at year-end 2025, reflecting an improved credit risk profile.

Negative

None.

Filing Explained

At June 30, 2026, Sierra Bancorp had 12,963,397 shares outstanding and 229,488 plan shares available for future awards.

Sierra Bancorp filed its unaudited Form 10-Q for the quarter ended June 30, 2026, updating interim financial statements, risks, and liquidity. The filing’s structural effect is a lower common-share count after repurchases, alongside continuing equity-award capacity that could increase shares later.

Common shares outstanding were 12,963,397 at June 30, 2026, versus 13,273,788 at December 31, 2025; the filing also reports 396,429 shares repurchased during the first six months. Issuing additional shares generally reduces an existing holder’s percentage ownership, and the company had 173,492 unvested restricted shares outstanding plus 229,488 shares remaining available for grants under the 2023 plan.

The filing reports $611,254 thousand of commitments or facilities to extend credit and $5,750 thousand of standby letters of credit at June 30, 2026. These are contractual credit capacities or guarantees rather than amounts already funded; the company states that many commitments may expire undrawn and therefore do not necessarily represent future cash requirements.

The current share-count picture is therefore a completed reduction in shares outstanding from repurchases, with additional award-related issuance potential disclosed but not presented as issued common shares in the filing.

Key Figures

Net income (Q2 2026): $9,919 Net income (six months 2026): $22,439 Diluted EPS (six months 2026): $1.72 +5 more

8 metrics

Net income (Q2 2026) $9,919 Net income for the three months ended June 30, 2026

Net income (six months 2026) $22,439 Net income for the six months ended June 30, 2026

Diluted EPS (six months 2026) $1.72 Diluted earnings per share for the six months ended June 30, 2026

Total assets $3,720,611 Total assets at June 30, 2026

Total deposits $2,930,991 Total deposits at June 30, 2026

Other borrowings $155,000 Other borrowings at June 30, 2026, versus $302,700 at December 31, 2025

Nonaccrual loans $10,544 Total nonaccrual loans at June 30, 2026

Commitments to extend credit $611,254 Unused commitments or facilities to extend credit at June 30, 2026

Key Terms

Allowance for credit losses, Collateral-dependent loans, Low-Income Housing Tax Credit (LIHTC) fund investments, Available-for-sale securities, +1 more

5 terms

Allowance for credit losses financial

"Allowance for credit losses on loans was $23,600 at June 30, 2026"

Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.

Collateral-dependent loans financial

"The amortized cost basis of collateral-dependent loans by class is presented"

Low-Income Housing Tax Credit (LIHTC) fund investments financial

"The Company currently has investments in eight different LIHTC fund limited partnerships"

Available-for-sale securities financial

"Available-for-sale securities are carried at their estimated fair market values"

Available-for-sale securities are investments in stocks, bonds or similar instruments that a company does not intend to trade frequently but may sell before they mature. They matter to investors because changes in the market value of these holdings show up as paper gains or losses on the company's balance sheet rather than immediately in profit, so they can affect reported net worth and the timing of income without changing day-to-day earnings. Think of them like items on a household shelf you might sell later: their value moves with the market even if you haven’t cashed out.

Held-to-maturity securities financial

"Held-to-maturity securities are carried at their amortized cost, net of the allowance"

Held-to-maturity securities are debt investments—like bonds—that a company or investor intends and is able to keep until they mature and repay their face value. Think of them as money you lock in like a fixed-term certificate: they matter to investors because their value is recorded at amortized cost rather than market price, so they provide predictable interest income and reduce balance-sheet volatility but limit flexibility to sell.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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10-Q Quarterly Reports: What Changes Quarter to Quarter →

Available on EDGAR 07/31/2026 - 06:07 AM Accepted by SEC EDGAR 07/31/2026 - 06:01 AM

FAQ

What were Sierra Bancorp (BSRR) earnings for Q2 2026?

Sierra Bancorp earned $9,919 thousand in net income for Q2 2026, compared with $10,633 thousand a year earlier. For the first six months of 2026, net income was $22,439 thousand and diluted EPS was $1.72.

What were Sierra Bancorp (BSRR) total assets and deposits at June 30, 2026?

At June 30, 2026, Sierra Bancorp reported total assets of $3.7 billion and deposit balances of $2.9 billion. Loans held for investment totaled 2,456,206 thousand in gross balances, supported by an allowance for credit losses on loans of 23,600 thousand.

How did Sierra Bancorp (BSRR) credit quality look at mid‑2026?

Nonaccrual loans were $10,544 thousand at June 30, 2026, down from $13,231 thousand at December 31, 2025. The allowance for credit losses on loans increased to $23,600 thousand, and there were no loans past due 90 days and still accruing interest.

Did Sierra Bancorp (BSRR) repurchase shares or pay dividends in the first half of 2026?

Yes. Sierra Bancorp used $14,908 thousand to repurchase common stock and paid cash dividends of $6,832 thousand in the first six months of 2026. Shares outstanding declined to 12,963,397, including 173,492 unvested restricted shares.

What was Sierra Bancorp (BSRR) funding and borrowing position at June 30, 2026?

Total deposits were $2,930,991 thousand, while other borrowings stood at $155,000 thousand, down from 302,700 thousand at year-end 2025. Repurchase agreements were 122,364 thousand and subordinated debentures 36,106 thousand, supporting overall funding.

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2026

Commission file number: 000-33063

SIERRA BANCORP

(Exact name of Registrant as specified in its charter)


California	33-0937517
(State of Incorporation)	(IRS Employer Identification No)

86 North Main Street, Porterville, California 93257

(Address of principal executive offices) (Zip Code)

(559) 782-4900

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

BSRR

The NASDAQ Stock Market LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☐	Accelerated Filer:	☒
Non-accelerated Filer:	☐	Smaller Reporting Company:	☐
Emerging Growth Company:	☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of July 27, 2026, the registrant had 12,963,397 shares of common stock outstanding, including 173,492 shares of unvested restricted stock.

Table of Contents

FORM 10-Q

Table of Contents


					Page
Part I - Financial Information					1
	Item 1. Financial Statements (Unaudited)				1
		Consolidated Balance Sheets			1
		Consolidated Statements of Income			2
		Consolidated Statements of Comprehensive Income			3
		Consolidated Statements of Changes In Shareholders’ Equity			4
		Consolidated Statements of Cash Flows			6
		Notes to Consolidated Financial Statements (Unaudited)			7

	Item 2. Management’s Discussion & Analysis of Financial Condition & Results of Operations				35
		Forward-Looking Statements			35
		Critical Accounting Policies			36
		Overview of the Results of Operations and Financial Condition			36
		Earnings Performance			38
			Net Interest Income and Net Interest Margin		38
			Provision for Credit Loss Expense		43
			Noninterest Income and Noninterest Expense		44
			Provision for Income Taxes		46
		Balance Sheet Analysis			46
			Earning Assets		46
				Investments	46
				Loan Portfolio	49
				Nonperforming Assets	51
				Allowance for Credit Losses on Loans	52
				Off-Balance Sheet Arrangements	54
			Other Assets		54
			Deposits and Interest-Bearing Liabilities		55
				Deposits	55
				Other Interest-Bearing Liabilities	56
			Noninterest-Bearing Liabilities		56
		Liquidity and Market Risk Management			57
		Capital Resources			59

	Item 3. Quantitative & Qualitative Disclosures about Market Risk				60

	Item 4. Controls and Procedures				60

Part II - Other Information					61
	Item 1. - Legal Proceedings				61
	Item 1A. - Risk Factors				61
	Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds				62
	Item 3. - Defaults upon Senior Securities				62
	Item 4. - Mine Safety Disclosures				62
	Item 5. - Other Information				62
	Item 6. - Exhibits				63

Signatures					65

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements

SIERRA BANCORP

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)


	June 30, 2026			December 31, 2025
ASSETS	(unaudited)			(audited)
Cash and due from banks	$	107,583		$	71,414
Interest-bearing deposits in banks		35,112			64,214
Total cash & cash equivalents		142,695			135,628
Investment securities
Available-for-sale, net of zero allowance for credit losses		611,822			625,330
Held-to-maturity, net of allowance for credit losses of $14 and $15		282,880			290,811
Total investment securities		894,702			916,141
Loans, net:
Gross loans		2,456,206			2,546,880
Deferred loan costs, net		(146)			(35)
Allowance for credit losses on loans		(23,600)			(21,480)
Net loans		2,432,460			2,525,365
Foreclosed assets		—			1,565
Premises and equipment, net		14,053			14,974
Goodwill		27,357			27,357
Other intangible assets, net		—			52
Bank-owned life insurance		70,080			69,283
Other assets		139,264			138,914
Total assets	$	3,720,611		$	3,829,279

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing	$	1,026,320		$	995,623
Interest-bearing		1,904,671			1,880,813
Total deposits		2,930,991			2,876,436
Repurchase agreements		122,364			130,853
Other borrowings		155,000			302,700
Long-term debt		49,528			49,483
Subordinated debentures		36,106			36,017
Allowance for credit losses on unfunded loan commitments		570			710
Other liabilities		59,155			68,217
Total liabilities		3,353,714			3,464,416

Commitments and contingent liabilities (Note 7)

Shareholders' equity
Common stock, no par value; 24,000,000 shares authorized; 12,963,397 and 13,273,788 shares issued and outstanding at June 30, 2026, and December 31, 2025, respectively		102,604			103,394
Additional paid-in capital		4,583			4,642
Retained earnings		283,908			280,001
Accumulated other comprehensive loss, net		(24,198)			(23,174)
Total shareholders' equity		366,897			364,863
Total liabilities and shareholders' equity	$	3,720,611		$	3,829,279

The accompanying notes are an integral part of these consolidated financial statements.

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SIERRA BANCORP

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 and 2025

(dollars in thousands, except per share data, unaudited)


	Three months ended June 30,					Six months ended June 30,
	2026			2025		2026		2025
Interest and dividend income
Loans, including fees	$	31,184		$	31,634	$	62,553	$	61,783
Taxable securities		7,965			9,295		15,957		18,435
Tax-exempt securities		1,678			1,577		3,302		3,153
Federal funds sold and other		112			211		323		799
Total interest income		40,939			42,717		82,135		84,170
Interest expense
Deposits		7,861			9,326		16,184		18,697
Federal funds purchased and repurchase agreements		1,250			596		1,727		667
Federal Home Loan Bank advances		389			1,057		1,155		1,873
Long-term debt		430			430		861		860
Subordinated debentures		597			655		1,188		1,308
Total interest expense		10,527			12,064		21,115		23,405
Net interest income		30,412			30,653		61,020		60,765
Credit loss expense - loans		2,283			1,210		2,360		3,171
Credit loss (benefit) expense - unfunded commitments		(90)			(10)		(140)		100
Credit loss benefit - debt securities held-to-maturity		—			—		(1)		—
Net interest income after credit loss expense		28,219			29,453		58,801		57,494
Noninterest income
Service charges and fees on deposit accounts		5,987			5,855		11,660		11,436
Net gain on sale of securities available-for-sale		—			1		—		124
Net gain (loss) on sale of fixed assets		—			(19)		360		(22)
Increase in cash surrender value of life insurance		416			343		835		581
Earnings on separate account life insurance		1,386			973		1,006		470
Other income		781			1,400		2,678		2,606
Total noninterest income		8,570			8,553		16,539		15,195
Noninterest expense
Salaries and benefits		12,548			12,544		25,247		25,547
Occupancy and equipment		3,204			3,142		6,289		6,120
Other		7,758			8,081		13,798		14,517
Total noninterest expense		23,510			23,767		45,334		46,184
Income before taxes		13,279			14,239		30,006		26,505
Provision for income taxes		3,360			3,606		7,567		6,771
Net income	$	9,919		$	10,633	$	22,439	$	19,734

PER SHARE DATA
Earnings per share basic	$	0.77		$	0.78	$	1.74	$	1.44
Earnings per share diluted	$	0.77		$	0.78	$	1.72	$	1.43
Average shares outstanding, basic		12,848,133			13,563,910		12,917,542		13,692,003
Average shares outstanding, diluted		12,959,127			13,637,252		13,027,893		13,777,006

The accompanying notes are an integral part of these consolidated financial statements.

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SIERRA BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 and 2025

(dollars in thousands, unaudited)


	Three months ended June 30,					Six months ended June 30,
	2026			2025		2026		2025
Net income	$	9,919		$	10,633	$	22,439	$	19,734
Other comprehensive income, net of tax:
Unrealized (loss) gain on securities:
Unrealized holding (loss) gain arising during period ⁽²⁾		1,039			315		(1,454)		3,810
Less: reclassification adjustment for gains included in net income ⁽¹⁾		—			(1)		—		(124)
Tax effect		(307)			(93)		430		(1,089)
Other comprehensive (loss) income, net of tax		732			221		(1,024)		2,597
Comprehensive income	$	10,651		$	10,854	$	21,415	$	22,331

(1)

Amounts are included in net gains on investment securities available-for-sale on the Consolidated Statements of Income in noninterest income. There were no income tax expenses associated with the reclassification adjustment for the three months ended June 30, 2026, and 2025. Income tax expenses associated with the reclassification adjustment for the six months ended June 30, 2026, and 2025 were zero and $37 thousand, respectively.

(2)

Included in the unrealized holding gain arising during the period is the accretion of the net unrealized loss on debt securities transferred to held-to-maturity from available-for-sale of $0.5 million for both of the three months ended June 30, 2026 and 2025 and $1.0 million for the six months ended June 30, 2026, and 2025.

The accompanying notes are an integral part of these consolidated financial statements.

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SIERRA BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2026 and 2025

(dollars in thousands, except per share data, unaudited)


													Accumulated
							Additional						Other
		Common Stock					Paid In			Retained			Comprehensive			Shareholders'
		Shares		Amount			Capital			Earnings			(Loss) Income			Equity
Balance, March 31, 2025		13,818,770		$	106,277		$	4,429		$	269,931		$	(28,881)		$	351,756
Net income		—			—			—			10,633			—			10,633
Other comprehensive income, net of tax		—			—			—			—			221			221
Stock options exercised, net of shares surrendered for cashless exercises		1,703			29			—			—			—			29
Restricted shares withheld for taxes		—			(184)			—			—			—			(184)
Restricted stock forfeited / cancelled		(3,004)			—			—			—			—			—
Stock based compensation - restricted stock		—			—			539			—			—			539
Stock repurchase		(135,641)			(1,038)			—			(2,761)			—			(3,799)
Excise tax on stock repurchase		—			(39)			—			—			—			(39)
Cash dividends - $0.25 per share		—			—			—			(3,449)			—			(3,449)
Balance, June 30, 2025		13,681,828		$	105,045		$	4,968		$	274,354		$	(28,660)		$	355,707

Balance, March 31, 2026		13,093,184		$	103,020		$	4,181		$	281,443		$	(24,930)		$	363,714
Net income		—			—			—			9,919			—			9,919
Other comprehensive income, net of tax		—			—			—			—			732			732
Stock options exercised, net of shares surrendered for cashless exercises		17,000			555			(89)			—			—			466
Restricted shares withheld for taxes		—			117			—			(117)			—			—
Restricted stock forfeited / cancelled		(13,990)			—			—			—			—			—
Stock based compensation - restricted stock		—			—			491			—			—			491
Stock repurchase		(132,797)			(1,047)			—			(3,938)			—			(4,985)
Excise tax on stock repurchased		—			(41)			—			—			—			(41)
Cash dividends - $0.26 per share		—			—			—			(3,399)			—			(3,399)
Balance, June 30, 2026		12,963,397		$	102,604		$	4,583		$	283,908		$	(24,198)		$	366,897

The accompanying notes are an integral part of these consolidated financial statements.

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SIERRA BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2026 and 2025

(dollars in thousands, except per share data, unaudited


													Accumulated
							Additional						Other
		Common Stock					Paid In			Retained			Comprehensive			Shareholders'
		Shares		Amount			Capital			Earnings			(Loss) Income			Equity
Balance, December 31, 2024		14,223,046		$	108,965		$	4,509		$	275,085		$	(31,257)		$	357,302
Net income		—			—			—			19,734			—			19,734
Other comprehensive income, net of tax		—			—			—			—			2,597			2,597
Stock options exercised, net of shares surrendered for cashless exercises		21,110			610			(99)			—			—			511
Restricted stock granted		62,692			—			—			—			—			—
Restricted shares withheld for taxes		(9,605)			(80)			—			(209)			—			(289)
Restricted stock forfeited / cancelled		(3,004)			—			—			—			—			—
Restricted stock vested in period		—			483			(483)			—			—			—
Stock based compensation - stock options		—			—			3			—			—			3
Stock based compensation - restricted stock		—			—			1,038			—			—			1,038
Stock repurchase		(612,411)			(4,694)			—			(13,293)			—			(17,987)
Excise tax on stock repurchase		—			(239)			—			—			—			(239)
Cash dividends - $0.50 per share		—			—			—			(6,963)			—			(6,963)
Balance, June 30, 2025		13,681,828		$	105,045		$	4,968		$	274,354		$	(28,660)		$	355,707

Balance, December 31, 2025		13,273,788		$	103,394		$	4,642		$	280,001		$	(23,174)		$	364,863
Net income		—			—			—			22,439			—			22,439
Other comprehensive loss, net of tax		—			—			—			—			(1,024)			(1,024)
Stock options exercised, net of shares surrendered for cashless exercises		58,200			1,783			(297)			—			—			1,486
Restricted stock granted		55,006			—			—			—			—			—
Restricted shares withheld for taxes		(13,023)			(106)			—			(355)			—			(461)
Restricted stock forfeited / cancelled		(14,145)			—			—			—			—			—
Restricted stock vested in period		—			747			(747)			—			—			—
Stock based compensation - restricted stock		—			—			985			—			—			985
Stock repurchase		(396,429)			(3,102)			—			(11,345)			—			(14,447)
Excise tax on stock repurchase		—			(112)			—			—			—			(112)
Cash dividends - $0.52 per share		—			—			—			(6,832)			—			(6,832)
Balance, June 30, 2026		12,963,397		$	102,604		$	4,583		$	283,908		$	(24,198)		$	366,897

The accompanying notes are an integral part of these consolidated financial statements.

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SIERRA BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2026 AND 2025

(dollars in thousands, unaudited)


		Six months ended June 30,
	2026			2025
Cash flows from operating activities:
Net income	$	22,439		$	19,734
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sales of securities		—			(124)
(Gain) loss on disposal of fixed assets		(360)			22
Stock based compensation expense		985			1,041
Provision for credit losses on loans		2,360			3,171
(Benefit) provision for credit losses on held-to-maturity securities		(1)			—
(Benefit) provision for credit losses on unfunded commitments		(140)			100
Depreciation and amortization		981			1,050
Net accretion on securities premiums and discounts		(754)			(153)
Net accretion of premiums/discounts for loans acquired		(7)			(149)
Increase in cash surrender value of life insurance policies		(1,841)			(1,051)
Amortization of core deposit intangible		52			324
Increase in interest receivable and other assets		(234)			(2,689)
Decrease in other liabilities		(8,893)			(17,587)
Deferred income tax benefit (provision)		1,361			(338)
Increase in value of restricted bank equity securities		(602)			—
Excise tax on stock repurchases		(281)			(111)
Amortization of debt issuance costs		45			45
Net amortization of variable interest entities		1,437			1,480
Net cash provided by operating activities		16,547			4,765
Cash flows from investing activities:
Maturities and calls of debt securities available-for-sale		23,264			11,000
Purchases of debt securities available-for-sale		(45,665)			(247,255)
Principal paydowns on debt securities available-for-sale		34,879			226,894
Maturities and calls of debt securities held-to-maturity		840			—
Principal paydowns on debt securities held-to-maturity		7,422			7,487
Net purchases of FHLB stock		(324)			—
Loan (originations) and payments, net		90,552			(109,347)
Purchases of premises and equipment		(129)			(836)
Proceeds from sale of premises and equipment		518			—
Proceeds from sales of foreclosed assets		1,565			—
Purchase of bank-owned life insurance		(47)			(127)
Purchase of split dollar life insurance policies		—			(15,000)
Liquidation of bank-owned life insurance		182			—
Capital contributions to partnership investments		(1,558)			—
Proceeds from BOLI death benefit		909			1,645
Net cash provided by (used in) investing activities		112,408			(125,539)
Cash flows from financing activities:
Increase in deposits		54,555			82,801
(Decrease) increase in Fed funds purchased		(90,000)			40,000
Decrease (increase) in short-term Federal Home Loan Bank advances		(12,700)			34,400
Repayments on Federal Home Loan Bank advances and other debt		(45,000)			—
(Decrease) increase in customer repurchase agreements		(8,489)			17,649
Cash dividends paid		(6,832)			(6,963)
Repurchase of common stock, net		(14,908)			(18,276)
Stock options exercised		1,486			511
Net cash (used in) provided by financing activities		(121,888)			150,122
Increase in cash and cash equivalents		7,067			29,348
Cash and cash equivalents
Beginning of period		135,628			100,664
End of period	$	142,695		$	130,012
Supplemental disclosure of cash flow information:
Interest paid	$	24,332		$	26,210
Income taxes paid	$	6,730		$	8,483
Supplemental schedule of noncash investing and financing activities:
Loans provided for sales of real estate owned	$	1,000		$	—
Right-of-use assets obtained in exchange for new lease liabilities	$	573		$	180

The accompanying notes are an integral part of these consolidated financial statements.

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SIERRA BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

Note 1 – The Business of Sierra Bancorp

Sierra Bancorp (the “Company”) is a California corporation headquartered in Porterville, California, and is a registered bank holding company under federal banking laws. The Company was formed to serve as the holding company for Bank of the Sierra (the “Bank”) and has been the Company’s sole shareholder since August 2001. The Company exists primarily for the purpose of holding the stock of the Bank and of such other subsidiaries it may acquire or establish. As of June 30, 2026, the Company’s only other subsidiaries were Sierra Statutory Trust II, Sierra Capital Trust III, and Coast Bancorp Statutory Trust II, which were formed solely to facilitate the issuance of capital trust pass-through securities (“TRUPS”). Pursuant to the Financial Accounting Standards Board (“FASB”) standard on the consolidation of variable interest entities, these trusts are not reflected on a consolidated basis in the Company’s financial statements. References herein to the “Company” include Sierra Bancorp and its consolidated subsidiary, the Bank, unless the context indicates otherwise.

Bank of the Sierra, a California state-chartered bank headquartered in Porterville, California, offers a wide range of retail and commercial banking services via branch offices located throughout California’s South San Joaquin Valley, the Central Coast, Ventura County, and neighboring communities. The Bank was incorporated in September 1977 and opened for business in January 1978 as a one-branch bank with $1.5 million in capital. The Company’s growth in the ensuing years has largely been organic in nature but includes four whole-bank acquisitions: Sierra National Bank in 2000, Santa Clara Valley Bank in 2014, Coast National Bank in 2016, and Ojai Community Bank in October 2017. As of the filing date of this report the Bank operates 34 full-service branches and an online branch and maintains ATMs at all but one branch location as well as at six non-branch locations. Moreover, the Bank has specialized lending units which focus on commercial and industrial, commercial real estate, and mortgage warehouse borrowers. The Company had total assets of $3.7 billion at June 30, 2026. The Company’s deposit accounts, which totaled $2.9 billion at June 30, 2026, are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to maximum insurable amounts.

Note 2 – Basis of Presentation

The accompanying interim unaudited consolidated financial statements have been prepared in a condensed format as allowed under U.S. generally accepted accounting principles (“GAAP”). Therefore, these financial statements do not include all of the information and footnotes required for complete, audited financial statements as presented in the Company’s Annual Report on Form 10-K. The information furnished in these interim statements reflects all adjustments that are, in the opinion of Management, necessary for a fair statement of the results for such periods. Such adjustments can generally be considered as normal and recurring unless otherwise disclosed in this Form 10-Q. In preparing the accompanying financial statements, Management has taken subsequent events into consideration, through July 30, 2026, and recognized them where appropriate. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for any other quarter, or for the full year. Certain amounts reported for 2025 have been reclassified to be consistent with the reporting for 2026, none of which impacted net income or shareholders’ equity. The interim financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission (the “SEC”).

Segment information

An operating segment is generally defined as a component of business for which discrete financial information is available and whose operating results are regularly reviewed by the chief operating decision maker. As a community-oriented financial institution, substantially all of the Company’s operations involve the delivery of loan and deposit products to customers.

The chief operating decision maker makes operating decisions and assesses performance based on an ongoing review of the Company’s community banking activities (loan and deposit products), which constitutes the Company’s only operating

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segment for financial reporting purposes. The Company’s single segment is managed on a consolidated basis by the chief operating decision maker, which is the Executive Committee, consisting of the chief executive officer, chief financial officer/chief operations officer, chief risk officer, chief credit officer, and chief banking officer. The accounting policies of the community banking segment are the same as those described in the summary of significant accounting policies of the Company. The chief operating decision maker uses consolidated expense information to manage the operations of the segment. The consolidated expense information is the same as is reported on the income statement as consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets.

The chief operating decision maker uses consolidated net income to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into the community banking segment or into other parts of the entity, such as for whole bank or branch acquisitions or to pay dividends.

Net income is used to monitor budget versus actual results. The chief operating decision maker also uses net income in competitive analysis by benchmarking to the Company’s peer banking competitors. The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment and in establishing Management’s compensation.

The Company does not have intra-entity revenues or transfers.

Revisions of Previously Issued Financial Statements

Certain immaterial prior period amounts in the Consolidated Statement of Cash Flows have been revised and are reflected below. Specifically, cash flows from investing activities related to available-for-sale and held-to-maturity debt securities were combined on the Consolidated Statement of Cash Flows. These have been disaggregated and presented gross by classification. The changes were presentation only and had no impact on previously reported net income, total assets, total liabilities, or shareholders’ equity. The changes also had no impact on net cash provided by (used in) investing activities or total change in cash and cash equivalents.

The effect of the above revision on previously reported financial statements is presented below (dollars in thousands, unaudited):


		As previously reported			Impact of Revision			As Revised
Consolidated statement of cash flows for the quarter ended June 30, 2025
Cash flows from investing activities:
Principal paydowns on debt securities available-for-sale		$	234,381		$	(7,487)		$	226,894
Principal paydowns on debt securities held-to-maturity		$	—		$	7,487		$	7,487

Note 3 – Current Accounting Developments

On October 9, 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification of Initiative.” ASU 2023-06 amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”). The ASU was issued in response to the SEC’s August 2018 final rule that updated and simplified disclosure requirements that the SEC believed were “redundant, duplicative, overlapping, outdated, or superseded.” The new guidance is intended to align U.S. GAAP requirements with those of the SEC and to facilitate the application of U.S. GAAP for all entities. ASU 2023-06 applies to all reporting entities within the scope of the amended subtopics. Note that some of the amendments introduced by the ASU are technical corrections or clarifications of the FASB’s current disclosure or presentation requirements. The effective date for each amendment of ASU 2023-06 will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company will apply the amendments in ASU 2023-06 prospectively after the effective dates. The adoption of this standard is not expected to have a significant effect on the Company’s financial statements.

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In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40).” ASU 2024-03 requires public business entities to disclose specific information about certain costs and expenses in the notes to its financial statements for interim and annual reporting periods. The objective of the disclosure requirements is to provide disaggregated information about a public business entity's expenses to help investors (a) better understand the entity's performance, (b) better assess the entity's prospects for future cash flows, and (c) compare an entity's performance over time and with that of other entities. The effective date of Update 2024-03 was amended by ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. Public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of Update 2024-03 is permitted. ASU 2024-03 is not expected to have a significant impact on our financial statements.

Note 4 – Share Based Compensation

On March 17, 2023, the Company’s Board of Directors approved and adopted the 2023 Equity Compensation Plan (the “2023 Plan”), which became effective May 24, 2023, the date approved by the Company’s shareholders. The 2023 Plan replaced the Company’s 2017 Stock Incentive Plan (the “2017 Plan”). Options to purchase 108,200 shares granted under the 2017 Plan and options to purchase 23,000 shares that were granted under the 2007 Plan were still outstanding as of June 30, 2026, and remain unaffected by that plan’s expiration. The 2023 Plan provides for the issuance of various types of equity awards, including options, stock appreciation rights, restricted stock awards, restricted share units, performance share awards, dividend equivalents, or any combination thereof. Such awards may be granted to officers and employees as well as non-employee directors, which may be granted on such terms and conditions as are established by the Board of Directors or the Compensation Committee in its discretion. The total number of shares of the Company’s authorized but unissued stock reserved for issuance pursuant to awards under the 2023 Plan was initially 360,000 shares, and the number remaining available for grant as of June 30, 2026, was 229,488. Any unexercised, unvested, or undistributed portion of any expired, cancelled, terminated, or forfeited awards under the Company’s 2017 Plan are added to the number of shares available to grant under the 2023 Plan. There were 173,492 unvested Restricted Stock Awards issued under the 2023 Equity Compensation Plan at June 30, 2026, and are included in shares outstanding. The potential dilutive impact of unexercised stock options and unvested restricted stock is discussed below in Note 5, Earnings per Share.

Pursuant to FASB’s standards on stock compensation, the value of each stock option and restricted stock award is reflected in the income statement as employee compensation or directors’ expense by amortizing its grant date fair value over the vesting period of the option or award. The Company utilized a Black-Scholes model to determine grant date fair values for options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Forfeitures are reflected in compensation costs as they occur for both types of awards. A pre-tax charge of $1.0 million was reflected in the Company’s income statement during the first six months of 2026 and $1.0 million during the first six months of 2025, as expense related to stock options and restricted stock awards.

Restricted Stock Grants

The Company’s Restricted Stock Awards are awards of either time-vested or performance-based shares. The Restricted Stock Awards are non-transferable shares of common stock and are available to be granted to the Company’s employees and directors. The vesting period of Restricted Stock Awards is determined at the time the awards are issued, and different awards may have different vesting terms or performance measures, provided, however, that no installment of any Restricted Stock Award shall become vested less than one year from the grant date. Restricted Stock Awards are valued utilizing the fair value of the Company’s stock at the grant date. These awards are expensed on a straight-line basis over the vesting period and consider the probability of meeting the performance criteria. There were 55,006 shares granted to employees of the Company during the first six months of 2026. As of June 30, 2026, there was $3.3 million of unamortized compensation cost related to unvested Restricted Stock Awards granted under the 2017 and 2023 plans. That cost is expected to be amortized over a weighted average period of 2.3 years.

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The Company’s restricted stock award activity for the six months ended June 30, 2026 and 2025, is summarized below (unaudited):


	Six months ended June 30,
	2026			2025
	Shares		Weighted Average Grant-Date Fair Value	Shares		Weighted Average Grant-Date Fair Value
Unvested shares, January 1,	161,467	$	26.02	173,970	$	20.75
Granted	55,006		37.05	62,692		30.94
Vested	(28,836)		25.87	(23,273)		20.77
Forfeited	(14,145)		28.51	(3,004)		19.97
Unvested shares, June 30,	173,492	$	29.52	210,385	$	24.07

Stock Option Grants

The Company has issued equity instruments in the form of Incentive Stock Options and Nonqualified Stock Options to certain officers and directors. No options have been granted since 2020, but the Company could elect to issue under the 2023 Plan. The exercise price of each stock option is determined at the time of the grant and may be no less than 100% of the fair market value of such stock at the time the option is granted.

The Company’s stock option activity during the six months ended June 30, 2026 and 2025, are summarized below (dollars in thousands, except per share data, unaudited):


		Six months ended June 30,
		2026									2025
		Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value⁽¹⁾			Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value⁽¹⁾
Outstanding at January 1,		189,400		$	26.85			$	1,104		239,600		$	26.50			$	580
Exercised		(58,200)		$	25.60			$	694		(21,110)		$	24.23			$	158
Forfeited/Expired		—		$	—			$	—		—		$	—			$	—
Outstanding at June 30,		131,200		$	27.41	2.59		$	1,752		218,490		$	26.72	3.31		$	649
Exercisable at June 30,		131,200		$	27.41	2.59		$	1,752		218,490		$	26.72	3.31		$	649

(1)

The aggregate intrinsic value of stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option that would have been received by the option holders had all option holders exercised their options on the last day of the period. This amount changes based on changes in the market value of the Company's stock.

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Note 5 – Earnings per Share

The computation of earnings per share, as presented in the Consolidated Statements of Income, is based on the weighted average number of shares outstanding during each period, excluding unvested restricted stock awards.

The Company’s earnings per share activity for the three and six months ended June 30, 2026 and 2025, is summarized below (dollars in thousands, except per share data, unaudited):


	Three months ended June 30,					Six months ended June 30,
	2026			2025		2026		2025
Basic Earnings Per Share
Net income	$	9,919		$	10,633	$	22,439	$	19,734
Weighted average shares outstanding		12,848,133			13,563,910		12,917,542		13,692,003
Basic earnings per share	$	0.77		$	0.78	$	1.74	$	1.44

Diluted Earnings Per Share
Net income	$	9,919		$	10,633	$	22,439	$	19,734
Weighted average shares outstanding		12,848,133			13,563,910		12,917,542		13,692,003
Effect of dilutive equity awards		110,994			73,342		110,351		85,003
Weighted average shares outstanding		12,959,127			13,637,252		13,027,893		13,777,006
Diluted earnings per share	$	0.77		$	0.78	$	1.72	$	1.43

Anti-dilutive equity awards		2,460			265,885		23		47,798

Note 6 – Comprehensive Income

As presented in the Consolidated Statements of Comprehensive Income, comprehensive (loss) income includes net income and other comprehensive (loss) income. The Company’s only source of other comprehensive (loss) income is unrealized gains and losses derived from available-for-sale investment securities, including those securities that were transferred to held-to-maturity. See Note 9 for additional details. Investment gains or losses that were realized and reflected in net income of the current period, which had previously been included in other comprehensive (loss) income as unrealized holding gains or losses in the period in which they arose, are considered to be reclassification adjustments that are excluded from other comprehensive (loss) income in the current period.

Note 7 – Commitments and Contingent Liabilities

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business. Those financial instruments currently consist of unused commitments to extend credit and standby letters of credit. They involve, to varying degrees, elements of risk in excess of the amount recognized in the consolidated balance sheet. The Company’s exposure to credit loss in the event of nonperformance by counterparties for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and issuing letters of credit as it does for originating loans included on the consolidated balance sheet. The following financial instruments represent off-balance-sheet credit risk (dollars in thousands):


	June 30, 2026			December 31, 2025
Commitments or facilities to extend credit	$	611,254		$	547,424
Standby letters of credit	$	5,750		$	5,708

Commitments to extend credit consist primarily of the unused or unfunded portions of the following: mortgage warehouse facilities; home equity lines of credit; commercial real estate construction loans, where disbursements are made over the

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course of construction; commercial revolving lines of credit; unsecured personal lines of credit; and formalized (disclosed) deposit account overdraft lines. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments are expected to expire without being drawn upon, the unused portions of committed amounts do not necessarily represent future cash requirements. Standby letters of credit are issued by the Company to guarantee the performance of a customer to a third party, and the credit risk involved in issuing letters of credit is essentially the same as the risk involved in extending loans to customers. Included in unused commitments are mortgage warehouse facilities which are in the form of repo lines and are unconditionally cancellable. Unused commitments on mortgage warehouse facilities were $336.5 million at June 30, 2026, and $247.7 million at December 31, 2025, with all but $5.0 million unconditionally cancellable.

The allowance for credit losses (ACL) on unfunded commitments is estimated using the same reserve or coverage rates calculated on collectively evaluated loans following the application of a funding rate to the amount of the portion of the unfunded commitment that is not unconditionally cancellable. The funding rate represents Management’s estimate of the amount of the current unfunded commitment that will be funded over the remaining contractual life of the commitment and is based on historical data. The ACL on unfunded loan commitments is located within liabilities on the consolidated balance sheet while any related provision (benefit) expense is recorded as a provision (benefit) for credit losses.

At June 30, 2026, the Company was also utilizing a letter of credit in the amount of $127.9 million issued by the Federal Home Loan Bank (“FHLB”) on the Company’s behalf as security for certain deposits and to facilitate certain credit arrangements with the Company’s customers. That letter of credit is backed by loans which are pledged to the FHLB by the Company.

The Company is subject to loss contingencies, including claims and legal actions arising in the ordinary course of business, which are recorded as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. Management does not believe there are such matters that will have a material effect on the consolidated financial statements.

Note 8 – Fair Value Disclosures and Reporting and Fair Value Measurements

FASB’s standards on financial instruments, and on fair value measurements and disclosures, require public business entities to disclose in their financial statement footnotes the estimated fair values of financial instruments. In addition to disclosure requirements, FASB’s standard on investments requires that debt securities classified as available-for-sale and equity securities with readily determinable fair values be measured and reported at fair value in the statement of financial position. Certain collateral-dependent, individually-evaluated loans are also reported at fair value, as explained in greater detail below, and foreclosed assets are carried at the lower of cost or fair value. FASB’s standard on financial instruments permits companies to report certain other financial assets and liabilities at fair value, but the Company has not elected the fair value option for any of those financial instruments.

Fair value measurement and disclosure standards also establish a framework for measuring fair values. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Further, the standards establish a fair value hierarchy that encourages an entity to maximize the use of observable inputs and limit the use of unobservable inputs when measuring fair values. The standards describe three levels of inputs that may be used to measure fair values:

●

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

●

Level 2: Significant observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

●

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the factors that market participants would likely consider in pricing an asset or liability.

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Fair value estimates are made at a specific point in time based on relevant market data and information about the financial instruments. Fair value disclosures for deposits include demand deposits, which are, by definition, equal to the amount payable on demand at the reporting date. Fair value calculations for loans reflect exit pricing and incorporate Management’s assumptions with regard to the impact of prepayments on future cash flows and credit quality adjustments based on risk characteristics of various financial instruments, among other things. Since the estimates are subjective and involve uncertainties and matters of significant judgment they cannot be determined with precision, and changes in assumptions could significantly alter the fair values presented.

Fair Value of Financial Instruments

(dollars in thousands, unaudited)


		June 30, 2026
				Fair Value Measurements
	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total

Financial assets:
Cash and cash equivalents	$	142,695		$	142,695		$	—		$	—		$	142,695
Securities available-for-sale	$	611,822		$	—		$	610,445		$	1,377		$	611,822
Securities held-to-maturity, net	$	282,880		$	—		$	278,748		$	—		$	278,748
Loans held for investment, net	$	2,432,460		$	—		$	—		$	2,336,559		$	2,336,559

Financial liabilities:
Deposits	$	2,930,991		$	1,026,320		$	1,903,157		$	—		$	2,929,477
Repurchase agreements	$	122,364		$	—		$	97,941		$	—		$	97,941
Other borrowings	$	155,000		$	—		$	154,666		$	—		$	154,666
Long-term debt, net	$	49,528		$	—		$	49,715		$	—		$	49,715
Subordinated debentures	$	36,106		$	—		$	35,722		$	—		$	35,722


		December 31, 2025
				Fair Value Measurements
	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total

Financial assets:
Cash and cash equivalents	$	135,628		$	135,628		$	—		$	—		$	135,628
Securities available-for-sale	$	625,330		$	—		$	624,017		$	1,313		$	625,330
Securities held-to-maturity, net	$	290,811		$	—		$	286,461		$	—		$	286,461
Loans held for investment, net	$	2,525,365		$	—		$	—		$	2,428,691		$	2,428,691

Financial liabilities:
Deposits	$	2,876,436		$	995,623		$	1,992,616		$	—		$	2,988,239
Repurchase agreements	$	130,853		$	—		$	107,084		$	—		$	107,084
Other borrowings	$	302,700		$	—		$	302,629		$	—		$	302,629
Long-term debt, net	$	49,483		$	—		$	49,472		$	—		$	49,472
Subordinated debentures	$	36,017		$	—		$	36,276		$	—		$	36,276

For financial asset categories carried on the consolidated balance sheet at fair value and measured on a recurring basis as of June 30, 2026, and December 31, 2025, the Company used the following methods and significant assumptions:

●

Investment securities: Fair values are determined by obtaining quoted prices on nationally recognized securities exchanges or by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities by relying on their relationship to other benchmark quoted securities. For securities where quoted prices or market prices of similar securities are not available, fair values are estimated using broker expertise and other

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market indicators (Level 3). For bonds that are hand priced, actual recent trades for the exact bond are used in determining the price, adjusted for changes in market conditions since the time of the observable trade. For bonds, where no recent observable trades have occurred, our brokers consider recent trades made for similar bonds, issued by banks with similar financial position or credit and adjusted for changes in conditions since the time of the observable trades. Significant changes in any of those inputs in isolation would have resulted in a significantly higher or lower fair value measurement.

Fair Value Measurements – Recurring

(dollars in thousands, unaudited)


	Fair Value Measurements at June 30, 2026, using
	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total			Realized Gain/(Loss) (Level 3)
Securities:
U.S. government agencies	$	—		$	18,083		$	—		$	18,083		$	—
Mortgage-backed securities		—			271,949			—			271,949			—
State and political subdivisions		—			54,881			—			54,881			—
Corporate bonds		—			82,642			1,377			84,019			—
Collateralized loan obligations		—			182,890			—			182,890			—
Total available-for-sale securities	$	—		$	610,445		$	1,377		$	611,822		$	—


	Fair Value Measurements at December 31, 2025, using
	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total			Realized Gain/(Loss) (Level 3)
Securities:
U.S. government agencies	$	—		$	32,901		$	—		$	32,901		$	—
Mortgage-backed securities		—			259,760			—			259,760			—
State and political subdivisions		—			46,921			—			46,921			—
Corporate bonds		—			85,154			1,313			86,467			—
Collateralized loan obligations		—			199,281			—			199,281			—
Total available-for-sale securities	$	—		$	624,017		$	1,313		$	625,330		$	—

The following tables present quantitative information about recurring Level 3 fair value measurements at June 30, 2026, and December 31, 2025 (dollars in thousands):

Range

 

Fair

Valuation

 

Unobservable

Weighted

June 30, 2026

Value

Technique(s)

Input(s)

Min

Max

Average

Corporate Bonds

1,377

Broker estimate

Discount rate

N/A

Range

Fair

Valuation

Unobservable

Weighted

December 31, 2025

 

Value

Technique(s)

 

Input(s)

Min

Max

Average

Corporate Bonds

1,313

Broker estimate

Discount rate

N/A

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The significant unobservable inputs utilized in the fair value measurement of the Company’s corporate bonds included risk profile and market conditions, and are not quantifiable inputs. Differing unobservable input assumptions, for example a change in market conditions, may have resulted in reduced or increased fair value.

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2026 and 2025:


Fair Value Measurements - Level 3 Recurring
(dollars in thousands, unaudited)
		Corporate Bonds
		2026		2025
Balance of recurring Level 3 assets at January 1,		$	1,313	$	55,653
Total gains or losses for the period:
Included in other comprehensive income			64		798
Purchases			—		20,750
Transfers into Level 3			—		2,909
Balance of recurring Level 3 assets at June 30,		$	1,377	$	80,110

Corporate bonds with a fair value of $54.5 million as of December 31, 2024, were transferred from Level 3 to Level 2 in the third quarter of 2025 because observable market data became available for the securities.

For financial asset categories carried on the consolidated balance sheet at fair value and measured on a nonrecurring basis as of June 30, 2026, and December 31, 2025, the Company used the following methods and significant assumptions:

●

Individually evaluated collateral dependent loans: Measured based on the fair value of collateral when foreclosure is probable, or repayment is expected through the sale or operation of collateral and borrower is experiencing financial difficulty. For real estate loans, fair value of the loan’s collateral is determined by third party appraisals, which are then adjusted for the estimated selling and closing costs related to liquidation of the collateral. For this asset class, the actual valuation methods (income, sales comparable, or cost) vary based on the status of the project or property. For example, land is generally based on the sales comparable method while construction is based on the income and/or sales comparable methods. The unobservable inputs may vary depending on the individual assets with no one of the three methods being the predominant approach. The Company reviews the third-party appraisal for appropriateness and adjusts the value downward to consider selling and closing costs, which typically range from 5% to 10% of the appraised value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on Management’s historical knowledge, changes in market conditions from the time of the valuation, and Management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Collateral-dependent loans are evaluated on a quarterly basis and adjusted in accordance with the allowance for credit losses policy.

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Fair Value Measurements – Nonrecurring

(dollars in thousands, unaudited)


	Fair Value Measurements at December 31, 2025, using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Individually evaluated collateral dependent loans
Real estate:
Farmland	$	—	$	—	$	1,699	$	1,699
Total real estate		—		—		1,699		1,699
Other commercial		—		—		1,183		1,183
Total collateral dependent loans		—		—		2,882		2,882
Foreclosed assets		—		—		1,565		1,565
Total assets measured on a nonrecurring basis	$		$		$	4,447	$	4,447

The table above includes collateral dependent loan balances for which a specific reserve has been established. There was one other commercial collateral dependent loan for which a specific reserve had been established with a fair value of zero as of June 30, 2026. Information on the Company’s total collateral dependent loan balances and specific loss reserves associated with those balances is included in Note 10 below.

The unobservable inputs are based on Management’s best estimates of appropriate discounts in arriving at fair market value. Adjusting any of those inputs could result in a significantly lower or higher fair value measurement.

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Note 9 – Investments

Investment Securities

Pursuant to FASB’s guidance on accounting for debt securities, available-for-sale securities are carried on the Company’s financial statements at their estimated fair market values, with monthly tax-effected “mark-to-market” adjustments reflected in accumulated other comprehensive income (loss) in shareholders’ equity. Held-to-maturity securities are carried on the Company’s financial statements at their amortized cost, net of the allowance for credit losses. Amortized cost is adjusted to the fair value of the security upon transfer to held-to-maturity.

Amortized Cost and Estimated Fair Value

(dollars in thousands, unaudited)


		June 30, 2026
		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses		Allowance for Credit Losses			Estimated Fair Value
Available-for-sale
U.S. government agencies		$	18,370		$	—		$	(287)	$	—		$	18,083
Mortgage-backed securities			275,398			807			(4,256)		—			271,949
State and political subdivisions			59,784			312			(5,215)		—			54,881
Corporate bonds			86,780			359			(3,120)		—			84,019
Collateralized loan obligations			182,665			293			(68)		—			182,890
Total available-for-sale securities		$	622,997		$	1,771		$	(12,946)	$	—		$	611,822

		Amortized Cost			Gross Unrecognized Gains			Gross Unrecognized Losses		Estimated Fair Value			Allowance for Credit Losses
Held-to-maturity
U.S. government agencies		$	4,320		$	—		$	(462)	$	3,858		$	—
Mortgage-backed securities			108,476			—			(8,471)		100,005			—
State and political subdivisions			170,098			4,787			—		174,885			(14)
Total held-to-maturity securities		$	282,894		$	4,787		$	(8,933)	$	278,748		$	(14)


		December 31, 2025
		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses		Allowance for Credit Losses			Estimated Fair Value
Available-for-sale
U.S. government agencies		$	33,000		$	35		$	(134)	$	—		$	32,901
Mortgage-backed securities			259,386			2,491			(2,117)		—			259,760
State and political subdivisions			52,610			68			(5,757)		—			46,921
Corporate bonds			90,114			293			(3,940)		—			86,467
Collateralized loan obligations			198,968			364			(51)		—			199,281
Total available-for-sale securities		$	634,078		$	3,251		$	(11,999)	$	—		$	625,330

		Amortized Cost			Gross Unrecognized Gains			Gross Unrecognized Losses		Estimated Fair Value			Allowance for Credit Losses
Held-to-maturity
U.S. government agencies		$	4,523		$	—		$	(413)	$	4,110		$	—
Mortgage-backed securities			115,228			20			(7,002)		108,246			—
State and political subdivisions			171,075			3,030			—		174,105			(15)
Total held-to-maturity securities		$	290,826		$	3,050		$	(7,415)	$	286,461		$	(15)

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An unrealized loss of $23.2 million and $24.2 million on securities transferred from the available-for-sale to held-to-maturity categorization, remains as of June 30, 2026, and December 31, 2025, respectively, and is included in accumulated other comprehensive loss, net of tax. The remaining unrealized loss on the securities transferred from available-for-sale to held-to-maturity will be accreted over the remaining term of the securities, with the amortized-cost basis of these securities and accumulated comprehensive income (loss) each increasing over time.

The Company elected the practical expedient available under the current expected credit losses (“CECL”) accounting standard to exclude accrued interest receivable from the amortized cost basis of all categorizations of investment securities, and resultingly did not estimate reserves on accrued interest receivable balances, as any past due interest income is reversed no later than 90 days past due. Accrued interest receivable is included in other assets on the Company’s consolidated balance sheet and as of June 30, 2026, measured at $4.5 million and $2.3 million for available-for-sale securities and held-to-maturity securities, respectively. Accrued interest receivable as of December 31, 2025, on these same classes of investment securities measured at $4.8 million and $2.4 million, respectively. During the six-month periods ending June 30, 2026 and 2025, no interest receivable on available-for-sale or held-to-maturity securities was reversed against interest income and the Company did not have any held-to-maturity debt securities past due.

A discounted cash-flow reserve calculation is performed on securities designated as held-to-maturity on a quarterly basis. As of June 30, 2026, and December 31, 2025, an allowance for credit losses of $14 thousand and $15 thousand, respectively had been established on the Company’s held-to-maturity portfolio. Because of the implicit and explicit guarantees of the U.S. government on the agency and mortgage-backed securities there is no expectation of future losses and no allowance for credit losses has been established for these securities.

The following table summarizes the amortized cost of held-to-maturity municipal bonds aggregated by nationally recognized statistical rating organizations (“NRSRO”) credit rating:

Held-To-Maturity by Credit Rating

(dollars in thousands, unaudited)


		Held-To-Maturity
		June 30, 2026		December 31, 2025
State and political subdivisions
AAA/Aaa		$	57,793	$	59,367
AA/Aa			107,557		110,255
A/A2			1,483		523
Not rated			927		930
Total ⁽¹⁾		$	167,760	$	171,075

(1)	Prerefunded and escrowed to maturity bonds with an amortized cost of $2.3 million are excluded.

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For available-for-sale debt securities in an unrealized loss position for which Management has an intent to sell the security or considers it more likely-than-not that the security in question will be sold prior to a recovery of its amortized cost basis, the security will be written down to fair value through a direct charge to income. For the remainder of available-for-sale debt securities in an unrealized loss position, which do not meet the previously outlined criteria, Management evaluates whether the decline in fair value is a reflection of credit deterioration or other factors. In performing this evaluation, Management considers the extent to which fair value has fallen below amortized cost, changes in ratings by rating agencies, and other information indicating a deterioration in repayment capacity of either the underlying issuer or the borrowers providing repayment capacity in a securitization. If Management’s evaluation indicates that a credit loss exists, then a present value of the expected cash flows is calculated and compared to the amortized cost basis of the security in question and to the degree that the amortized cost basis exceeds the present value an ACL is established, with the caveat that the maximum amount of the reserve on any individual security is the difference between the fair value and amortized cost balance of the security in question. Any unrealized loss that has not been recorded through an ACL is recognized in other comprehensive income (loss).

The following table summarizes available-for-sale debt securities in an unrealized loss position for which an ACL has not been recorded:

Investment Portfolio - Unrealized Losses

(dollars in thousands, unaudited)


		June 30, 2026
		Less than twelve months						Twelve months or more						Total
	Number of Securities	Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value
Available-for-sale
U.S. government agencies	5	$	(109)		$	10,760		$	(178)		$	7,323		$	(287)		$	18,083
Mortgage-backed securities	106		(2,610)			158,628			(1,646)			25,451			(4,256)			184,079
State and political subdivisions	49		(26)			1,739			(5,189)			36,286			(5,215)			38,025
Corporate bonds	70		(427)			21,696			(2,693)			43,502			(3,120)			65,198
Collateralized loan obligations	8		(55)			58,408			(13)			9,987			(68)			68,395
Total available-for-sale	238	$	(3,227)		$	251,231		$	(9,719)		$	122,549		$	(12,946)		$	373,780


		December 31, 2025
		Less than twelve months						Twelve months or more						Total
	Number of Securities	Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value
Available-for-sale
U.S. government agencies	5	$	(10)		$	5,990		$	($124)		$	14,375		$	(134)		$	20,365
Mortgage-backed securities	72		(755)			92,185			(1,362)			28,712			(2,117)			120,897
State and political subdivisions	51		(14)			1,481			(5,743)			37,029			(5,757)			38,510
Corporate bonds	70		(483)			25,381			(3,457)			41,993			(3,940)			67,374
Collateralized loan obligations	7		(51)			59,209			—			—			(51)			59,209
Total available-for-sale	205	$	(1,313)		$	184,246		$	(10,686)		$	122,109		$	(11,999)		$	306,355

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Investment Portfolio - Realized Gains/(Losses)

(dollars in thousands, unaudited)


	Three months ended June 30,						Six months ended June 30,
	2026			2025		2026		2025
Proceeds from sales, calls and maturities of securities available for sale	$	12,104		$	6,000	$	24,104	$	11,000
Gross gains on sales, calls and maturities of securities available for sale		—			1		—		124
Gross losses on sales, calls and maturities of securities available for sale		—			—		—		—
Net gain (loss) on sale of securities available for sale	$	—		$	1	$	—	$	124

The amortized cost and estimated fair value of investment securities available-for-sale and held-to-maturity at June 30, 2026, and December 31, 2025 (dollars in thousands), are shown below, grouped by the remaining time to contractual maturity dates. The expected life of investment securities may not be consistent with contractual maturity dates since the issuers of the securities might have the right to call or prepay obligations with or without penalties.


	June 30, 2026
	Available-for-Sale					Held-to-Maturity
	Amortized Cost			Fair Value		Amortized Cost			Fair Value
Maturing within one year	$	285		$	285	$	1,331		$	1,328
Maturing after one year through five years		19,702			19,886		6,446			6,341
Maturing after five years through ten years		81,422			78,051		17,607			16,853
Maturing after ten years		63,525			58,761		149,034			154,221
Securities not due at a single maturity date:
Mortgage-backed securities		275,398			271,949		108,476			100,005
Collateralized loan obligations		182,665			182,890		—			—
Total	$	622,997		$	611,822	$	282,894		$	278,748


	December 31, 2025
	Available-for-Sale					Held-to-Maturity
	Amortized Cost			Fair Value		Amortized Cost			Fair Value
Maturing within one year	$	10,285		$	10,320	$	824		$	825
Maturing after one year through five years		19,667			19,907		5,014			4,902
Maturing after five years through ten years		82,725			78,553		17,806			17,020
Maturing after ten years		63,047			57,509		151,954			155,468
Securities not due at a single maturity date:
Mortgage-backed securities		259,386			259,760		115,228			108,246
Collateralized loan obligations		198,968			199,281		—			—
Total	$	634,078		$	625,330	$	290,826		$	286,461

Low-Income Housing Tax Credit (“LIHTC”) Fund Investments

The Company has the ability to invest in limited partnerships which own housing projects that qualify for federal and/or California state tax credits by mandating a specified percentage of low-income tenants for each project. The primary investment return comes from tax credits that flow through to investors. Because rent levels are lower than standard market rents and the projects are generally highly leveraged, each project also typically generates tax-deductible operating losses allocated to the limited partners for tax purposes.

The Company currently has investments in eight different LIHTC fund limited partnerships made in 2014, 2015, two in 2022, one in 2023, and three in 2024, all of which were California-focused funds that help the Company meet its obligations under the Community Reinvestment Act. The Company utilized the cost method of accounting for LIHTC fund investments, which were initially recorded on the consolidated balance sheet as an asset representing the total cash

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expected to be invested over the life of the partnership. Any commitments or contingent commitments for future investment are reflected as a liability. The income statement reflects tax credits and any other tax benefits from these investments “below the line” within income tax provision, while the initial book value of the investment is amortized on the proportional amortization method as a “below the line” expense, over the time period in which the tax credits and tax benefits are expected to be received.

As of June 30, 2026, the Company’s total LIHTC investment book balance was $21.2 million, which is included in “Other Assets” on the consolidated balance sheet. This investment is offset by $5.1 million in remaining commitments for additional capital contributions, which is included in “Other Liabilities” on the consolidated balance sheet. There were approximately $1.5 million in tax credits derived from the Company’s LIHTC investments that were recognized during the six months ended June 30, 2026, and “below the line” amortization expense of $1.4 million associated with those investments was recorded for the same time period. LIHTC investments are evaluated annually for potential impairment, and the Company concluded the carrying value of the investments is stated fairly and is not impaired.

As of December 31, 2025, the Company’s total LIHTC investment book balance was $22.6 million, which included $6.6 million in remaining commitments for additional capital contributions. There were $2.9 million in tax credits derived from LIHTC investments recognized during the year ended December 31, 2025; “below the line” amortization expense of $3.0 million associated with those investments was netted against pre-tax noninterest income for the same time period.

The Company’s investments in qualified affordable housing projects and small business investment companies meet the definition of a variable interest entity, as the entities are structured such that the limited partner investors lack substantive voting rights. Pursuant to the FASB standard on the consolidation of variable interest entities, these investments are not reflected on a consolidated basis in the Company’s financial statements.

Note 10 – Loans and Allowance for Credit Losses

The ACL on the loan portfolio is a valuation allowance deducted from the recorded balance in loans. Under CECL, the ACL represents principal which is not expected to be collected over the contractual life of the loans, adjusted for expected prepayments. The ACL is increased by a provision for credit losses charged to expense and by principal recovered on charged-off balances. It is reduced by principal charge-offs. The amount of the allowance is based on Management’s evaluation of the collectability of the loan portfolio, using information from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Adjustments are also made for changes in risk profile, credit concentrations, historical trends, and other economic conditions.

The Company elected the practical expedient available under CECL to exclude accrued interest receivable from the amortized cost basis of all categorizations of loans and, as a result, did not estimate reserves on accrued interest receivable balances, as any past due interest income is reversed on a timely basis. Accrued interest receivable on loans of $7.1 million and $7.0 million at June 30, 2026, and December 31, 2025, respectively, is included in other assets on the Company’s consolidated balance sheet.

The majority of the disclosures in this footnote are prepared at the class level, which is equivalent to the call report or call code classification. The final table in this section separates a roll forward of the ACL at the portfolio segment level. Unless specifically noted otherwise, the disclosures in this footnote are prepared on an amortized cost basis.

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Loan Distribution
(dollars in thousands, unaudited)
		June 30, 2026			December 31, 2025
Real estate:
Residential real estate		$	344,535		$	358,454
Commercial real estate			1,391,964			1,393,183
Other construction/land			15,932			14,497
Farmland			65,625			68,157
Total real estate			1,818,056			1,834,291
Other commercial			178,215			191,500
Mortgage warehouse facilities			457,457			518,333
Consumer			2,478			2,756
Subtotal			2,456,206			2,546,880
Net deferred loan (fees)			(146)			(35)
Loans, amortized cost basis			2,456,060			2,546,845
Allowance for credit losses			(23,600)			(21,480)
Net loans		$	2,432,460		$	2,525,365

The Company places a loan on nonaccrual status when Management has determined full repayment of principal and collection of contractually agreed upon interest is unlikely or the loan in question has become delinquent more than 90 days. The Company may decide it is appropriate to continue to accrue interest on certain loans more than 90 days delinquent if they are well-secured by collateral and collection is in process. When a loan is placed on nonaccrual status, any accrued but uncollected interest for the loan is reversed out of interest income in the period in which the loan’s status changed. For loans with an interest reserve (i.e., loan proceeds are advanced to the borrower to make interest payments) all interest recognized from the inception of the loan is reversed when the loan is placed on nonaccrual. Once a loan is on nonaccrual status, subsequent payments received from the customer are applied to principal, and no further interest income is recognized until the principal has been paid in full or until circumstances have changed such that payments are again consistently received as contractually required. Generally, loans are not restored to accrual status until the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

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Nonaccrual Loans
(dollars in thousands, unaudited)
		June 30, 2026
		Nonaccrual Loans
		With no allowance for credit loss			With an allowance for credit loss		Total		Loans Past Due 90+ Accruing
Real estate:
Residential real estate		$	358		$	—	$	358	$	—
Farmland			3,105			—		3,105		—
Total real estate			3,463			—		3,463		—
Other commercial			4,060			3,019		7,079		—
Consumer loans			—			2		2		—
Total		$	7,523		$	3,021	$	10,544	$	—


		December 31, 2025
		Nonaccrual Loans
		With no allowance for credit loss			With an allowance for credit loss		Total		Loans Past Due 90+ Accruing
Real estate:
Residential real estate		$	210		$	—	$	210	$	—
Farmland			—			1,717		1,717		—
Total real estate			210			1,717		1,927		—
Other commercial			11,304			—		11,304		—
Total		$	11,514		$	1,717	$	13,231	$	—

The Company did not recognize any interest on nonaccrual loans during the three and six months ended June 30, 2026 and 2025, and would have recognized an additional $0.9 million and $0.9 million in interest income on nonaccrual loans during the first six months of 2026 and 2025, respectively, had those loans not been designated as nonaccrual. During the three months ended June 30, 2026, and 2025, the Company reversed $0.2 million and $0.1 million, respectively, of accrued interest receivable associated with loans placed on nonaccrual status, which reduced interest income. For the six months ended June 30, 2026, and 2025, these reversals totaled $0.2 million and $0.3 million, respectively.

The following table presents the amortized cost basis of collateral-dependent loans by class as of June 30, 2026, and December 31, 2025:


Collateral Dependent Loans
(dollars in thousands, unaudited)
		June 30, 2026				December 31, 2025
		Amortized Cost		Individual Reserves		Amortized Cost		Individual Reserves
Real estate:
Residential real estate		$	358	$	—	$	210	$	—
Farmland			3,105		—		1,717		11
Total real estate			3,463		—		1,927		11
Other commercial ⁽¹⁾			6,508		2,548		11,297		—
Total Loans		$	9,971	$	2,548	$	13,224	$	11

(1)	The collateral type on this loan category is primarily agricultural assets.

During the first six months of 2026 the amortized cost balance of collateral-dependent loans decreased by $3.3 million due primarily to a $4.2 million paydown on one agricultural production loan during the first quarter of 2026. The weighted average loan-to-value ratio of collateral-dependent loans was 40.0% at June 30, 2026. There were no consumer mortgage

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loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of June 30, 2026, and December 31, 2025.


Past Due Loans
(dollars in thousands, unaudited)
		June 30, 2026
		30-59 Days Past Due			60-89 Days Past Due		Loans Past Due 90+ Days		Total Past Due		Loans not Past Due		Total Loans
Real estate:
Residential real estate		$	20		$	41	$	358	$	419	$	345,156	$	345,575
Commercial real estate			4,834			—		—		4,834		1,384,896		1,389,730
Other construction/land			—			—		—		—		15,851		15,851
Farmland			—			743		2,678		3,421		62,338		65,759
Total real estate			4,854			784		3,036		8,674		1,808,241		1,816,915
Other commercial			212			2,548		4,532		7,292		171,872		179,164
Mortgage warehouse facilities			—			—		—		—		457,457		457,457
Consumer			1			—		1		2		2,522		2,524
Total Loans		$	5,067		$	3,332	$	7,569	$	15,968	$	2,440,092	$	2,456,060


		December 31, 2025
		30-59 Days Past Due			60-89 Days Past Due		Loans Past Due 90+ Days		Total Past Due		Loans not Past Due		Total Loans
Real estate:
Residential real estate		$	18		$	—	$	192	$	210	$	359,304	$	359,514
Commercial real estate			4,657			—		—		4,657		1,386,233		1,390,890
Other construction/land			—			—		—		—		14,414		14,414
Farmland			2,037			—		1,717		3,754		64,553		68,307
Total real estate			6,712			—		1,909		8,621		1,824,504		1,833,125
Other commercial			131			—		11,304		11,435		181,142		192,577
Mortgage warehouse facilities			—			—		—		—		518,333		518,333
Consumer			11			—		—		11		2,799		2,810
Total Loans		$	6,854		$	—	$	13,213	$	20,067	$	2,526,778	$	2,546,845

Loan Modifications

Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, rate reduction, payment deferral, or term extension. When principal forgiveness is provided, the amount of forgiveness is charged off against the allowance for credit losses.

In certain cases, the Company provides multiple types of concessions on a single loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For the loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: principal forgiveness, rate reduction, payment deferral, and/or term extension.

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The following tables present the amortized cost basis of loans at June 30, 2026 and 2025, that were both experiencing financial difficulty by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below (dollars in thousands, unaudited):


		Three months ended June 30, 2026
	Principal Forgiveness			Payment Delay		Term Extension		Combination Term Extension Interest Rate Reduction		Total Class of Financing Receivable
Other commercial	$	—		$	—	$	673	$	235		0.51%
Total	$	—		$	—	$	673	$	235		0.04%


		Three months ended June 30, 2025
	Principal Forgiveness			Payment Delay		Term Extension		Combination Term Extension Interest Rate Reduction		Total Class of Financing Receivable
Other commercial		—			—		14		—		0.01%
Total	$	—		$	—	$	14	$	—		0.00%


		Six months ended June 30, 2026
	Principal Forgiveness			Payment Delay		Term Extension		Combination Term Extension Interest Rate Reduction		Total Class of Financing Receivable
Other commercial	$	—		$	—	$	1,228	$	235		0.82%
Total	$	—		$	—	$	1,228	$	235		0.06%


		Six months ended June 30, 2025
	Principal Forgiveness			Payment Delay		Term Extension		Combination Term Extension Interest Rate Reduction		Total Class of Financing Receivable
Other commercial		—			—		19		—		0.01%
Total	$	—		$	—	$	19	$	—		0.00%

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The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three and six months ended June 30, 2026 and 2025 (dollars in thousands, unaudited):


			Three months ended June 30, 2026
			Principal Forgiveness		Weighted-Average Interest Rate Reduction	Weighted-Average Term Extension (years)
Other commercial		$	—		0.50%	2.62


			Three months ended June 30, 2025
			Principal Forgiveness		Weighted-Average Interest Rate Reduction	Weighted-Average Term Extension (years)
Other commercial		$	—		—	5.00


			Six months ended June 30, 2026
			Principal Forgiveness		Weighted-Average Interest Rate Reduction	Weighted-Average Term Extension (years)
Other commercial		$	—		0.50%	2.19


			Six months ended June 30, 2025
			Principal Forgiveness		Weighted-Average Interest Rate Reduction	Weighted-Average Term Extension (years)
Other commercial		$	—		—	1.70

There were no payment defaults on loans previously modified in the preceding 12 months for either of the periods ending June 30, 2026 and 2025. For the purpose of this disclosure, the Company defines a payment default as 90 days past due. The Company had $0.1 million in additional funds committed on loans which have been modified to borrowers experiencing financial difficulty as of both June 30, 2026, and June 30, 2025.

The Company monitors the credit quality of loans on a continuous basis using the regulatory and accounting classifications of pass, special mention, and substandard to characterize and qualify the associated credit risk. Loans classified as “loss” are immediately charged off. The Company uses the following definitions of risk classifications:

●

Pass: Includes larger, non-homogeneous loans not meeting the risk rating definitions below and smaller, homogeneous loans not assessed on an individual basis.

●

Special Mention: Includes loans with a potential weakness that deserves Management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

●

Substandard: Includes loans with clear and well-defined weaknesses, such as a highly leveraged position, unfavorable financial operating results and/or trends, uncertain repayment sources, or poor financial condition, which may jeopardize ultimate recoverability of the debt.

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Loan Credit Quality by Vintage

(dollars in thousands, unaudited)


	June 30, 2026
	Term Loans Amortized Cost Basis by Origination Year
	2026		2025		2024		2023		2022		Prior		Revolving Loans Amortized Cost		Revolving Loans Converted to Term Loans		Total Loans
Residential real estate
Pass	$	732	$	—	$	—	$	—	$	84,770	$	247,500	$	8,408	$	2,919	$	344,329
Special mention		—		—		—		—		—		104		20		367		491
Substandard		—		—		—		—		—		499		41		215		755
Subtotal		732		—		—		—		84,770		248,103		8,469		3,501		345,575
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Commercial real estate
Pass		49,906		140,774		133,813		91,363		205,584		693,953		16,921		6,132		1,338,446
Special mention		—		46		4,594		—		2,737		25,662		559		—		33,598
Substandard		—		—		—		—		—		17,686		—		—		17,686
Subtotal		49,906		140,820		138,407		91,363		208,321		737,301		17,480		6,132		1,389,730
Current period gross charge-offs		—		—		—		—		—		—		—		90		90

Other construction/land
Pass		—		1,742		9,913		—		—		2,649		—		—		14,304
Special mention		—		—		—		—		—		1,547		—		—		1,547
Subtotal		—		1,742		9,913		—		—		4,196		—		—		15,851
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Farmland
Pass		—		3,294		4,705		4,888		8,326		20,596		4,603		585		46,997
Special mention		—		—		8,486		—		—		316		6,833		—		15,635
Substandard		—		—		976		1,417		—		734		—		—		3,127
Subtotal		—		3,294		14,167		6,305		8,326		21,646		11,436		585		65,759
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Other commercial
Pass		2,171		6,067		5,168		4,651		1,976		12,023		130,186		4,913		167,155
Special mention		—		135		9		7		—		—		1,300		2,923		4,374
Substandard		—		178		—		3,202		—		—		3,849		406		7,635
Subtotal		2,171		6,380		5,177		7,860		1,976		12,023		135,335		8,242		179,164
Current period gross charge-offs ⁽¹⁾		—		—		—		10		—		—		60		48		118

Mortgage warehouse facilities
Pass		—		—		—		—		—		—		457,457		—		457,457
Subtotal		—		—		—		—		—		—		457,457		—		457,457
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Consumer
Pass		—		—		31		149		38		78		2,225		—		2,521
Special mention		—		—		—		—		—		—		1		—		1
Substandard		—		—		—		—		—		—		2		—		2
Subtotal		—		—		31		149		38		78		2,228		—		2,524
Current period gross charge-offs ⁽¹⁾		—		—		—		—		—		—		292		55		347

Total	$	52,809	$	152,236	$	167,695	$	105,677	$	303,431	$	1,023,347	$	632,405	$	18,460	$	2,456,060

(1)	Consumer overdrafts are included in consumer loans and commercial overdrafts are included in other commercial and make up the majority of the gross charge-offs of loans originated in the revolving loans category for these loan classes.

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Loan Credit Quality by Vintage

(dollars in thousands, unaudited)


			December 31, 2025
		Term Loans Amortized Cost Basis by Origination Year
	2025		2024		2023		2022		2021		Prior		Revolving Loans Amortized Cost		Revolving Loans Converted to Term Loans		Total Loans
Residential real estate
Pass	$	1,144	$	—	$	—	$	89,643	$	205,789	$	47,613	$	9,113	$	3,741	$	357,043
Special mention		—		—		—		—		1,384		522		—		—		1,906
Substandard		—		—		—		—		—		384		34		147		565
Subtotal		1,144		—		—		89,643		207,173		48,519		9,147		3,888		359,514
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Commercial real estate
Pass		145,537		140,079		98,341		191,505		43,829		676,260		21,803		7,517		1,324,871
Special mention		83		—		—		19,356		—		28,727		60		—		48,226
Substandard		—		—		—		—		—		17,793		—		—		17,793
Subtotal		145,620		140,079		98,341		210,861		43,829		722,780		21,863		7,517		1,390,890
Current period gross charge-offs		—		—		—		—		—		274		—		1,147		1,421

Other construction/land
Pass		482		9,616		—		—		—		3,262		—		—		13,360
Special mention		—		—		—		—		—		1,054		—		—		1,054
Subtotal		482		9,616		—		—		—		4,316		—		—		14,414
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Farmland
Pass		3,439		14,361		4,946		8,501		10,752		11,660		11,934		611		66,204
Special mention		—		—		—		—		—		355		—		—		355
Substandard		—		—		1,717		—		—		31		—		—		1,748
Subtotal		3,439		14,361		6,663		8,501		10,752		12,046		11,934		611		68,307
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Other commercial
Pass		7,162		5,995		5,863		2,658		429		13,229		137,208		2,150		174,694
Special mention		197		11		—		13		—		—		3,710		2,636		6,567
Substandard		—		12		7		—		—		—		10,116		1,181		11,316
Subtotal		7,359		6,018		5,870		2,671		429		13,229		151,034		5,967		192,577
Current period gross charge-offs ⁽¹⁾		121		25		2,292		—		7		1		276		5,300		8,022

Mortgage warehouse facilities
Pass		—		—		—		—		—		—		518,333		—		518,333
Subtotal		—		—		—		—		—		—		518,333		—		518,333
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Consumer
Pass		768		38		212		49		27		80		1,614		—		2,788
Special mention		—		—		—		—		—		3		8		—		11
Substandard		—		—		11		—		—		—		—		—		11
Subtotal		768		38		223		49		27		83		1,622		—		2,810
Current period gross charge-offs ⁽¹⁾		826		6		1		1		—		31		42		—		907

Total	$	158,812	$	170,112	$	111,097	$	311,725	$	262,210	$	800,973	$	713,933	$	17,983	$	2,546,845

(1)	Consumer overdrafts are included in consumer loans and commercial overdrafts are included in other commercial and make up the majority of the gross charge-offs of loans originated in the revolving loans category for these loan classes.

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CECL replaced the legacy accounting for loans designated as purchased credit impaired (“PCI”) with loans designated as purchased credit deteriorated (“PCD”). PCD loans are loans acquired or purchased, which as of acquisition, had evidence of more than insignificant credit deterioration since origination. Due to the immaterial balance in the Company’s PCI loans at the CECL implementation date, management elected not to transition these loans into the PCD designation. As of June 30, 2026, the Company had no loans categorized as PCD.

Management calculates the quantitative portion of collectively evaluated reserves for all loan categories, with the exception of Farmland, Agricultural Production and Consumer loans, using a discounted cash flow (“DCF”) methodology. For purposes of calculating the quantitative portion of collectively evaluated reserves on Farmland, Agricultural Production, and Consumer categories a Remaining Life methodology is utilized.

The model used for calculating the Company’s ACL is reviewed and revised periodically; most recently a full review with modifications in the third quarter of 2024, with a partial review and minimal modifications completed in the third quarter of 2025. In the most recent full review, the Company changed to a Multi-Factor Regression Model from a Single-Factor Regression Model used in previous periods. Additionally, legacy peer groups were expanded to include California banks with an asset size between $1.5 billion to $10 billion. The Company’s ACL is calculated quarterly, with any difference in the calculated ACL and the recorded ACL adjusted through an entry to the provision (benefit) for credit losses. For purposes of estimating the Company’s ACL, Management generally evaluates collectively evaluated loans by call code in order to group loans with similar risk characteristics together; however, Management has grouped loans in selected call codes together in determining portfolio segments, due to similar risk characteristics and reserve methodologies used for certain call code classifications.

The DCF quantitative reserve methodology incorporates the consideration of probability of default (“PD”) and loss given default (“LGD”) estimates to estimate periodic losses. The PD estimates are derived through the application of reasonable and supportable economic forecasts to call code specific regression models, derived from the consideration of historical bank-specific and peer loss-rate data. The loss-rate data has been regressed against benchmark economic indicators, for which reasonable and supportable forecasts exist, in the development of the call-code specific regression models. Regression models are updated periodically, in order to pull in more recent loss-rate data. Reasonable and supportable forecasts of the selected economic metric are then input into the regression model to calculate an expected default rate. The expected default rates are then applied to expected monthly loan balances estimated through the consideration of contractual repayment terms and expected prepayments. The Company utilizes a four-quarter forecast period, after which the expected default rates revert to the historical average for each call code, over a four-quarter reversion period, on a straight-line basis. The prepayment assumptions applied to expected cash flow over the contractual life of the loans are estimated based on historical, bank-specific experience, peer data, and the consideration of current and expected conditions and circumstances including the level of interest rates. Management may update prepayment assumptions when changing conditions impact Management’s estimate or additional historical data indicates a reevaluation is warranted. LGD utilized in the DCF is derived from the application of the Frye-Jacobs theory, which relates LGD to PD based on historical peer data, as calculated by a third-party. Economic forecasts are considered over a four-quarter forecast period, with reversion to mean occurring on a straight-line basis over four quarters. The call code multiple factor regression models utilized as of June 30, 2026, for Residential Real Estate loans relied upon reasonable and supportable forecasts of the National Unemployment Rate and House Price Index (HPI). The call code multiple factor regression models utilized as of June 30, 2026, for Commercial Real Estate and Other Construction loans relied upon reasonable and supportable forecasts of the National Unemployment Rate and Gross Domestic Product (GDP). Management selected the National Unemployment Rate, HPI, and GDP as the drivers of quantitative portion of collectively evaluated reserves on loan classes reliant upon the DCF methodology, primarily as a result of high correlation coefficients identified in regression modeling, the availability of forecasts including the quarterly Federal Open Market Committee (FOMC) forecast and given the widespread familiarity of stakeholders with these economic metrics.

The quantitative reserves for Farmland, Agricultural Production, and Consumer loans are calculated using a Remaining Life methodology where the Company’s average historical loss-rates are applied to expected loan balances over an estimated remaining life of loans in calculation of the quantitative portion of collectively evaluated loans in these classes. The estimated remaining life is calculated using historical peer data. For the Farmland,

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Agricultural Production and Consumer classes of loans, reasonable and supportable forecasts of the National Unemployment Rate, real GDP and the housing price index are considered through estimation of qualitative reserves.

Management recognizes there are additional factors impacting risk of loss in the loan portfolio beyond what is captured in the quantitative portion of reserves on collectively evaluated loans. As current and expected conditions may vary compared with conditions over the historical lookback period, which is utilized in the calculation of quantitative reserves, Management considers whether additional or reduced reserve levels on collectively evaluated loans may be warranted given the consideration of a variety of qualitative factors. Several of the following qualitative factors (“Q-factors”) considered by Management reflect the legacy regulatory guidance on Q-factors, whereas several others represent factors unique to the Company or unique to the current time period.

●

Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices

●

Changes in international, regional, and local economic and business conditions, and developments that affect the collectability of the portfolio, as reflected in forecasts of the Housing Price Index, Real GDP, and the National Unemployment Rate (Farmland & Agricultural Production and Consumer segments only)

●

Changes in the nature and volume of the loan portfolio

●

Changes in the experience, ability, and depth of lending Management and other relevant staff

●

Changes in the volume and severity of past due, nonaccruals loans, and adversely classified loans, as reflected in changes of the relative level of loans classified as substandard and special mention

●

Changes in the quality of the Company’s loan review processes

●

Changes in the value of underlying collateral for loans not identified as collateral-dependent

●

Changes in loan categorization concentrations

●

Other external factors, which include the influence of peer data on estimated quantitative reserves, residual COVID-19 related risk, expected impact of current and expected inflationary environment, reliance on the National Unemployment rate as opposed to the California unemployment rate in the calculation of quantitative reserves, the expected impact of current and expected geo-political conditions

The qualitative portion of the Company’s reserves on collectively evaluated loans are calculated using a combination of numeric frameworks and Management judgment to determine risk categorizations in each of the Q-factors presented above. The amount of qualitative reserves is also contingent upon the historical peer, life-of-loan-equivalent, loss-rate ranges, and the relative weighting of Q-factors according to Management’s judgment.

Although collectively evaluated reserves are generally calculated separately at the call code or loan class level, Management has grouped loan classes with similar risk characteristics into the following portfolio segments:

●

1-4 Family Real Estate

●

Commercial Real Estate

●

Farmland & Agricultural Production

●

Commercial & Industrial

●

Mortgage Warehouse

●

Consumer

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Loans secured by Residential Real Estate have a different profile from those secured by Commercial Real Estate. Generally, the borrowers for Residential Real Estate loans are consumers, whereas borrowers for Commercial Real Estate are often businesses. The COVID-19 pandemic illustrated how these different categories of real estate loans were subject to different risks, which was exacerbated by the widespread work-from-home model adopted by many companies during and since the pandemic. Farmland and Agricultural Production loans are included in a single segment as these loans are oftentimes to the same borrowers, facing the same risks relating to commodity prices, water supply and drought conditions, in addition to other environmental concerns. Commercial & Industrial loans are separated into a separate segment given the uniqueness of these loans, which are often revolving and secured by business assets other than real estate. Mortgage Warehouse balances warrant presentation as an individual portfolio segment given the specific nature of these constantly revolving lines to mortgage originators and due to a very limited loss history, even after consideration of peer data. Finally, Consumer loans are split out as a result of the small balance, homogeneous terms that characterize these loans.

Management individually evaluates loans that do not share risk characteristics with other loans when estimating reserves. As of June 30, 2026 and 2025, the only loans Management considered to have different risk characteristics from other loans sharing the same call report code included loans designated as nonaccrual.

The following tables present the activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2026 and 2025:

Allowance for Credit Losses

(dollars in thousands, unaudited)


		Residential Real Estate		Commercial Real Estate			Farmland & Agricultural Production			Commercial & Industrial		Mortgage Warehouse Facilities			Consumer			Total
Allowance for credit losses:
Balance March 31, 2026		$	1,368	$	16,277		$	1,627		$	1,265	$	604		$	109		$	21,250
Charge-offs			—		—			—			(30)		—			(131)			(161)
Recoveries			—		—			—			184		—			44			228
(Benefit) provision for credit losses			(48)		(57)			2,578			(197)		(79)			86			2,283
Balance June 30, 2026		$	1,320	$	16,220		$	4,205		$	1,222	$	525		$	108		$	23,600


		Residential Real Estate		Commercial Real Estate			Farmland & Agricultural Production			Commercial & Industrial		Mortgage Warehouse Facilities			Consumer			Total
Allowance for credit losses:
Balance March 31, 2025		$	1,746	$	17,287		$	6,032		$	1,506	$	339		$	140		$	27,050
Charge-offs			—		(1,147)			(5,300)			(118)		—			(166)			(6,731)
Recoveries			—		—			—			10		—			141			151
(Benefit) provision for credit losses			(52)		1,195			(211)			173		112			(7)			1,210
Balance June 30, 2025		$	1,694	$	17,335		$	521		$	1,571	$	451		$	108		$	21,680

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		Residential Real Estate		Commercial Real Estate			Farmland & Agricultural Production			Commercial & Industrial		Mortgage Warehouse Facilities			Consumer			Total
Allowance for credit losses:
Balance, December 31, 2025		$	1,411	$	16,650		$	1,146		$	1,496	$	665		$	112		$	21,480
Charge-offs			—		(90)			—			(118)		—			(347)			(555)
Recoveries			—		—			21			205		—			89			315
(Benefit) provision for credit losses			(91)		(340)			3,038			(362)		(140)			255			2,360
Balance June 30, 2026		$	1,320	$	16,220		$	4,205		$	1,221	$	525		$	109		$	23,600


		Residential Real Estate		Commercial Real Estate			Farmland & Agricultural Production			Commercial & Industrial		Mortgage Warehouse Facilities			Consumer			Total
Allowance for credit losses:
Balance, December 31, 2024		$	1,808	$	17,143		$	3,827		$	1,282	$	398		$	372		$	24,830
Charge-offs			—		(1,147)			(5,300)			(176)		—			(495)			(7,118)
Recoveries			—		—			410			24		—			363			797
(Benefit) provision for credit losses			(114)		1,339			1,584			441		53			(132)			3,171
Balance June 30, 2025		$	1,694	$	17,335		$	521		$	1,571	$	451		$	108		$	21,680

Note 11 – Goodwill

The balance of goodwill at the six months beginning and ended June 30, 2026 and 2025 was $27.4 million. There was no acquired goodwill for the six months ended June 30, 2026 and 2025.

The Company performs its goodwill impairment tests annually, or more often if events or circumstances indicate the carrying value may not be recoverable. The annual assessment date was changed to October 1 in 2023 to allow more time for evaluation of impairment.

The Company performed its annual quantitative goodwill impairment assessment effective as of October 1, 2025, using a market approach. Based on the results of the Company’s goodwill impairment assessment, the Company determined that the fair value of its reporting unit, which was at the consolidated level, exceeded the carrying value. Management continues to evaluate whether or not a triggering event occurs, or circumstances change that would more likely than not reduce the fair value of the Company below its carrying amount before the next annual test in 2026 and has concluded no such events have occurred. Therefore, goodwill was not impaired as of June 30, 2026, and there were no impairment charges related to the Company’s goodwill recorded during the six months ended June 30, 2026 and 2025.

Note 12 – Borrowings and Other Arrangements

Repurchase Agreements – Repurchase agreements represent “sweep accounts,” where commercial deposit balances above a specified threshold are transferred at the close of each business day into separate non-deposit accounts. Customers use balances of the non-deposit accounts to purchase government bonds from the Company daily, subject to an agreement from the Company to repurchase such securities the next business day. Repurchase agreements totaled $122.4 million at June 30, 2026, relative to a balance of $130.9 million at December 31, 2025.

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Long-Term Debt – The Company has long-term debt in the form of fixed to floating rate subordinated debentures with a fixed rate of 3.25% until September 30, 2026, then floating rate at 253.5 basis points over 3-month term Secured Overnight Financing Rate (“SOFR”) until maturity on October 1, 2031. The balance of the Company’s long-term debt, net of unamortized issuance costs, was $49.5 million at June 30, 2026, and $49.5 million at December 31, 2025.

Subordinated Debentures – Sierra Statutory Trust II (“Trust II”), Sierra Capital Trust III (“Trust III”), and Coast Bancorp Statutory Trust II (“Trust IV”), (collectively, the “Trusts”) exist solely for the purpose of issuing trust preferred securities fully and are unconditionally guaranteed by the Company. For financial reporting purposes, the Trusts are not consolidated, and the Floating Rate Junior Subordinated Deferrable Interest Debentures (the “Subordinated Debentures”) held by the Trusts and issued and guaranteed by the Company are reflected in the Company’s consolidated balance sheet in accordance with provisions of ASC Topic 810. Trust preferred securities are variable rate instruments which were benchmarked against the London Interbank Offered Rate (LIBOR) plus a spread until LIBOR was phased out on June 30, 2023. These instruments are benchmarked against the SOFR, effective June 30, 2023. At June 30, 2026, and December 31, 2025, the Company’s trust preferred securities totaled $36.1 million and $36.0 million, respectively.

The following table summarizes the Company’s other borrowings as of June 30, 2026, and December 31, 2025:


	June 30, 2026					December 31, 2025
				Weighted					Weighted
				Average					Average
	Balance			Rate		Balance			Rate
Overnight Fed funds purchased	$	120,000		3.75%		$	210,000		4.19%
Short-term FHLB advance		—		4.00%			12,700		4.50%
Long-term FHLB advance		35,000		3.88%			80,000		3.91%
Total other borrowings	$	155,000		3.81%		$	302,700		4.05%

The Company has established secured and unsecured lines of credit under which it may borrow funds from time to time on a term or overnight basis from the FHLB, FRB, and other correspondent banks.

Federal Funds Purchased – The Company had unsecured lines of credit with its correspondent banks which, in the aggregate, amounted to $366.8 million at June 30, 2026, and $250.8 million at December 31, 2025, at fixed interest rates which vary with market conditions. There was $120.0 million in outstanding overnight balances under these lines of credit at June 30, 2026, and $210.0 million at December 31, 2025.

Secured FHLB Borrowings – At June 30, 2026, and December 31, 2025, the Company had secured available lines of credit with the FHLB totaling $611.6 million and $629.5 million, respectively, based on eligible collateral of certain loans and investment securities. There were no borrowings outstanding against these lines at June 30, 2026 and $12.7 million outstanding at December 31, 2025.

Federal Reserve Line of Credit – The Company has an available line of credit with the FRB of San Francisco secured by certain loans and investments. At June 30, 2026, and December 31, 2025, the Company had borrowing capacity under this line totaling $243.8 million and $254.9 million, respectively. The Company had outstanding borrowings of zero and $210.0 million on this line of credit as of June 30, 2026, and December 31, 2025.

Note 13 – Revenue Recognition

The Company utilizes the guidance found in ASU 2014-09, Revenue from Contracts with Customers (ASC 606), when accounting for certain noninterest income. The core principle of this guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Sufficient information should be provided to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company’s revenue streams that are within the scope of and accounted for under Topic 606 include service charges on deposit accounts, debit card interchange fees, and fees levied for other services the Company provides its customers. The guidance does not apply to revenue associated with financial instruments such as

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loans and investments, and other noninterest income such as loan servicing fees and earnings on bank-owned life insurance, which are accounted for on an accrual basis under other provisions of GAAP.

All of the Company’s revenue from contracts within the scope of ASC 606 is recognized as noninterest income. Due to the short-term nature of the Company’s contracts with customers, an insignificant amount of receivables related to such revenue was recorded at the three and six months ended June 30, 2026 and 2025. The following table presents the Company’s sources of noninterest income. Items outside the scope of ASC 606 are noted as such (dollars in thousands, unaudited).


	Three months ended June 30,					Six months ended June 30,
	2026			2025		2026			2025
Noninterest income
Service charges on deposits
Returned item and overdraft fees	$	1,313		$	1,255	$	2,637		$	2,500
Other service charges on deposits		2,597			2,544		5,005			4,928
Debit card interchange income		2,077			2,056		4,018			4,008
Dividends on equity investments⁽¹⁾		203			317		998			691
Unrealized gain recognized on equity investments⁽¹⁾		—			—		602			—
Net gain on sale of securities⁽¹⁾		—			1		—			124
Other⁽¹⁾		2,380			2,380		3,279			2,944
Total noninterest income	$	8,570		$	8,553	$	16,539		$	15,195
Percentage of noninterest income not within scope of ASC 606.		30.14%			31.54%		29.50%			24.74%

(1)	Not within scope of ASC 606. Revenue streams are not related to contracts with customers and are accounted for under other provisions of GAAP.

With regard to noninterest income associated with customer contracts, the Company has determined that transaction prices are fixed, and performance obligations are satisfied as services are rendered, thus there is little or no judgment involved in the timing of revenue recognition under contracts that are within the scope of ASC 606.

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PART I - FINANCIAL INFORMATION

ITEM 2

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Form 10-Q includes forward-looking statements that involve inherent risks and uncertainties. These forward-looking statements are within the meaning of Section 27A of the Securities Act of 1933 (“1933 Act”), as amended and Section 21E of the Securities Exchange Act of 1934 (“1934 Act”), as amended. Those sections of the 1933 Act and 1934 Act provide a “safe harbor” for forward-looking statements in order to encourage companies to provide prospective information about their financial performance as long as important factors that could cause actual results to differ significantly from projected results are identified with meaningful cautionary statements. Words such as “expects,” “anticipates,” “believes,” “projects,” “intends,” and “estimates” or variations of such words and similar expressions, as well as future or conditional verbs preceded by “will,” “would,” “should,” “could,” or “may” are intended to identify forward-looking statements. These forward-looking statements are based on certain underlying assumptions and are not guarantees of future performance, as they could be impacted by several potential risks and developments that cannot be predicted with any degree of certainty.

These statements are based on Management’s current expectations regarding economic, legislative, regulatory, and other environmental issues that may affect earnings in future periods. Therefore, actual outcomes and results may differ materially from what is expressed, forecast in, or implied by such forward-looking statements.

A variety of factors could have a material adverse impact on the Company’s financial condition or results of operations and should be considered when evaluating the Company’s potential future financial performance. They include, but are not limited to:

●

risks associated with fluctuations in interest rates, including the impact on other comprehensive income, the ability for customers to repay on floating or adjustable rates loans, and the impact on costs and demand of deposits and funding, the impact on interest income on earning assets, the impact on valuations of collateral on loans, and the impact on fair value of longer-term assets;

●

risks associated with inflation (including efforts by the Federal Open Market Committee of the Federal Reserve Bank (“FRB”) to control the same);

●

the risk of unfavorable economic conditions in the Company’s market areas, or the impact on the Company’s market areas of national or international economic conditions or changes to economic policies, including tariffs and trade agreements;

●

liquidity risks, including the ability to effectively manage the potential loss of deposits, the ability to maintain funding lines of credit, and the loss of value of unencumbered investment securities;

●

increases in nonperforming assets and credit losses that could occur, particularly in times of weak economic conditions or rising interest rates;

●

the impact of adverse developments at other banks, including bank failures, which impact general sentiment regarding the stability and liquidity of banks;

●

risks associated with the multitude of, or changes to, current and prospective banking laws and regulations, and related interpretations, to which the Company is and will be subject;

●

operational risks including the ability to detect and prevent financial reporting errors, operations errors, and fraud;

●

the Company’s ability to diversify and grow its loan portfolio;

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●

the Company’s ability to attract and retain skilled employees;

●

the Company’s ability to successfully deploy new technology and manage cyber security risks;

●

the risk to the Company’s operations and ability to serve customers due to the inability of a vendor to meet its service level agreements;

●

the outcome of any existing or future legal action for which the Company or Bank is a defendant;

●

risks associated with a U.S. Government shutdown, including delays in regulatory reviews, approvals, or rulemaking from federal agencies, reduced access to government economic data and reports which could affect our ability to assess risk and make informed investment or risk management decisions, heightened volatility or reduced liquidity in financial markets, credit and counterparty risk exposure in connection with clients or counterparties that rely on government funding or contracts, and diminished investor and consumer confidence which could reduce demand for financial products;

●

the effects of severe weather events, pandemics, other public health crises, acts of war or terrorism, and other external events; and

●

the success of acquisitions or branch expansions, closures, or consolidations.

Risk factors that could cause actual results to differ materially from results that might be implied by forward-looking statements include the risk factors detailed in the Company’s Form 10-K for the fiscal year ended December 31, 2025, and in Item 1A, herein. The Company does not update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events.

CRITICAL ACCOUNTING POLICY AND ACCOUNTING ESTIMATES

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States. The financial information and disclosures contained within those statements are significantly impacted by Management’s estimates and judgments, which are based on historical experience and incorporate various assumptions that are believed to be reasonable under current circumstances. Actual results may differ from those estimates under divergent conditions.

Critical accounting policies are those that involve the most complex and subjective decisions and assessments which have the greatest potential impact on the Company’s stated results of operations. In Management’s opinion, the Company’s has identified one critical accounting policy:

●

the establishment of the allowance for credit losses, including the valuation of individually evaluated loans, as explained in detail in Notes 8 and 10 to the consolidated financial statements and in the “Provision for Credit Losses” and “Allowance for Credit Losses” sections of this discussion and analysis

Critical accounting areas are evaluated on an ongoing basis to ensure the Company’s financial statements incorporate its most recent expectations regarding those areas.

OVERVIEW OF THE RESULTS OF OPERATIONS

AND FINANCIAL CONDITION

RESULTS OF OPERATIONS SUMMARY

Second Quarter 2026 Compared to Second Quarter 2025

Second quarter 2026 net income was $9.9 million, and $0.77 per diluted share as compared to $10.6 million and $0.78 per diluted share in the second quarter of 2025. The Company’s annualized return on average equity was 10.90% and annualized return on average assets was 1.09% for the quarter ended June 30, 2026, compared to 12.08% and 1.16%,

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respectively, for the same quarter in 2025. The primary drivers behind the variance in second quarter net income are as follows:

●

A $1.1 million increase in credit loss expense on loans, resulting primarily from a $2.5 million specific reserve on a single agricultural production loan to a borrower in the lumber industry.

●

Net interest income remained stable, decreasing $0.2 million, while noninterest income increased slightly and noninterest expense decreased by $0.3 million.

●

Noninterest income and noninterest expense changes included a $0.4 million increase in earnings from separate account life insurance and a $0.1 million increase in deferred compensation expense. Separate account life insurance income and deferred compensation expense are designed to offset each other.

●

Noninterest expense in the second quarter of 2026 included approximately $0.5 million of severance and recruitment related charges resulting from a restructuring of the executive team.

First Half of 2026 Compared to First Half of 2025

●

Net income increased $2.7 million, or 14%, to $22.4 million for the first six months of 2026. The increase was driven primarily by a $1.3 million increase in noninterest income, a $1.1 million decrease in provision for credit losses, and a $0.9 million decrease in noninterest expense. Diluted earnings per share increased 20% to $1.72 compared to $1.43 in the comparative period.

●

Net interest income increased $0.3 million due primarily to a four basis point increase in net interest margin to 3.75%, partially offset by slightly lower average earning assets. Funding costs declined meaningfully during the period, with cost of funds decreasing to 1.32% from 1.48% and cost of deposits declining to 1.14% from 1.31%.

●

Noninterest income increased $1.3 million, or 9%, compared to the first six months of 2025. The increase was driven primarily by a $0.5 million increase in earnings on separate account life insurance, a $0.3 million increase in cash surrender value income from life insurance, a $0.2 million increase in service charges and fees, and a $0.4 million gain on sale of fixed assets. These favorable variances were partially offset by lower securities gains.

●

Noninterest expense decreased $0.9 million, or 2%, compared to the first six months of 2025. The reduction was driven primarily by lower other operating expenses and deposit service costs, partially offset by increased occupancy expenses and higher professional service costs.

FINANCIAL CONDITION SUMMARY

June 30, 2026, Relative to December 31, 2025 (unless otherwise noted)

The Company’s assets totaled $3.7 billion at June 30, 2026, a decrease of $108.7 million, or 3% from December 31, 2025. The following provides a summary of key balance sheet changes during the first six months of 2026:

●

Investment securities decreased $21.4 million, or 2%, to $894.7 million primarily due to calls of U.S. government agencies and collateralized loan obligations (“CLOs”).

●

Gross loans decreased $90.8 million, or 4%, due to a $60.9 million decrease in mortgage warehouse balances, a $13.9 million decrease in residential real estate loans, a $13.4 million decrease in other commercial loans, a $1.2 million decrease in commercial real estate, and a $2.5 million decrease in farmland loans. These decreases were partially offset by an increase of $1.4 million in construction loans.

●

Mortgage warehouse average balances increased $8.0 million during the second quarter of 2026 compared to the linked quarter, while ending balances declined by $21.0 million. Average balances of commercial real estate and commercial and industrial loans decreased during the quarter, and period-end balances increased slightly. However, loan production strengthened significantly as the quarter progressed, that we believe reflects a shift in

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momentum entering the third quarter of 2026, driven by increasing commercial real estate and commercial and industrial lending opportunities.

●

Total deposits increased $54.6 million, or 2%. Growth was concentrated in noninterest-bearing demand deposits and non-maturing interest-bearing deposits. Customer deposits increased $57.5 million, while brokered deposits decreased $2.9 million during the period.

●

Other interest-bearing liabilities declined to $155.0 million at June 30, 2026, from $302.7 million at December 31, 2025, primarily reflecting a reduction in wholesale funding as mortgage warehouse loan balances decreased. The decline consisted of a $102.7 million reduction in overnight borrowings and a $45.0 million reduction in FHLB term advances. Customer repurchase agreements also decreased $8.5 million during the period.

●

Total capital of $366.9 million at June 30, 2026, reflects an increase of $2.0 million compared to December 31, 2025. The increase in equity during the first six months of 2026 was primarily attributable to $22.4 million in net income, partially offset by $14.4 million in share repurchases, $6.8 million in cash dividends declared, and a $1.0 million increase in accumulated other comprehensive loss, related to changes in the fair value of investment securities. The remaining difference was related to activity from stock options and restricted stock during the year.

EARNINGS PERFORMANCE

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

NET INTEREST INCOME AND NET INTEREST MARGIN

Net interest income was $30.4 million for the second quarter of 2026, a decrease of $0.2 million, or 1%, compared to the second quarter of 2025. The decrease was primarily attributable to lower average interest-earning asset balances and yields, substantially offset by lower funding costs. Interest expense declined $1.5 million, or 13%, from the prior-year quarter, reflecting the benefits of lower deposit and wholesale funding costs.

For the second quarter of 2026, average interest-earning assets decreased $81.2 million, or 2%, from the same period in 2025, while the yield on those assets declined eight basis points to 5.02%. The decline in average earning assets was driven primarily by lower investment securities balances and decreases in real estate loans and agricultural production loans.

Average interest-bearing liabilities decreased $23.7 million in the second quarter of 2026 compared to the same period in 2025, while the cost of those liabilities declined 26 basis points to 1.92%. The quarterly decrease was primarily attributable to a 28 basis point reduction in the cost of interest-bearing deposits and a 23 basis point reduction in the cost of borrowed funds to 1.73% and 2.81%, respectively. Average interest-bearing deposit balances declined $42.8 million from the prior-year quarter, comprised primarily of a decline in higher-cost customer time deposits which decreased $62.7 million and brokered deposits which declined $16.2 million. These changes were partially offset by higher average balances of federal funds purchased, which also increased to fund mortgage warehouse lending activity.

The reduction in funding costs more than offset the modest decline in earning asset yields, resulting in a six basis point increase in the net interest margin to 3.74% from 3.68% in the second quarter of 2025.

Net interest income for the first six months of 2026 increased $0.3 million to $61.0 million, compared to the same period in 2025. The increase resulted primarily from an improved net interest margin, driven by lower funding costs and partially offset by a modest decline in average earning assets. Average interest-earning assets decreased $19.6 million, or 1%, and the yield on those assets decreased nine basis points to 5.03%.

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For the first six months of 2026, interest expense decreased $2.3 million to $21.1 million, compared to $23.4 million during the same period in 2025. The decrease was driven by a 23 basis point reduction in the cost of interest-bearing liabilities to 1.93%, partially offset by a $25.1 million increase in average interest-bearing liabilities. The reduction in funding costs contributed to a four basis point increase in net interest margin to 3.75% for the first six months of 2026, compared to 3.71% for the same period in 2025.

The Company had $1.8 billion in adjustable and variable rate loans and $214.4 million in floating rate bonds, as compared to $220.5 million in floating rate CDs and $36.1 million in floating rate trust preferred securities at June 30, 2026. The adjustable-rate loans have repricing frequencies ranging from 30-days to 10-years. Of the $1.8 billion in adjustable and variable rate loans, $793.3 million reprice or mature in the next twelve months, including $457.5 million in mortgage warehouse facilities, which generally reprice immediately as interest rates change. In addition, there were $620.2 million of fixed-term deposits that reprice or mature within twelve months. Of the $793.3 million in adjustable and variable rate loans that reprice or mature over the next twelve months, $270.5 million, or 34%, have a pricing index rate higher than the current index, while $12.7 million, or 2%, have a pricing index rate lower than the current index. The remaining balance of $510.1 million in loans are priced at the current index rate.

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

The following tables show average balances for significant balance sheet categories and the amount of interest income or interest expense associated with each category for the noted periods. The tables also display calculated yields on each major component of the Company’s investment and loan portfolios, average rates paid on each key segment of the Company’s interest-bearing liabilities, and net interest margin for the noted periods.

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Average Balances and Rates

(dollars in thousands, unaudited)


		For the three months ended								For the three months ended
		June 30, 2026								June 30, 2025
Assets		Average Balance ⁽¹⁾			Income/ Expense			Average Rate/Yield ⁽²⁾		Average Balance ⁽¹⁾			Income/ Expense			Average Rate/Yield ⁽²⁾
Investments:
Interest-earning due from banks		$	11,265		$	112		3.99%		$	18,122		$	211		4.67%
Taxable			695,359			7,965		4.59%			770,413			9,295		4.84%
Non-taxable			207,513			1,678		4.11%			196,364			1,577		4.08%
Total investments			914,137			9,755		4.48%			984,899			11,083		4.68%

Loans:⁽³⁾
Real estate			1,803,504			22,250		4.95%			1,849,725			22,589		4.90%
Agricultural			58,703			723		4.94%			72,933			915		5.03%
Commercial			106,435			1,531		5.77%			109,407			1,612		5.91%
Consumer			2,445			54		8.86%			3,214			64		7.99%
Mortgage warehouse facilities			422,257			6,608		6.28%			368,592			6,440		7.01%
Other			2,393			18		3.02%			2,351			14		2.39%
Total loans			2,395,737			31,184		5.22%			2,406,222			31,634		5.27%
Total interest-earning assets ⁽⁴⁾			3,309,874			40,939		5.02%			3,391,121			42,717		5.10%
Other earning assets			17,935								17,062
Non-earning assets			318,610								280,045
Total assets		$	3,646,419							$	3,688,228


Liabilities and shareholders' equity
Interest-bearing deposits:
Demand deposits		$	237,488		$	1,263		2.13%		$	224,649		$	1,420		2.54%
NOW			361,845			97		0.11%			375,695			140		0.15%
Savings accounts			366,475			111		0.12%			354,798			97		0.11%
Money market			171,583			772		1.80%			146,193			608		1.67%
Time deposits			454,295			3,216		2.84%			516,970			4,283		3.32%
Brokered deposits			228,210			2,402		4.22%			244,401			2,778		4.56%
Total interest-bearing deposits			1,819,896			7,861		1.73%			1,862,706			9,326		2.01%
Borrowed funds:
Federal funds purchased			125,005			1,171		3.76%			46,214			517		4.49%
Repurchase agreements			125,120			45		0.14%			124,636			79		0.25%
Short term borrowings			3,606			34		3.78%			24,716			277		4.50%
Long term FHLB advances			40,714			389		3.83%			80,000			780		3.91%
Long-term debt			49,514			430		3.48%			49,424			430		3.49%
Subordinated debentures			36,078			597		6.64%			35,899			655		7.32%
Total borrowed funds			380,037			2,666		2.81%			360,889			2,738		3.04%
Total interest-bearing liabilities			2,199,933			10,527		1.92%			2,223,595			12,064		2.18%
Demand deposits - noninterest-bearing			1,018,453								1,020,374
Other liabilities			63,077								91,191
Shareholders' equity			364,956								353,068
Total liabilities and shareholders' equity		$	3,646,419							$	3,688,228
Interest income/interest-earning assets								5.02%								5.10%
Interest expense/interest-earning assets								1.28%								1.42%
Net interest income and margin⁽⁵⁾					$	30,412		3.74%					$	30,653		3.68%

(1)	Average balances are obtained from the best available daily or monthly data and are net of deferred fees and related direct costs.

(2)	Yields and net interest margin have been computed on a tax equivalent basis utilizing a 21% effective federal tax rate.

(3)	Loans are gross of the allowance for expected credit losses. Loan fees have been included in the calculation of interest income. Net loan costs and loan acquisition FMV amortization were $(0.3) million and $(0.4) million for the quarters ended June 30, 2026 and 2025, respectively.

(4)	Nonaccrual loans have been included in total loans for purposes of computing total earning assets.

(5)	Net interest margin represents net interest income as a percentage of average interest-earning assets.

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Average Balances and Rates
(Dollars in Thousands, Unaudited)
	For the six months ended						For the six months ended
	June 30, 2026						June 30, 2025
Assets	Average Balance ⁽¹⁾		Income/ Expense		Average Rate/Yield ⁽²⁾	Average Balance ⁽¹⁾		Income/ Expense		Average Rate/Yield ⁽²⁾
Investments:
Interest-earning due from banks	$	17,305	$	323	3.76%	$	36,281	$	799	4.44%
Taxable		702,349		15,957	4.58%		752,903		18,435	4.94%
Non-taxable		205,667		3,302	4.10%		196,957		3,153	4.09%
Total investments		925,321		19,582	4.46%		986,141		22,387	4.75%

Loans:⁽³⁾
Real estate		1,813,047		44,642	4.97%		1,837,146		44,576	4.89%
Agricultural		60,738		1,447	4.80%		74,615		1,945	5.26%
Commercial		109,070		3,128	5.78%		106,296		3,127	5.93%
Consumer		2,522		109	8.72%		3,250		133	8.25%
Mortgage warehouse facilities		418,286		13,197	6.36%		341,075		11,970	7.08%
Other		2,270		30	2.67%		2,356		32	2.74%
Total Loans		2,405,933		62,553	5.24%		2,364,738		61,783	5.27%
Total interest-earning assets ⁽⁴⁾		3,331,254		82,135	5.03%		3,350,879		84,170	5.12%
Other earning assets		17,504					17,062
Non-earning assets		301,369					277,002
Total assets	$	3,650,127				$	3,644,943
Liabilities and shareholders' equity
Interest-bearing deposits:
Demand deposits	$	230,847	$	2,366	2.07%	$	216,258	$	2,712	2.53%
NOW		359,261		173	0.10%		377,009		259	0.14%
Savings accounts		365,002		216	0.12%		353,727		187	0.11%
Money market		163,073		1,387	1.72%		145,646		1,180	1.63%
Time Deposits		456,874		6,421	2.83%		524,095		8,694	3.35%
Brokered deposits		273,453		5,621	4.15%		244,480		5,665	4.67%
Total interest-bearing deposits		1,848,510		16,184	1.77%		1,861,215		18,697	2.03%
Borrowed funds:
Federal funds purchased		84,121		1,565	3.75%		23,325		519	4.49%
Repurchase agreements		126,765		107	0.17%		118,533		148	0.25%
Short term borrowings		3,796		72	3.82%		14,437		323	4.51%
Long term FHLB advances		59,144		1,138	3.88%		80,000		1,550	3.91%
Long-term debt		49,503		861	3.51%		49,413		860	3.51%
Subordinated debentures		36,056		1,188	6.64%		35,877		1,308	7.35%
Total borrowed funds		359,385		4,931	2.77%		321,585		4,708	2.95%
Total interest-bearing liabilities		2,207,895		21,115	1.93%		2,182,800		23,405	2.16%
Demand deposits - noninterest-bearing		1,012,146					1,011,895
Other liabilities		64,702					96,967
Shareholders' equity		365,384					353,281
Total liabilities and shareholders' equity	$	3,650,127				$	3,644,943
Interest income/interest-earning assets					5.03%					5.12%
Interest expense/interest-earning assets					1.28%					1.41%
Net interest income and margin⁽⁵⁾			$	61,020	3.75%			$	60,765	3.71%

(1)	Average balances are obtained from the best available daily or monthly data and are net of deferred fees and related direct costs.

(2)	Yields and net interest margin have been computed on a tax equivalent basis utilizing a 21% effective federal tax rate.

(3)	Loans are gross of the allowance for possible loan losses. Loan fees have been included in the calculation of interest income. Net loan fees and loan acquisition FMV amortization were $(0.6) million and $(0.7) million for the six months ended June 30, 2026, and 2025, respectively.

(4)	Non-accrual loans have been included in total loans for purposes of computing total earning assets.

(5)	Net interest margin represents net interest income as a percentage of average interest-earning assets.

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The Volume and Rate Variances table below sets forth the dollar difference for the comparative periods in interest earned or paid for each major category of interest-earning assets and interest-bearing liabilities, and the amount of such change attributable to fluctuations in average balances (volume) or differences in average interest rates. Volume variances are equal to the increase or decrease in average balances multiplied by prior period rates, and rate variances are equal to the change in rates multiplied by prior period average balances. Variances attributable to both rate and volume changes, calculated by multiplying the change in rates by the change in average balances, have been allocated to the mix variance.

Volume & Rate Variances

(dollars in thousands, unaudited)


		Three months ended June 30,										Six months ended June 30,
		2026 over 2025										2026 over 2025
		Increase (decrease) due to										Increase (decrease) due to
Assets:		Volume			Rate		Mix			Net		Volume		Rate		Mix		Net
Investments:
Federal funds sold/due from time		$	(80)		$	(31)	$	12		$	(99)	$	(418)	$	(122)	$	64	$	(476)
Taxable			(906)			(470)		46			(1,330)		(1,238)		(1,329)		89		(2,478)
Non-taxable			22			11		68			101		177		9		(37)		149
Total investments ⁽¹⁾			(964)			(490)		126			(1,328)		(1,479)		(1,442)		116		(2,805)
Loans:
Real estate			(564)			231		(6)			(339)		(585)		660		(9)		66
Agricultural			(178)			(17)		3			(192)		(362)		(167)		31		(498)
Commercial			(44)			(38)		1			(81)		82		(79)		(2)		1
Consumer			(15)			7		(2)			(10)		(29)		7		(2)		(24)
Mortgage warehouse			938			(672)		(98)			168		2,710		(1,209)		(274)		1,227
Other			—			4		—			4		(1)		(1)		—		(2)
Total loans ⁽¹⁾			137			(485)		(102)			(450)		1,815		(789)		(256)		770
Total interest-earning assets ⁽¹⁾		$	(827)		$	(975)	$	24		$	(1,778)	$	336	$	(2,231)	$	(140)	$	(2,035)
Liabilities
Interest-bearing deposits:
Demand deposits		$	81			(225)		(13)		$	(157)	$	183	$	(496)		(33)	$	(346)
NOW			(5)			(39)		1			(43)		(12)		(78)		4		(86)
Savings accounts			3			11		—			14		6		22		1		29
Money market			105			50		9			164		141		59		7		207
Time deposits			(519)			(624)		76			(1,067)		(1,115)		(1,328)		170		(2,273)
Brokered deposits			(184)			(206)		14			(376)		672		(640)		(76)		(44)
Total interest-bearing deposits ⁽¹⁾			(519)			(1,033)		87			(1,465)		(125)		(2,461)		73		(2,513)
Borrowed funds:
Federal funds purchased			881			(84)		(143)			654		1,353		(85)		(222)		1,046
Repurchase agreements			—			(34)		—			(34)		10		(48)		(3)		(41)
Short term borrowings			(237)			(44)		38			(243)		(238)		(49)		36		(251)
Long-term FHLB Advances			(383)			(16)		8			(391)		(404)		(11)		3		(412)
Long term debt			1			(1)		—			—		2		(1)		—		1
Subordinated debentures			3			(61)		—			(58)		7		(126)		(1)		(120)
Total borrowed funds ⁽¹⁾			265			(240)		(97)			(72)		730		(320)		(187)		223
Total interest-bearing liabilities ⁽¹⁾			(254)			(1,273)		(10)			(1,537)		605		(2,781)		(114)		(2,290)
Net interest income ⁽¹⁾		$	(573)		$	298	$	34		$	(241)	$	(269)	$	550	$	(26)	$	255

(1)	Subtotals are a sum of the categories above and are not recalculated on the portfolio totals.

The volume and rate analysis indicates that lower funding costs remained the primary driver of earnings performance during both the quarterly and year-to-date periods. Favorable deposit and borrowing cost repricing largely offset pressure from lower investment balances and reduced earning asset yields, while growth in mortgage warehouse lending provided a meaningful positive volume contribution.

Variances in net interest income were the result of changes discussed under the “Net Interest Income and Net Interest Margin” heading.

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PROVISION FOR CREDIT LOSS EXPENSE

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 loss expense on loans of $2.3 million for the second quarter of 2026, compared to $1.2 million for the second quarter of 2025. For the first six months of 2026, the provision for credit losses on loans was $2.4 million, compared to $3.2 million for the same period in 2025. A $2.5 million specific reserve established on an agricultural production loan during the second quarter of 2026 was the primary driver of the increase in credit loss expense for the quarterly comparison. Following the end of the second quarter, the Company received a $0.5 million payment on this loan. Management continues to work with the borrower to evaluate and pursue various resolution alternatives for this credit.

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.

The Company’s policies for monitoring the adequacy of the allowance, determining loan balances that should be charged off, and other detailed information with regard to changes in the allowance are discussed in Note 10 to the consolidated financial statements, and below, under “Allowance for Credit Losses.” The process utilized to establish an appropriate credit allowance for losses on loans can result in a high degree of variability in the Company’s credit loss provision, and consequently in net earnings.

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NONINTEREST INCOME AND NONINTEREST EXPENSE

Noninterest Income/Expense

(dollars in thousands, unaudited)


	Three months ended June 30,				Six months ended June 30,
Noninterest income:	2026		2025		2026		2025
Service charges and fees on deposit accounts
Interchange income on debit cards	$	2,077	$	2,056	$	4,018	$	4,008
Business analysis fees		1,174		1,123		2,204		2,157
Overdraft fee income		1,313		1,255		2,637		2,500
Other service charges and fees		1,423		1,421		2,801		2,771
Net gain on sale of securities available-for-sale		—		1		—		124
Gain (loss) on sale of fixed assets		—		(19)		360		(22)
Increase in cash surrender value of life insurance		416		343		835		581
Earnings on separate account life insurance		1,386		973		1,006		470
Other		781		1,400		2,678		2,606
Total noninterest income	$	8,570	$	8,553	$	16,539	$	15,195
As a % of average interest-earning assets ⁽¹⁾		1.04%		1.01%		1.00%		0.91%

Noninterest expense:
Salaries and employee benefits
Salary and incentives	$	10,403	$	10,463	$	20,811	$	21,150
Employee benefits		2,009		1,953		4,297		4,253
Deferred compensation		136		128		139		144
Occupancy costs		3,204		3,142		6,289		6,120
Advertising and marketing costs		338		405		670		753
Data processing costs		1,657		1,566		3,240		3,064
Deposit services costs		1,983		2,118		3,931		4,109
Loan services costs
Loan processing		117		113		231		251
Foreclosed assets		1		(2)		18		2
Other operating costs		772		1,078		1,551		2,006
Professional services costs
Legal and accounting services		572		419		1,129		1,070
Director's costs		337		309		692		619
Deferred directors' fees cost/(benefit)		1,039		948		467		504
Other professional services		694		711		1,394		1,417
Stationery and supply costs		100		132		197		233
Debit card and fraud loss		148		284		278		489
Total noninterest expense	$	23,510	$	23,767	$	45,334	$	46,184
As a % of average interest-earning assets ⁽¹⁾		2.85%		2.81%		2.74%		2.78%

(1)	Annualized

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Noninterest Income:

Total noninterest income was unchanged at $8.6 million compared to the second quarter of 2025. Favorable variances included a $0.4 million increase in earnings on separate account BOLI, a $0.1 million increase in service charges and fees on deposit accounts, and a modest increase in cash surrender value income from life insurance. These improvements were largely offset by a $0.6 million decrease in other income, mainly due to a decrease in gain on life insurance proceeds.

For the first six months of 2026, noninterest income increased $1.3 million, or 9%, to $16.5 million compared to $15.2 million for the same period in 2025. The increase was driven primarily by a $0.5 million increase in earnings on separate account life insurance, a $0.3 million increase in cash surrender value income from life insurance, a $0.2 million increase in service charges and fees on deposit accounts, and a $0.4 million favorable variance from gains on sales of fixed assets. These favorable changes were partially offset by lower gains on sale of investment securities.

The Company’s non-qualified deferred compensation plan for officers and directors, allows participants to defer a portion of their earnings and select from various hypothetical investment alternatives to determine their individual returns. The Company economically offsets this liability with separate account life insurance policies that are invested in similar underlying fund types within the life insurance policy. Because the deferred compensation liability and the separate account life insurance asset are not contractually linked, differences in balances, fund performance, and insurance costs can result in temporary timing mismatches between changes in separate account life insurance income and the related deferred compensation expense.

Earnings on separate account life insurance were $1.4 million for the second quarter of 2026, compared to a loss of $0.4 million in the linked quarter and earnings of $1.0 million in the second quarter of 2025. For the first six months of 2026, earnings on separate account life insurance totaled $1.0 million, compared to $0.5 million for the same period in 2025. These changes reflect market-driven fluctuations in the value of the underlying investment alternatives and do not represent changes in the operating performance or credit quality of the Company.

The majority of the related deferred compensation expense or benefit is reported within professional services expense under deferred directors' fees, as it primarily relates to directors' deferred compensation elections. Deferred directors' fee expense was $1.0 million during the second quarter of 2026, compared to a benefit of $0.6 million in the linked quarter and expense of $0.9 million in the second quarter of 2025. For the first six months of 2026 and 2025, deferred directors' fee expense totaled $0.5 million.

Noninterest Expense:

Total noninterest expense decreased $0.3 million, or 1%, compared to the second quarter of 2025. Salaries and benefits expense remained essentially unchanged from the prior year quarter. Other noninterest expense decreased $0.3 million, primarily due to lower deposit service costs and other operating expenses. These favorable variances were partially offset by higher deferred compensation expense, legal and accounting costs, and directors' fees.

For the first six months of 2026, noninterest expense decreased $0.9 million, or 2%, to $45.3 million from $46.2 million for the same period in 2025. Salaries and benefits decreased $0.3 million, while other noninterest expense declined $0.7 million. The improvement was primarily attributable to lower deposit service costs, lower operating expenses, and reduced sundry and teller expenses, partially offset by higher occupancy costs, legal and accounting expenses, and director-related costs. In addition, we had $0.5 million in severance and recruiting costs related to an executive leadership restructuring during the quarter, which was offset by a reduction in overall staff. These results reflect management's continued focus on maintaining a relatively flat expense base while selectively investing in strategic growth initiatives, technology enhancements, regulatory compliance, and customer service capabilities.

Overall full-time equivalent employees were 452 at June 30, 2026, as compared to 465 at December 31, 2025, and 494 at June 30, 2025.

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PROVISION FOR INCOME TAXES

The Company records its provision for income taxes using the annual effective tax rate method prescribed by ASC 740, Income Taxes. Under this methodology, income tax expense is determined by applying the Company's estimated annual effective tax rate to year-to-date pre-tax income and adjusting for discrete tax items recognized in the period in which they occur. The estimated annual effective tax rate reflects the impact of tax-exempt income, tax credits, and other permanent differences between book and taxable income. 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 effective tax rate was 25.3% for the second quarter of 2026, unchanged from the second quarter of 2025 and as compared to 25.2% in the linked first quarter of 2026. For the first six months of 2026, the effective tax rate was 25.2%, compared to 25.5% for the same period in 2025. The lower year-to-date effective tax rate reflects the continued benefit of tax-exempt income and tax credit investments as a percentage of pre-tax earnings.

BALANCE SHEET ANALYSIS

EARNING ASSETS

The Company’s interest-earning assets are comprised of loans and investments, including overnight investments and surplus balances held in interest-earning accounts in its FRB account. The composition, growth characteristics, and credit quality of both of those components are significant determinants of the Company’s financial condition. Investments are analyzed in the section immediately below, while the loan portfolio and other factors affecting earning assets are discussed in the sections following investments.

INVESTMENTS

The Company’s investments may at any given time consist of debt securities and marketable equity securities (together, the “investment portfolio”), investments in the time deposits of other banks, surplus interest-earning balances in its FRB account, and overnight fed funds sold. The Company’s investments can serve several purposes, including the following: 1) they can provide liquidity for potential funding needs; 2) they provide a source of pledged assets for securing public deposits, bankruptcy deposits and certain borrowed funds which require collateral; 3) they constitute a large base of assets with structural characteristics that can be changed more readily than loan or deposit portfolios, as might be required for interest rate risk management purposes; 4) they are another interest-earning option for the placement of surplus funds when loan demand is light; and 5) they can provide partially tax exempt income.

The investment portfolio is reflected on the balance sheet as investment securities and totaled $894.7 million, or 24% of total assets at June 30, 2026, and $916.1 million, or 24% of total assets at December 31, 2025. The modest decrease was due to regularly scheduled maturities and paydowns.

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 3.1 years for available-for-sale investments and 5.2 years for held-to-maturity investments at June 30, 2026, as compared to 2.8 years for available-for-sale investments and 5.6 years for held-to-maturity investments at December 31, 2025.

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The following table sets forth the carrying amount for available-for-sale securities, at fair value, and held-to-maturity securities, at amortized cost, net of the allowance for credit losses of the Company’s investment portfolio by investment type as of the dates noted:

Investment Portfolio

(dollars in thousands, unaudited)


	June 30, 2026					December 31, 2025
	Carrying Amount			Percent		Carrying Amount			Percent
Available for sale
U.S. government agencies	$	18,083		2.02%		$	32,901		3.59%
Mortgage-backed securities		271,949		30.40%			259,760		28.35%
State and political subdivisions		54,881		6.13%			46,921		5.12%
Corporate bonds		84,019		9.39%			86,467		9.44%
Collateralized loan obligations		182,890		20.44%			199,281		21.75%
Total available for sale		611,822		68.38%			625,330		68.25%
Held to maturity
U.S. government agencies		4,320		0.48%			4,523		0.49%
Mortgage-backed securities		108,476		12.12%			115,228		12.58%
State and political subdivisions		170,084		19.02%			171,060		18.68%
Total held to maturity		282,880		31.62%			290,811		31.75%
Total securities	$	894,702		100.00%		$	916,141		100.00%

The fair value of 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 $362.5 million at June 30, 2026, and $367.5 million at December 31, 2025, leaving $528.1 million in unpledged debt securities at June 30, 2026, and $548.6 million at December 31, 2025. Securities pledged in excess of actual pledging needs and thus available for liquidity purposes, if needed, totaled $204.3 million at June 30, 2026, and $192.3 million at December 31, 2025.

At June 30, 2026, the Company’s investment portfolio included 231 municipal bonds issued by 201 different government municipalities and agencies located within 28 different states, with an aggregate fair value of $229.8 million. The largest exposure to any single municipality or agency was a combined $5.2 million (fair value) in general obligation bonds issued by the City of New York (NY). In addition, the Company owned 100 subordinated debentures issued by bank-holding companies totaling $84.0 million (fair value).

At December 31, 2025, the Company’s investment portfolio included 227 municipal bonds issued by 199 different government municipalities and agencies located within 28 states, with an aggregate fair value of $221.0 million. The largest exposure to any single municipality or agency was a combined $5.2 million (fair value) in general obligation bonds issued by the City of New York (NY). In addition, the Company owned 109 subordinated debentures issued by bank-holding companies totaling $86.5 million (fair value).

The Company’s investments in bonds issued by corporations, states, municipalities, and political subdivisions are evaluated in accordance with Financial Institution Letter 48-2012, issued by the FDIC, “Revised Standards of Creditworthiness for Investment Securities,” and other regulatory guidance. Credit ratings are considered in Management’s analysis only as a guide to the historical default rate associated with similarly rated bonds. There have been no significant differences in internal analyses compared with the ratings assigned by the third-party credit rating agencies.

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The following table summarizes the amortized cost and fair values of general obligation and revenue bonds in the Company’s investment securities portfolio at the indicated dates, identifying the state in which the issuing municipality or agency operates for the Company’s largest geographic concentrations:


	June 30, 2026						December 31, 2025
	Amortized			Fair Market			Amortized			Fair Market
General obligation bonds	Cost			Value			Cost			Value
State of issuance
Texas	$	85,929		$	86,220		$	86,922		$	85,424
California		74,235			71,175			50,945			49,130
Other (22 & 22 states, respectively)		47,590			50,077			60,220			61,092
Total general obligation bonds		207,754			207,472			198,087			195,646

Revenue bonds
State of issuance
Texas		4,196			4,021			5,534			5,378
California		2,374			2,182			3,583			3,586
Other (13 & 13 states, respectively)		15,558			16,091			16,481			16,416
Total revenue bonds		22,128			22,294			25,598			25,380
Total obligations of states and political subdivisions	$	229,882		$	229,766		$	223,685		$	221,026

ALLOWANCE FOR CREDIT LOSSES – AFS INVESTMENT SECURITIES

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, 2026, and December 31, 2025, 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, 2026, and December 31, 2025, was attributable to credit deterioration and a risk of loss, requiring an allowance for credit losses.

●

U.S. government agencies are supported by the full faith and creditworthiness of the U.S. federal government and Management did not consider a default, much less a loss on these securities to be a reasonable possibility as of either June 30, 2026, or December 31, 2025.

●

Mortgage-backed securities issued by government-sponsored enterprises (“GSEs”) carry an implicit guarantee by the U.S. federal government, as the GSEs can draw funds from the U.S. federal government up to a limit, with an implied ability to draw funds beyond the limit. Management did not consider a default, much less a loss on these securities to be a reasonable possibility as of either June 30, 2026, or December 31, 2025.

●

Management routinely monitors third party credit grades of the municipal issuers in the Company’s state and political subdivisions portfolio. On a quarterly basis Management receives financial information from a third-party service in order to monitor the underlying issuer’s financial stability. In addition, Management performs 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 June 30, 2026, and December 31, 2025, Management concluded that no allowance for credit losses was warranted on any of the Company’s available-for-sale 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.

●

The Company has invested in corporate debt issuances of other financial institutions. Various financial metrics, including credit quality, reserve adequacy, profitability and capital, of each of the issuing financial institutions

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are reviewed by Management quarterly. Following review of the financial metrics available for each of the underlying institutions as of June 30, 2026, and December 31, 2025, Management concluded the unrealized loss position of these securities were related exclusively to the fluctuation in market conditions, primarily interest rates, from the date of purchase, and were not reflective of any credit concerns with the issuing financial institution. These bonds were subject to a credit review by the credit administration department prior to their purchase and are subject to ongoing quarterly reviews.

●

The Company has invested exclusively in AA and AAA tranches of various collateralized loan obligations, which are securitizations of commercial loans. Each purchase is subject to a credit, concentration, and structure review by the credit administration department prior to their purchase and are subject to ongoing quarterly reviews. Management monitors the credit rating, in addition to various performance metrics available through a third-party informational service, of these investments on a quarterly basis. Following review of financial metrics as of both June 30, 2026, and December 31, 2025, Management concluded that the unrealized loss position of these securities related exclusively to the fluctuation in market conditions, primarily interest rate spreads due to changes in supply or demand, from the date of purchase, and were not reflective of any credit concerns with the tranches comprising the Company’s investments.

LOAN PORTFOLIO

A distribution of the Company’s loans showing the balance and percentage of loans by type is presented for the noted periods in the table below. The balances in the table are after deferred or unamortized loan origination, extension, or commitment fees, and deferred origination costs. While not reflected in the loan totals and not currently comprising a material segment of lending activities, the Company also occasionally originates and sells, or participates out portions of loans to non-affiliated investors.

Loan Distribution

(dollars in thousands, unaudited)


	June 30, 2026			December 31, 2025
	Amount		Percent	Amount		Percent
Real estate:
Residential real estate	$	345,575	14.07%	$	359,514	14.12%
Commercial real estate		1,389,730	56.57%		1,390,890	54.61%
Other construction/land		15,851	0.65%		14,414	0.57%
Farmland		65,759	2.68%		68,307	2.68%
Total real estate		1,816,915	73.97%		1,833,125	71.98%
Other commercial		179,164	7.29%		192,577	7.56%
Mortgage warehouse facilities		457,457	18.64%		518,333	20.35%
Consumer loans		2,524	0.10%		2,810	0.11%
Total loans	$	2,456,060	100.00%	$	2,546,845	100.00%

The decrease in gross loan balances compared to December 31, 2025, was primarily driven by a $60.9 million reduction in mortgage warehouse facilities balances, reflecting normal fluctuations in mortgage origination activity and secondary market demand. Other changes in loan balances were primarily attributable to scheduled paydowns, payoffs, and normal customer activity. Despite the decline in period-end balances, mortgage warehouse average balances increased $8.0 million during the second quarter of 2026 compared to the linked quarter. Average balances of commercial real estate and commercial and industrial loans declined modestly during the quarter, while period-end balances remained relatively stable. As the quarter progressed, however, loan production strengthened significantly, that we believe reflects a shift in momentum entering the third quarter of 2026. This improvement was particularly evident within the commercial real estate and commercial and industrial portfolios and resulted in an enhanced pipeline of lending opportunities entering the second half of the year.

The Company's loan portfolio remains diversified, with commercial real estate representing 57% of total loans, mortgage warehouse facilities representing 19%, residential real estate comprising 14%, and other commercial loans representing

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7% of the portfolio at June 30, 2026. Commercial real estate balances remained relatively stable during the first six months of the year despite elevated payoff activity, reflecting continued success in replacing runoff with new production.

As indicated in the loan rollforward table below, new credit extended for the second quarter of 2026 increased $41.6 million over the linked quarter to $49.4 million and increased $1.2 million over the same period in 2025. The Company also had $59.6 million in loan paydowns and maturities, a $27.4 million decline in line of credit utilization, and a decrease of $60.9 million in mortgage warehouse facilities utilization for the first half of 2026.


LOAN ROLLFORWARD
(Dollars in Thousands, Unaudited)
	For the three months ended:						For the six months ended:
		6/30/2026		3/31/2026		6/30/2025		6/30/2026		6/30/2025
Gross loans beginning balance	$	2,466,891	$	2,546,880	$	2,306,762	$	2,546,880	$	2,331,341
New credit extended		49,370		7,811		48,147		57,181		114,517
Changes in line of credit utilization ⁽¹⁾		(4,841)		(22,592)		2,587		(27,433)		(9,542)
Change in mortgage warehouse		(20,997)		(39,880)		118,665		(60,877)		75,496
Pay-downs, maturities, charge-offs and amortization		(34,217)		(25,328)		(41,556)		(59,545)		(77,207)
Gross loans ending balance		2,456,206		2,466,891		2,434,605	$	2,456,206	$	2,434,605
Deferred costs and (fees), net		(146)		(97)		4		(146)		4
Gross loans, amortized cost	$	2,456,060	$	2,466,794	$	2,434,609	$	2,456,060	$	2,434,609

(1)	Change does not include new balances on lines of credit extended during the respective periods as such balances are included as part of “New credit extended” line above.

At June 30, 2026, the total regulatory CRE concentration ratio of total CRE over Tier 1 Capital plus allowance was 235.9% as compared to 242.1% at December 31, 2025. The overall level of construction and land development lending was 3.4% of regulatory capital plus allowance for credit losses at June 30, 2026. At June 30, 2026, non-owner occupied commercial real estate included $304.7 million of retail; $137.2 million of warehouse/industrial; $147.7 million of office; and $256.0 million of hospitality. Approximately $25.1 million, or 17% of the office real estate matures or reprices in less than two years.

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NONPERFORMING ASSETS

Nonperforming assets are currently comprised of loans for which the Company is no longer accruing interest and foreclosed assets.

Nonperforming assets

(dollars in thousands, unaudited)


	June 30, 2026		December 31, 2025		June 30, 2025
Nonperforming loans:
Real estate:
Residential real estate	$	358	$	210	$	270
Commercial real estate		—		—		1,872
Other construction/land		—		—		—
Farmland		3,105		1,717		1,717
Total real estate nonperforming loans		3,463		1,927		3,859
Other commercial		7,079		11,304		11,122
Consumer loans		2		—		—
Total nonperforming loans		10,544		13,231		14,981

Foreclosed assets		—		1,565		—
Total nonperforming assets	$	10,544	$	14,796	$	14,981
Nonperforming loans as a % of total gross loans		0.43%		0.52%		0.62%
Nonperforming assets as a % of total gross loans and foreclosed assets		0.43%		0.58%		0.62%

Total nonperforming assets, comprised of nonaccrual loans and foreclosed assets, declined $4.3 million to $10.5 million at June 30, 2026, compared to $14.8 million at December 31, 2025. The improvement was primarily attributable to lower nonaccrual loan balances, reflecting resolutions and paydowns within the Company's criticized loan portfolio. The increase in nonaccrual Farmland balances was primarily attributable to a single relationship which management believes is well secured and has a current loan-to-value ratio of approximately 61%. Additionally, the Company sold its only foreclosed asset during the first six months of 2026, eliminating foreclosed assets from the balance sheet.

The Company’s ratio of nonperforming loans to gross loans decreased to 0.43% at June 30, 2026, compared to 0.52% at December 31, 2025, reflecting both the reduction in nonperforming loan balances and a modest decline in total loan balances during the quarter.

The Company had no foreclosed assets at June 30, 2026, compared to $1.6 million at December 31, 2025, as the remaining foreclosed property was resolved during the first quarter of 2026. All nonperforming assets are individually evaluated for credit losses on a quarterly basis, and Management believes the allowance for credit losses allocated to these loans is appropriate.

An action plan is in place for each non-accruing loan, and they are all being actively managed. Collection efforts are continuously pursued for all nonperforming loans, but the Company cannot provide assurance that they will be resolved in a timely manner or that nonperforming balances will not increase.

At June 30, 2026, loans past due 30 to 89 days and still accruing totaled $5.4 million compared to $6.8 million at December 31, 2025. Approximately $4.6 million of this balance related to a single commercial real estate loan that became 30 days past due near the end of the second quarter of 2026. Management believes the loan is well secured, with an estimated current loan-to-value ratio of approximately 51%, and therefore does not consider the credit to present a significant loss exposure. 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.

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ALLOWANCE FOR CREDIT LOSSES – LOANS

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.

The following tables highlight the coverage ratios by loan category at June 30, 2026, and December 31, 2025 (dollars in thousands, unaudited):


	As of June 30, 2026
		Balance		Total Allowance	Percent of Portfolio	Coverage Ratio ⁽¹⁾
Real estate:
Commercial real estate	$	1,389,730	$	15,913	56.58%	1.15%
Other construction/land		15,851		307	0.65%	1.94%
Farmland		65,759		532	2.68%	0.81%
Total real estate ⁽²⁾		1,471,340		16,752	59.91%	1.14%
Other Commercial		179,164		4,895	7.29%	2.73%
Consumer loans (including overdrafts)		2,524		108	0.10%	4.28%
Subtotal ^{(2) (3)}		1,653,028		21,755	67.30%	1.32%
Residential real estate		345,575		1,320	14.07%	0.38%
Mortgage warehouse facilities		457,457		525	18.63%	0.11%
Gross loans, amortized cost	$	2,456,060	$	23,600	100.00%	0.96%


	As of December 31, 2025
		Balance		Total Allowance	Percent of Portfolio	Coverage Ratio (1)
Real estate:
Commercial real estate	$	1,390,890	$	16,354	54.61%	1.18%
Other construction/land		14,414		296	0.57%	2.05%
Farmland		68,307		496	2.68%	0.73%
Total real estate ⁽²⁾		1,473,611		17,146	57.86%	1.16%
Other Commercial		192,577		2,146	7.56%	1.11%
Consumer loans (including overdrafts)		2,810		112	0.11%	3.99%
Subtotal ^{(2) (3)}		1,668,998		19,404	65.53%	1.16%
Residential real estate		359,514		1,411	14.12%	0.39%
Mortgage warehouse facilities		518,333		665	20.35%	0.13%
Gross loans, amortized cost	$	2,546,845	$	21,480	100.00%	0.84%

(1)	Coverage ratio equals allowance for credit losses on loans divided by total loans on the amortized cost basis.

(2)	Does not include residential real estate.

(3)	Does not include mortgage warehouse facilities.

The allowance for credit losses on loans was $23.6 million, or 0.96% of gross loans, at June 30, 2026, compared to $21.5 million, or 0.84% of gross loans, at December 31, 2025. The Company's overall coverage ratio is influenced by the composition of its loan portfolio, which includes significant concentrations in mortgage warehouse and residential real estate loans that have historically experienced minimal credit losses and therefore require comparatively low reserve

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allocations. At June 30, 2026, mortgage warehouse and residential real estate loans totaled $803.0 million, representing approximately 33% of total loans, while the related allowance was $1.8 million, or 0.23% of the outstanding balances. As a result, these portfolios reduce the Company's overall allowance coverage ratio. Excluding mortgage warehouse and residential real estate loans, the allowance for credit losses totaled $21.8 million and represented 1.32% of the remaining loan portfolio, compared to 1.16% at December 31, 2025. The Company's commercial real estate portfolio, which represents its largest loan segment, maintained a reserve coverage ratio of 1.15% at June 30, 2026. The increase in the allowance during the first six months of 2026 was driven primarily by higher reserve levels within the other commercial loan portfolio, including increased specific reserves related to individually evaluated credits and changes in management's assessment of credit risk.

Allowance for Credit Losses on Loans

(dollars in thousands, unaudited)


	For the three months ended		For the three months ended		For the six months ended		For the six months ended		For the year ended
	June 30,		June 30,		June 30,		June 30,		December 31,
Balances:	2026		2025		2026		2025		2025
Average gross loans outstanding during period ⁽¹⁾	$	2,395,737	$	2,406,222	$	2,405,933	$	2,195,352	$	2,409,304
Gross Loans outstanding at end of period	$	2,456,206	$	2,434,605	$	2,456,206	$	2,320,629	$	2,546,880

Allowance for credit losses on loans:
Balance at beginning of period	$	21,250	$	27,050	$	21,480	$	24,830	$	24,830
Provision charged to expense		2,283		1,210		2,360		3,171		6,095
Charge-offs
Real estate
Commercial real estate		—		1,147		90		1,147		1,421
Total real estate		—		1,147		90		1,147		1,421
Other commercial		30		5,418		117		5,475		8,022
Consumer loans		131		166		348		496		907
Total	$	161	$	6,731	$	555	$	7,118	$	10,350
Recoveries
Real estate
Farmland	$	—	$	—	$	—	$	410	$	410
Total real estate		—		—		—		410		410
Other commercial		184		11		226		24		42
Consumer loans		44		140		89		363		453
Total	$	228	$	151	$	315	$	797	$	905
Net loan (recoveries) charge-offs	$	(67)	$	6,580	$	240	$	6,321	$	9,445
Balance at end of period	$	23,600	$	21,680	$	23,600	$	21,680	$	21,480

RATIOS
Net (recoveries) charge-offs to average loans (annualized)		(0.01)%		1.10%		0.02%		0.18%		0.39%
Allowance for credit losses on loans to gross loans at end of period		0.96%		0.89%		0.96%		0.98%		0.84%
Net loan (recoveries) charge-offs to allowance for credit losses on loans at end of period		(0.28)%		30.35%		1.02%		13.42%		43.97%
Net loan (recoveries) charge-offs to provision for credit losses on loans		(2.93)%		543.80%		10.17%		134.99%		154.96%

(1)	Average balances are obtained from the best available daily or monthly data and are net of deferred fees and related direct costs.

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OFF-BALANCE SHEET ARRANGEMENTS

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.

A summary of the Company’s unfunded commitments and utilization is presented below (dollars in thousands, unaudited):


	June 30, 2026			December 31, 2025			June 30, 2025
	Line Available ⁽²⁾		Utilization %	Line Available ⁽²⁾		Utilization %	Line Available ⁽²⁾		Utilization %
Real estate:
Residential real estate	$	12,457	48.15%	$	15,726	44.50%	$	18,792	40.69%
Commercial real estate		20,230	87.59%		23,203	86.93%		29,150	84.50%
Other construction/land		985	92.15%		2,634	79.10%		5,781	54.22%
Farmland		3,372	79.32%		3,126	80.20%		4,968	66.73%
Total real estate		37,044	82.84%		44,689	80.92%		58,691	76.27%
Other commercial		172,504	48.94%		187,084	48.81%		202,473	44.39%
Consumer		4,461	22.62%		4,580	24.29%		4,789	23.81%
Subtotal ⁽¹⁾		214,009	61.75%		236,353	61.00%		265,953	56.94%
Mortgage warehouse facilities		336,543	57.61%		247,667	67.67%		334,604	54.57%
Overdrafts - Commercial and Consumer		66,452	1.46%		69,112	1.40%		69,944	1.24%
Total	$	617,004	56.58%	$	553,132	61.64%	$	670,501	52.95%

Unused commitment as a percent of gross loans, amortized cost		25.12%			21.72%			27.54%
Unused mortgage warehouse facilities as percent of gross loans, amortized cost		13.70%			9.72%			13.74%

(1)	Excludes mortgage warehouse facilities and overdraft lines.

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

The Company also had undrawn letters of credit issued to customers totaling $5.7 million at June 30, 2026, and December 31, 2025. The effect on the Company’s revenues, expenses, cash flows and liquidity from the unused portion of commitments to provide credit cannot be reasonably predicted because there is no guarantee that the lines of credit will ever be used. However, the “Liquidity” section in this Form 10-Q outlines resources available to draw upon should the Company be required to fund a significant portion of unused commitments.

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 $87.7 million at June 30, 2026. That letter of credit is backed by loans pledged to the FHLB by the Company. For more information on the Company’s off-balance sheet arrangements, see Note 7 to the consolidated financial statements located elsewhere herein.

OTHER ASSETS

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

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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 $107.6 million at June 30, 2026, relative to $71.4 million at December 31, 2025.

Foreclosed assets are discussed above in the section titled “Nonperforming Assets.”

Net premises and equipment decreased by $0.9 million during the first six months of 2026, to $14.1 million. This decline was mostly a result of the sale of a bank owned real estate property and depreciation in the first six months of 2026.

Goodwill was $27.4 million at June 30, 2026, unchanged during the first half of 2026. Goodwill is tested for impairment annually, unless events and circumstances exist which indicate that an impairment test should be performed. The annual goodwill impairment test was last performed on October 1, 2025, and it was determined that no impairment existed. Management continues to evaluate whether or not a triggering event occurs, or circumstances change that would more likely than not reduce the fair value of the Company below its carrying amount before the next annual test in 2026.

Bank-owned life insurance, with a balance of $70.1 million at June 30, 2026, increased $0.8 million during the first six months of 2026. Additional details are discussed above in the “Noninterest Income and Noninterest Expense” section.

The remainder of other assets consists primarily of right-of-use assets tied to operating leases, accrued interest receivable, deferred taxes, investments in bank stocks, prepaid assets, investments in low-income housing credits, investments in SBA loan funds, and other miscellaneous assets. Bank stocks include Pacific Coast Bankers Bank (PCBB) stock (marked to market value annually) and restricted stock related to the Federal Home Loan Bank of San Francisco (FHLB SF) stock held in conjunction with our FHLB borrowings. Both the PCBB and FHLB SF stock are not deemed to be marketable or liquid. Our net deferred tax asset is evaluated as of every reporting date pursuant to FASB guidance, and we have determined that no impairment exists.

DEPOSITS AND INTEREST-BEARING LIABILITIES

DEPOSITS

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.

Deposit Distribution

(dollars in thousands, unaudited)


	June 30, 2026			December 31, 2025
	Amount		Percent	Amount		Percent
Noninterest bearing demand deposits	$	1,026,320	35.02%	$	995,623	34.61%
Interest bearing demand deposits		235,042	8.02%		224,745	7.81%
NOW		356,472	12.16%		357,001	12.41%
Savings		364,455	12.43%		365,064	12.69%
Money market		179,706	6.13%		151,760	5.28%
Customer time deposits		451,819	15.42%		462,153	16.07%
Brokered deposits		317,177	10.82%		320,090	11.13%
Total deposits	$	2,930,991	100.00%	$	2,876,436	100.00%

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Total deposits increased $54.6 million, or 1.9%, to $2.93 billion at June 30, 2026, from $2.88 billion at December 31, 2025. The increase was primarily driven by growth in core deposit categories, including a $30.7 million increase in noninterest-bearing demand deposits and a $27.9 million increase in money market deposits.

The growth in noninterest-bearing demand deposits improved the Company's funding mix, with such deposits representing 35.0% of total deposits at June 30, 2026, compared to 34.6% at December 31, 2025. Interest-bearing transaction accounts increased $9.8 million, while savings balances remained relatively stable. Partially offsetting these increases were declines in customer time deposits and brokered deposits of $10.3 million and $2.9 million, respectively, reflecting the Company's continued emphasis on lower-cost funding sources.

Overall uninsured deposits are estimated to be $734.2 million, or 25% 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 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, 2026, the Company had approximately 114,000 accounts, and the 25 largest deposit balance customers had balances of approximately 11% of overall deposits. During the first half of 2026, except for seasonal fluctuations in the normal course of business, there have been no material changes in the composition of our 25 largest deposit balance customers.

OTHER INTEREST-BEARING LIABILITIES

Customer repurchase agreements were $122.4 million at June 30, 2026, as compared to $130.9 million at December 31, 2025. Customer repurchase agreements allow customers to sweep excess deposit balances over the FDIC insurance limit each day into a separate repurchase agreement account. Monies in that account are used daily by the customer to purchase specific government debt securities from the Company under an agreement from the Company to repurchase the same securities from the customer on the next business day. These accounts are not deposits and are not FDIC insured. However, the repurchase agreement provides a customer with a larger account balance to have their account effectively secured with US government securities.

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.

At June 30, 2026, the Company had $120.0 million in overnight borrowings and $35.0 million of term FHLB borrowings, as compared to $222.7 million in overnight borrowings and $80.0 million of term FHLB borrowings at December 31, 2025.

Long-term debt at June 30, 2026, consisted of $49.5 million of subordinated debt. This remained relatively unchanged from December 31, 2025. Subordinated debentures related to $36.1 million of trust preferred securities at June 30, 2026, were $0.1 million higher than at December 31, 2025. The small increase resulted from the amortization of the discount on junior subordinated debentures that were part of the Company’s acquisition of Coast Bancorp in 2016. Trust preferred securities are variable rate instruments benchmarked against the Secured Overnight Financing Rate (SOFR).

OTHER NONINTEREST-BEARING LIABILITIES

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 $59.2 million at June 30, 2026, as compared to $68.2 million at December 31, 2025, a decrease of $9.1 million or 13%.

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LIQUIDITY AND MARKET RISK MANAGEMENT

LIQUIDITY

The Company continues to have substantial liquidity through unencumbered assets and available borrowings. In addition, the Company’s loan-to-deposit ratio was 84% at June 30, 2026, and 89% at December 31, 2025, compared to an internal policy guideline of less than 90%.

Liquidity management refers to the Company’s ability to maintain cash flows that are adequate to fund operations and meet other obligations and commitments in a timely and cost-effective manner. Detailed cash flow projections are reviewed by Management on a monthly basis, with various stress scenarios applied to assess the Company’s ability to meet liquidity needs under unusual or adverse conditions. Liquidity ratios are also calculated and reviewed on a regular basis. While those ratios are merely indicators and are not measures of actual liquidity, they are closely monitored; the Company is committed to maintaining adequate liquidity resources to draw upon should unexpected needs arise.

The Company, on occasion, experiences cash needs as the result of loan growth, deposit outflows, asset purchases or liability repayments. To meet these short-term needs, the Company can borrow overnight funds from other financial institutions, draw advances via FHLB lines of credit, or solicit brokered deposits if customer deposits are not immediately obtainable from local sources.

At June 30, 2026, and December 31, 2025, the Company had the following sources of primary and secondary liquidity (dollars in thousands):


Primary and secondary liquidity sources		6/30/2026		12/31/2025
Cash and cash equivalents	$	142,695	$	135,628
Unpledged investment securities		528,091		551,406
Excess pledged securities		52,540		35,620
FHLB borrowing availability		611,578		629,481
Unsecured lines of credit		366,785		250,785
Funds available through fed discount window		243,782		254,908
Totals	$	1,945,471	$	1,857,828

Available funding sources, detailed above, of $1.9 billion represented 66% of total deposits and 265% of estimated uninsured and/or uncollateralized deposits as of June 30, 2026. Unpledged investment securities include $132.6 million of CLOs. As CLO rates reset every 90 days to current rates, the volatility of pricing of these securities is limited and the Company could sell such securities for liquidity at a significantly lower loss than selling lower-rate fixed term securities such as US government bonds or municipal bonds.

The Company performs regular stress tests on its liquidity, and at this time, Management believes it has sufficient primary and secondary liquidity sources for operations.

The Company has a higher level of actual balance sheet liquidity than might otherwise be the case since the Company utilizes a letter of credit from the FHLB rather than investment securities for certain pledging requirements. That letter of credit, which is backed by loans pledged to the FHLB by the Company, totaled $125 million at June 30, 2026, and December 31, 2025. Other sources of liquidity include the brokered deposit market, deposit listing services, Intrafi, and the ability to offer local time-deposit campaigns. Management is of the opinion that available investments and other potentially liquid assets, along with standby funding sources it has arranged, are more than sufficient to meet the Company’s current and anticipated short-term liquidity needs.

The Company’s primary liquidity ratio was 19.1% at June 30, 2026, as compared to an internal policy guideline of “greater than 15%”. Ratios and sub-limits for the various components comprising wholesale funding, which were all well within policy guidelines at June 30, 2026, are also periodically reviewed by Management and the Board. The Company has been able to maintain a robust liquidity position in recent periods, but no assurance can be provided that the liquidity position will continue at current strong levels.

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The holding company’s primary uses of funds include operating expenses incurred in the normal course of business, interest on trust preferred securities and subordinated debt, shareholder dividends, and share repurchases. Its primary source of funds is dividends from the Bank since the holding company does not conduct regular banking operations. As of June 30, 2026, the holding company maintained a cash balance of $4.4 million. Management anticipates that the holding company has sufficient liquidity to meet its funding requirements for the foreseeable future. Both the holding company and the Bank are subject to legal and regulatory limitations on dividend payments, as outlined in Item 5(c) Dividends in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC.

INTEREST RATE RISK MANAGEMENT

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

To identify areas of potential exposure to interest rate changes, the Company utilizes a third-party that uses commercially-available modeling software to perform periodic earnings simulations using a dynamic balance sheet and calculate the Company’s market value of equity under varying interest rate scenarios. The model imports relevant information for the Company’s financial instruments and incorporates Management’s assumptions on pricing, duration, and optionality for anticipated new volumes. Assumptions regarding deposit betas in a rates up environment can range from 25% to 100% and from 0% to 100% in a rates down environment, depending on the deposit type. Deposit average life assumptions range from two to nine years based on the Company’s own historical averages. Prepayment speeds are based on expectations derived from historical market data. Various rate scenarios consisting of key rate and yield curve projections are then applied in order to calculate the expected effect of a given interest rate change on interest income, interest expense, and the value of the Company’s financial instruments. The rate projections can be shocked (an immediate and parallel change in all base rates, up or down), ramped (an incremental increase or decrease in rates over a specified time period), economic (based on current trends and econometric models) or stable (unchanged from current actual levels).

In addition to a stable rate scenario, which presumes that there are no changes in interest rates, the Company typically uses at least eight other interest rate scenarios in conducting rolling 12-month net interest income simulations: upward shocks of 100, 200, 300, and 400 basis points, and downward shocks of 100, 200, 300, and 400 basis points. Those scenarios may be supplemented, reduced in number, or otherwise adjusted as determined by Management to provide the most meaningful simulations considering economic conditions and expectations at the time the modeling is performed. The Company’s guideline is to limit any projected decline in net interest income relative to the stable rate scenario to no more than 10% for a 100 basis point interest rate shock, 15% for a 200 basis point shock, 20% for a 300 basis point shock, and 25% for a 400 basis point shock.

The Company had the following estimated net interest income sensitivity profiles over one year, without factoring in any potential negative impact on spreads resulting from competitive pressures or credit quality deterioration or any shifts in the Company’s projected balance sheet in different rate environments (dollars in thousands, unaudited):


	June 30, 2026				June 30, 2025
Immediate change in Interest Rates (basis points)	% Change in Net Interest Income		$ Change in Net Interest Income		% Change in Net Interest Income		$ Change in Net Interest Income
+400		(1.9)%	$	(2,522)		4.9%	$	6,787
+300		(1.2)%	$	(1,623)		3.8%	$	5,239
+200		(0.6)%	$	(781)		2.7%	$	3,695
+100		(0.1)%	$	(166)		1.5%	$	2,020
Base
-100		(2.5)%	$	(3,359)		(3.9)%	$	(5,437)
-200		(5.7)%	$	(7,538)		(8.1)%	$	(11,156)
-300		(8.8)%	$	(11,671)		(12.5)%	$	(17,242)
-400		(7.1)%	$	(9,445)		(16.9)%	$	(23,424)

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The table above presents the estimated impact of immediate, parallel shifts in interest rates across all yield curves and represents an extreme scenario. Management utilizes this analysis as one tool in evaluating the Company's overall interest rate risk profile.

The Company's interest rate risk profile remained within internal policy limits at June 30, 2026. Compared to June 30, 2025, the balance sheet exhibited substantially less sensitivity to changes in market interest rates. In rising-rate scenarios, projected changes in net interest income ranged from a decrease of 0.1% to a decrease of 1.9%, compared to projected increases ranging from 1.5% to 4.9% at June 30, 2025. The reduction in asset sensitivity reflects changes in the composition and repricing characteristics of the Company's balance sheet, including less longer-term fixed-rate funding.

While the Company remains more sensitive to declining interest rates than rising interest rates, the potential adverse impact of falling rates improved significantly from the prior year. Under a 400 basis point declining-rate scenario, net interest income is projected to decrease 7.1% at June 30, 2026, compared to a 16.9% decrease at June 30, 2025. Similarly, the projected decline under a 200 basis point shock improved to 5.7% from 8.1% in the prior year. Management believes this improvement reflects the benefit of lower funding costs already realized during the current interest rate cycle, as well as a more balanced overall interest rate risk position, with increased levels of funding that will reprice as rates fall.

The simulation results indicate that the Company's primary interest rate risk continues to be associated with declining market rates, as variable-rate earning assets generally reprice downward more rapidly than interest-bearing liabilities. However, the magnitude of this exposure has moderated compared to prior periods, resulting in a more balanced earnings profile across a wide range of potential interest rate environments. All modeled interest rate shock scenarios remain within the Company's Board-approved policy limits.

Management also evaluates a variety of alternative interest rate paths and stress scenarios that do not assume instantaneous parallel shifts in the yield curve, including forecasts in which short-term and long-term interest rates move independently. In addition, the Company evaluates stress assumptions related to deposit balances, deposit pricing, migration from low-cost to higher-cost deposit products, and loan prepayment speeds. Consistent with prior periods, the most significant modeled risk to future net interest income remains the reduction or migration of low-cost core deposits into higher-cost funding sources.

CAPITAL RESOURCES

The Company had total shareholders’ equity of $366.9 million at June 30, 2026, comprised of $102.6 million in common stock, $4.6 million in additional paid-in capital, $283.9 million in retained earnings, and accumulated other comprehensive loss of $24.2 million. At the end of 2025, total shareholders’ equity was $364.9 million.

The $2.0 million, or 0.6%, increase in equity during the first six months of 2026 was primarily attributable to $22.4 million in net income, partially offset by $14.4 million in share repurchases, $6.8 million in cash dividends declared, and a $1.0 million increase in accumulated other comprehensive loss, primarily related to changes in the fair value of investment securities. The remaining change reflects the impact of share repurchases, stock-based compensation activity, and stock option exercises during the period.

At June 30, 2026, the Company had a 2025 Share Repurchase Plan authorizing 1,000,000 shares of common stock, with an expiration date of October 31, 2026. At June 30, 2026, there were 381,532 shares of common stock remaining available for repurchase under the 2025 Share Repurchase Plan.

The Company uses a variety of measures to evaluate its capital adequacy, including the leverage ratio which is calculated separately for the Company and the Bank. Management reviews these capital measurements on a quarterly basis and takes appropriate action to help ensure that they meet or surpass established internal and external guidelines. As permitted by the regulators for financial institutions that are not deemed to be “advanced approaches” institutions, the Company has elected to opt out of the Basel III requirement to include accumulated other comprehensive income in risk-based capital. The following table sets forth the Company’s regulatory capital ratios as of the dates indicated:

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Regulatory Capital Ratios


						Minimum		Minimum
						Requirement		Required
		June 30,		December 31,		to be		Community Bank
		2026		2025		Well Capitalized		Leverage Ratio ⁽¹⁾
Bank of the Sierra
Tier 1 Capital to Adjusted Average Assets ("Leverage Ratio")		12.25	%	11.94	%	9.00	%	9.00	%
Sierra Bancorp
Tier 1 Capital to Adjusted Average Assets ("Leverage Ratio")		11.02	%	10.80	%	9.00	%	N/A

(1)

If the subsidiary bank’s leverage ratio exceeds the minimum ratio under the community bank leverage ratio framework, it is deemed to be “well capitalized” under all other regulatory capital requirements. The Company may revert back to the regulatory framework for Prompt Corrective Action if the subsidiary bank’s leverage ratio falls below the minimum under the community bank leverage ratio framework.

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

PART I – FINANCIAL INFORMATION

ITEM 3

QUANTITATIVE & QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

The information concerning quantitative and qualitative disclosures about market risk is included in Part I, Item 2 above. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Market Risk Management.”

PART I – FINANCIAL INFORMATION

Item 4

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and its Chief Financial Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end

of the period covered by this report (the “Evaluation Date”) have concluded that as of the Evaluation Date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities, particularly during the period in which this quarterly report was being prepared.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that are filed or submitted under the Exchange Act is accumulated and communicated to Management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized, and reported within the time periods specified by the SEC.

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Changes in Internal Controls

There were no significant changes in the Company’s internal controls over financial reporting that occurred in the first six months of 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

From time to time, the Company and the Bank are defendants in legal proceedings, at various points of the legal process, arising from transactions conducted in the ordinary course of business. In the opinion of Management, in consultation with legal counsel, it is not probable that current legal actions will result in an unfavorable outcome that has a material adverse effect on the Company’s consolidated balance sheets, statements of income, statements of comprehensive income, or statements of cash flows. In the event such legal action results in an unfavorable outcome, the resulting liability could have a material adverse effect on the Company’s balance sheet, income statement, comprehensive income/(loss), or cash flows.

ITEM 1A: RISK FACTORS

There were no material changes from the risk factors disclosed in the Company’s Form 10-K for the fiscal year ended December 31, 2025.

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ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In October 2025, the Board approved the 2025 Share Repurchase Plan by authorizing 1,000,000 shares of common stock for repurchase which expires on October 31, 2026.


Stock Repurchases
Period	Total Number of Shares Purchased ⁽¹⁾		Average Price Paid per Share	Total Number of Shares Purchased as Part of a Publicly Announced Plan	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plan at the End of the Period
April 1 - April 31, 2026	2,329	$	36.08	2,329	512,000
May 1 - May 31, 2026	100,207	$	37.49	100,207	411,793
June 1 - June 30, 2026	30,261	$	37.83	30,261	381,532
Total	132,797			132,797

(1)

The total number of shares purchased during the periods indicated includes shares purchased as part of a publicly-announced programs and/or shares received from employees upon the vesting of restricted stock awards in satisfaction of applicable tax withholding obligations, as is permitted under the Company’s equity compensation plans.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable

ITEM 5: OTHER INFORMATION

Not applicable

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ITEM 6: EXHIBITS


Exhibit #		Description
3.1		Restated Articles of Incorporation of Sierra Bancorp (1)
3.2		Amended and Restated By-laws of Sierra Bancorp (2)
4.1		Description of Securities (3)
4.2		3.25% Fixed to Floating Subordinated Debt issued September 24, 2021 (4)
4.3		Indenture dated as of March 17, 2004, between U.S. Bank N.A., as Trustee, and Sierra Bancorp, as Issuer (7)
4.4		Indenture dated as of June 15, 2006, between Wilmington Trust Co., as Trustee, and Sierra Bancorp, as Issuer (8)
4.5		Indenture dated as of September 20, 2007, between Wilmington Trust Co., as Trustee, and Coast Bancorp, as Issuer (12)
4.6		First Supplemental Indenture dated as of July 8, 2016, between Wilmington Trust Co. as Trustee, Sierra Bancorp as the “Successor Company”, and Coast Bancorp (12)
10.1		Salary Continuation Agreement for James C. Holly (5)*
10.2		Split Dollar Agreement and Amendment thereto for James C. Holly (6)*
10.3		Director Retirement and Split dollar Agreements Effective October 1, 2002, for Albert Berra, Morris Tharp, and Gordon Woods (6)*
10.4		401 Plus Non-Qualified Deferred Compensation Plan (6)*
10.5		Amended and Restated Declaration of Trust of Sierra Statutory Trust II, dated as of March 17, 2004 (7)
10.6		Amended and Restated Declaration of Trust of Sierra Capital Trust III, dated as of June 15, 2006 (8)
10.7		2007 Stock Incentive Plan (9)
10.8		Sample Retirement Agreement Entered into with Each Non-Employee Director Effective January 1, 2007 (10)*
10.9		Salary Continuation Agreement for Kevin J. McPhaill (10)*
10.10		First Amendment to the Salary Continuation Agreement for Kevin J. McPhaill (11)*
10.11		Amended and Restated Declaration of Trust of Coast Bancorp Statutory Trust II, dated as of September 20, 2007 (12)
10.12		2017 Stock Incentive Plan (13)*
10.13		Employment agreements dated as of December 27, 2018, for Kevin McPhaill, CEO and Michael Olague, Chief Banking Officer (14)*
10.14		Employment agreement dated as of November 15, 2019, for Christopher Treece, Chief Financial Officer (15)*
10.15		Employment agreement dated as of December 14, 2020, for Hugh Boyle, Chief Credit Officer (16)*
10.16		Form Indemnification Agreement dated as of January 28, 2021, for Directors and Executive Officers (17)*
10.17		Split Dollar Master Agreement and Election Form Effective October 1, 2002, for Kevin McPhaill (18)*
10.18		First Amendments to employment agreements dated as of January 19, 2023 for Kevin McPhaill, CEO, Christopher Treece, CFO, Hugh Boyle, CCO, and Michael Olague, CBO (23)*
10.19		Split Dollar Agreement for Albert Berra (19)*
10.20		2023 Equity Based Compensation Plan (20) *
10.21		Employment agreement dated as of August 25, 2023, for Natalia Coen, Chief Risk Officer (21)*
10.22		Director Emeritus Plan (22)*
31.1		Certification of Chief Executive Officer (Section 302 Certification)
31.2		Certification of Chief Financial Officer (Section 302 Certification)
32		Certification of Periodic Financial Report (Section 906 Certification)
101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Table of Contents

(1)	Filed as Exhibit 3.1 to the Form 10-Q filed with the SEC on August 7, 2009, and incorporated herein by reference.

(2)	Filed as an Exhibit to the Form 8-K filed with the SEC on May 25, 2022, and incorporated herein by reference.

(3)	Filed as an Exhibit to the Form 10-K filed with the SEC on March 12, 2020, and incorporated herein by reference.

(4)	Filed as an Exhibit to the Form 8-K filed with the SEC on September 24, 2021, and incorporated herein by reference.

(5)	Filed as Exhibit 10.7 to the Form 10-Q filed with the SEC on May 15, 2003, and incorporated herein by reference.

(6)	Filed as Exhibits 10.12, 10.18 through 10.20, and 10.22 to the Form 10-K filed with the SEC on March 15, 2006, and incorporated herein by reference.

(7)	Filed as Exhibits 10.9 and 10.10 to the Form 10-Q filed with the SEC on May 14, 2004, and incorporated herein by reference.

(8)	Filed as Exhibits 10.26 and 10.27 to the Form 10-Q filed with the SEC on August 9, 2006, and incorporated herein by reference.

(9)	Filed as Exhibit 10.20 to the Form 10-K filed with the SEC on March 15, 2007, and incorporated herein by reference.

(10)	Filed as Exhibits 10.1 through 10.2 to the Form 8-K filed with the SEC on January 8, 2007, and incorporated herein by reference.

(11)	Filed as Exhibit 10.24 to the Form 10-Q filed with the SEC on May 7, 2015, and incorporated herein by reference.

(12)	Filed as Exhibits 10.1 through 10.3 to the Form 8-K filed with the SEC on July 11, 2016, and incorporated herein by reference.

(13)	Filed as Exhibit 10.1 to the Form 8-K filed with the SEC on March 17, 2017, and incorporated herein by reference.

(14)	Filed as Exhibits 99.1 and 99.4 to the Form 8-K filed with the SEC on December 28, 2018, and incorporated by reference.

(15)	Filed as Exhibit 99.1 to the Form 8-K filed with the SEC on November 11, 2019, and incorporated by reference.

(16)	Filed as Exhibit 10.1 to the Form 8-K filed with the SEC on December 09, 2020, and incorporated herein by reference.

(17)	Filed as Exhibit 10.1 to the Form 8-K filed with the SEC on January 29, 2021, and incorporated herein by reference.

(18)	Filed as Exhibit 10.25 to the form 10-Q filed with the SEC on November 3, 2022, and incorporated herein by reference.

(19)	Filed as Exhibit 10.26 to the form 10-Q filed with the SEC on May 5, 2023, and incorporated herein by reference.

(20)	Filed as Exhibit 4.1 to the form S-8 filed with the SEC on June 15, 2023, and incorporated herein by reference.

(21)	Filed as Exhibit 10.1 to the form 8-K filed with the SEC on August 31, 2023, and incorporated herein by reference.

(22)	Filed as Exhibit 10.1 to the form 8-K filed with the SEC on July 27, 2026, and incorporated herein by reference.

*Indicates Management contract or compensatory plan or arrangement.

Table of Contents

SIGNATURES

Pursuant to the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized:


July 31, 2026		/s/ Kevin J. McPhaill
Date		SIERRA BANCORP
		Kevin J. McPhaill
		President & Chief Executive Officer
		(Principal Executive Officer)

July 31, 2026		/s/ Christopher G. Treece
Date		SIERRA BANCORP
		Christopher G. Treece
		Chief Financial Officer

July 31, 2026		/s/ Marcus G. Wolfe
Date		SIERRA BANCORP
		Marcus G. Wolfe
		Principal Accounting Officer

Source: View Original Filing on SEC EDGAR