[10-Q] PLUMAS BANCORP Quarterly Earnings Report
Plumas Bancorp reported third‑quarter 2025 results reflecting the July 1 acquisition of Cornerstone Community Bancorp and broad-based balance sheet growth. Total assets reached $2.23 billion versus $1.62 billion at year‑end 2024; loans were $1.48 billion and deposits $1.82 billion.
Quarterly net income was $5.15 million (diluted EPS $0.73) compared with $7.83 million ($1.31) a year ago. Net interest income rose to $25.17 million from $18.87 million, but a higher provision for credit losses ($5.37 million vs a $0.40 million recovery) and increased non‑interest expenses ($15.13 million vs $10.82 million) weighed on earnings. Other comprehensive income improved with a $4.19 million quarterly gain as securities valuations recovered.
Shareholders’ equity increased to $245.95 million, supported by $44.63 million of common stock issuance tied to the acquisition and higher retained earnings. Goodwill rose to $24.22 million. Shares outstanding were 6,955,514 as of November 3, 2025.
- None.
- None.
Insights
Strong balance-sheet growth post-acquisition; earnings tempered by credit costs and expenses.
Plumas Bancorp expanded materially after closing Cornerstone on
Earnings contracted year over year as the provision for credit losses increased to
Capital rose with equity at
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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| | QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED |
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| | TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO ___________ |
COMMISSION FILE NUMBER:
PLUMAS BANCORP
(Exact Name of Registrant as Specified in Its Charter)
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| Registrant’s Telephone Number, Including Area Code ( | |
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.
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).
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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act:
Large Accelerated Filer ☐ Accelerated Filer ☐
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 Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class: | Trading Symbol | Name of Each Exchange on which Registered: |
| | | The |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of November 3, 2025:
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PLUMAS BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investment securities available for sale, net of allowance for credit losses of $0 at September 30, 2025 and December 31, 2024 | ||||||||
| Loans, less allowance for credit losses of $19,564 at September 30, 2025 and $13,196 at December 31, 2024 | ||||||||
| Other real estate owned | ||||||||
| Premises and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Bank owned life insurance | ||||||||
| Goodwill | ||||||||
| Accrued interest receivable and other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Deposits: | ||||||||
| Non-interest bearing | $ | $ | ||||||
| Interest bearing | ||||||||
| Total deposits | ||||||||
| Repurchase agreements | ||||||||
| Lease liabilities | ||||||||
| Accrued interest payable and other liabilities | ||||||||
| Other borrowings | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 5) | ||||||||
| Shareholders’ equity: | ||||||||
| Common stock, no par value; 22,500,000 shares authorized; issued and outstanding – 6,952,064 shares at September 30, 2025 and 5,903,368 at December 31, 2024 | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss, net | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements.
PLUMAS BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Interest Income: | ||||||||||||||||
| Interest and fees on loans | $ | $ | $ | $ | ||||||||||||
| Interest on investment securities | ||||||||||||||||
| Other | ||||||||||||||||
| Total interest income | ||||||||||||||||
| Interest Expense: | ||||||||||||||||
| Interest on deposits | ||||||||||||||||
| Interest on borrowings | ||||||||||||||||
| Other | ||||||||||||||||
| Total interest expense | ||||||||||||||||
| Net interest income before provision for (recovery of) credit losses | ||||||||||||||||
| Provision for (Recovery of) Credit Losses | ( | ) | ||||||||||||||
| Net interest income after provision for (recovery of) credit losses | ||||||||||||||||
| Non-Interest Income: | ||||||||||||||||
| Interchange revenue | ||||||||||||||||
| Service charges | ||||||||||||||||
| Net (loss) gain on sale of investment securities | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain on sale of buildings | ||||||||||||||||
| Other | ||||||||||||||||
| Total non-interest income | ||||||||||||||||
| Non-Interest Expenses: | ||||||||||||||||
| Salaries and employee benefits | ||||||||||||||||
| Occupancy and equipment | ||||||||||||||||
| Other | ||||||||||||||||
| Total non-interest expenses | ||||||||||||||||
| Income before provision for income taxes | ||||||||||||||||
| Provision for Income Taxes | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Basic earnings per share | $ | $ | $ | $ | ||||||||||||
| Diluted earnings per share | $ | $ | $ | $ | ||||||||||||
See notes to unaudited condensed consolidated financial statements.
PLUMAS BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Other comprehensive income: | ||||||||||||||||
| Change in net unrealized loss on securities | ||||||||||||||||
| Change in fair value hedge | ||||||||||||||||
| Less: reclassification adjustments for net (gain) loss included in net income | ( | ) | ||||||||||||||
| Net unrealized holding gain | ||||||||||||||||
| Related tax effect: | ||||||||||||||||
| Change in net unrealized loss on securities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value hedge | ( | ) | ( | ) | ||||||||||||
| Reclassification of net gain (loss) included in net income | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax effect | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive income | ||||||||||||||||
| Total comprehensive income | $ | $ | $ | $ | ||||||||||||
See notes to unaudited condensed consolidated financial statements.
PLUMAS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands, except shares)
| Common Stock | Retained | Accumulated Other Comprehensive Loss | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Earnings | (Net of Taxes) | Equity | ||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net Income | - | - | - | |||||||||||||||||
| Other comprehensive income | - | - | ||||||||||||||||||
| Cash dividends on common stock ($0.81 per share) | - | - | ( | ) | - | ( | ) | |||||||||||||
| Exercise of stock options | ||||||||||||||||||||
| Stock-based compensation expense | - | - | - | |||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net Income | - | - | - | |||||||||||||||||
| Other comprehensive income | - | |||||||||||||||||||
| Cash dividends on common stock ($0.90 per share) | - | - | ( | ) | - | ( | ) | |||||||||||||
| Issuance of Common Stock | ||||||||||||||||||||
| Vesting of stock options assumed in merger | - | |||||||||||||||||||
| Vesting of restricted stock units | - | - | - | - | ||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||
| Stock-based compensation expense | - | - | - | |||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Retained | Accumulated Other Comprehensive Loss | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Earnings | (Net of Taxes) | Equity | ||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net Income | - | - | - | |||||||||||||||||
| Other comprehensive income | - | - | - | |||||||||||||||||
| Cash dividends on common stock ($0.27 per share) | - | - | ( | ) | - | ( | ) | |||||||||||||
| Exercise of stock options | ||||||||||||||||||||
| Stock-based compensation expense | - | - | - | |||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net Income | - | - | - | |||||||||||||||||
| Other comprehensive income | - | |||||||||||||||||||
| Cash dividends on common stock ($0.30 per share) | - | - | ( | ) | - | ( | ) | |||||||||||||
| Issuance of Common Stock | ||||||||||||||||||||
| Vesting of stock options assumed in merger | - | |||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||
| Stock-based compensation expense | - | - | - | |||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| See notes to unaudited condensed consolidated financial statements. |
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PLUMAS BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| For the Nine Months Ended |
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| September 30, |
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| 2025 |
2024 |
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| Cash Flows from Operating Activities: |
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| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Provision for credit losses |
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| Provision for Other Real Estate Owned (OREO) losses |
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| Change in deferred loan origination costs/fees, net |
( |
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| Depreciation of premises and equipment and amortization of intangibles |
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| Stock-based compensation expense |
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| Net loss on sale of investment securities |
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| Amortization of discount on subordinated debentures |
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| Accretion of premium on time deposits |
( |
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| Amortization of investment security premiums |
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| Accretion of investment security discounts |
( |
) | ( |
) | ||||
| Accretion of discount on loans |
( |
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| Loss on sale of other vehicles |
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| Gain on sale of loans held for sale |
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| Loans originated for sale |
( |
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| Proceeds from loan sales |
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| Earnings on bank-owned life insurance |
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| Gain on sale of buildings |
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| Increase in accrued interest receivable and other assets |
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| (Decrease) increase in accrued interest payable and other liabilities |
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| Net cash provided by operating activities |
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| Cash Flows from Investing Activities: |
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| Proceeds from principal repayments from available-for-sale securities |
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| Proceeds from sale of available-for-sale securities |
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| Proceeds from matured and called available-for-sale securities |
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| Purchases of available-for-sale securities |
( |
) | ( |
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| Purchase of Federal Reserve Bank stock |
( |
) | ( |
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| Net increase in loans |
( |
) | ( |
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| Cash acquired in acquisition, net of consideration paid |
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| Proceeds from the sale of OREO |
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| Proceeds from sale of other vehicles |
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| Proceeds from the sale of buildings |
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| Purchase of premises and equipment |
( |
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| Net cash provided by investing activities |
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Continued on next page.
PLUMAS BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
(Continued)
| For the Nine Months Ended |
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| September 30, |
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| 2025 |
2024 |
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| Cash Flows from Financing Activities: |
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| Net (decrease) increase in demand, interest bearing and savings deposits |
$ | ( |
) | $ | ||||
| Net (decrease) increase in time deposits |
( |
) | ||||||
| Net increase (decrease) in securities sold under agreements to repurchase |
( |
) | ||||||
| Cash dividends paid on common stock |
( |
) | ( |
) | ||||
| Increase in other borrowings |
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| Decrease in other borrowings |
( |
) | ( |
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| Proceeds from exercise of stock options |
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| Net cash used in financing activities |
( |
) | ( |
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| Increase in cash and cash equivalents |
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| Cash and Cash Equivalents at Beginning of Period |
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| Cash and Cash Equivalents at End of Period |
$ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information: |
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| Cash paid during the period for: |
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| Interest expense |
$ | $ | ||||||
| Income taxes |
$ | $ | ||||||
| Supplemental noncash disclosures |
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| Real estate and vehicles acquired through foreclosure/repossession |
$ | $ | ||||||
| Common stock retired in connection with the exercise of stock options |
$ | $ | ||||||
| Lease liabilities arising from obtaining right-of-use assets |
$ | $ | ||||||
| Assets acquired in acquisition plus goodwill recognized |
$ | $ | ||||||
| Liabilities assumed in acquisition |
$ | $ | ||||||
| Common stock issued in acquisition |
$ | $ | ||||||
See notes to unaudited condensed consolidated financial statements.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. THE BUSINESS OF PLUMAS BANCORP
During 2002, Plumas Bancorp (the "Company") was incorporated as a bank holding company for the purpose of acquiring Plumas Bank (the "Bank") in a one bank holding company reorganization. This corporate structure gives the Company and the Bank greater flexibility in terms of operation, expansion and diversification. Plumas Bancorp's Principal Executive Office is located in Reno, Nevada.
The Bank operates
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the Company and the consolidated accounts of its wholly-owned subsidiary, Plumas Bank. All significant intercompany balances and transactions have been eliminated.
The accounting and reporting policies of Plumas Bancorp and subsidiary conform with accounting principles generally accepted in the United States of America and prevailing practices within the banking industry. In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position at September 30, 2025 and the results of its operations and its cash flows for the three and nine-month periods. Our condensed consolidated balance sheet at December 31, 2024 is derived from audited financial statements.
The unaudited condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting on Form 10-Q. Accordingly, certain disclosures normally presented in the notes to the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted. The Company believes that the disclosures are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2024 Annual Report to Shareholders on Form 10-K. The results of operations for the three and nine-month periods ended September 30, 2025, may not necessarily be indicative of future operating results. In preparing such financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the periods reported. Actual results could differ significantly from those estimates.
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, which constitutes the Company’s only operating segment for financial reporting purposes. The Company’s single reportable segment is determined by the Chief Financial Officer, who is the designated chief operating decision maker, based upon information provided about the Company’s products and services offered, primarily banking operations. The segment is also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business such as branches and departments, which are then aggregated if operating performance, products/services, and customers are similar. The chief operating decision maker will evaluate the financial performance of the Company’s business components such as by evaluating revenue streams, significant expenses, and budget to actual results in assessing the Company’s segment and in the determination of allocating resources. The chief operating decision maker uses revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets. The chief operating decision maker uses consolidated net income to benchmark the Company against its competitors. The benchmarking analysis coupled with monitoring of budget to actual results are used in assessment performance and in establishing compensation. Loans, investments, and deposits provide the revenues in the banking operation. Interest expense, provisions for credit losses, and payroll provide the significant expenses in the banking operation. 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. All operations are domestic.
Purchased Credit Deteriorated (PCD) Loans
PCD loans are loans acquired at a discount that is due, in part, to credit quality deterioration since origination which may be determined through observation of missed payments, downgrade in risk rating, deterioration of a borrower's financial trends or other observable factors including subjectivity utilized by management. PCD loans are initially recorded at fair value, by taking the sum of the present value of expected future cash flows and an allowance for credit losses, at acquisition. The allowance for credit losses for PCD loans is recorded through a gross-up of reserves on the consolidated balance sheets, while the allowance for acquired non-PCD loans, such as loans, is recorded through the provision for credit losses on the consolidated statements of income, consistent with originated loans. Subsequent to acquisition, the allowance for credit losses for PCD loans will generally follow the same forward-looking estimation, provision, and charge-off process as non-PCD acquired and originated loans.
As part of the acquisition of Cornerstone on July 1, 2025, the Company acquired PCD loans. At acquisition, the Company recorded PCD loans at their purchase price and simultaneously established an allowance for credit losses based on expected credit losses over the life of the loans.
Reconciliation of Purchase Price to Par Value (in thousands):
| Par value of Acquired PCD Loans | $ |
| Less Credit Mark (ACL) | (315) |
| Less: Interest Mark (Non-Credit Discount) | (3,609) |
| Fair Value (Purchase Price) | $ |
The fair value of PCD loans acquired in the Cornerstone acquisition was determined using a discounted cash flow (DCF) model. Key inputs and assumptions included:
| ● | Expected cash flows based on contractual terms adjusted for estimated prepayments and defaults |
| ● | Discount rates reflecting current market rates for similar loans, adjusted for credit risk |
| ● | Loss expectations derived from historical performance and forward-looking economic forecasts |
| ● | Segmentation by loan type (e.g., commercial, consumer, real estate) to reflect differing risk profiles |
The resulting fair value represents the present value of expected future cash flows, net of credit losses, and includes a gross-up for the allowance for credit losses under ASC 326.
Non-PCD Loans
As part of the acquisition of Cornerstone, the Company acquired a portfolio of loan receivables that did not exhibit credit deterioration at the acquisition date (non-PCD loans). In accordance with ASC 805 and ASC 326, these loans were initially recorded at fair value. An allowance for credit losses related to the non-PCD loans was recognized separately from the purchase price allocation, resulting in a charge to credit loss expense on the acquisition date. This treatment reflects the expected credit losses on the acquired loans and is consistent with the CECL model. The total fair value of non-PCD loans acquired was $
Business Combination and Fair Value Measurements
The Company completed its acquisition of Cornerstone on July 1, 2025. The transaction was accounted for under the acquisition method in accordance with ASC 805, Business Combinations, and the identifiable assets acquired, and liabilities assumed were recorded at their estimated fair values. Acquisition-related costs, including legal, accounting, and other professional fees, totaled approximately $
Fair Value Methodologies:
| ● | Loans: Fair value was estimated using a discounted cash flow model that considered credit quality, interest rate environment, and expected prepayments. Credit mark adjustments were applied to reflect estimated losses. |
| ● | Investment Securities: Valued based on quoted market prices or observable inputs such as yield curves and credit spreads. |
| ● | Premises and Equipment: Based on third-party appraisals and market comparables. | |
| ● | Core Deposit Intangible: Determined using a discounted cash flow model based on expected deposit retention and cost differentials relative to market rates. |
| ● | Time Deposits and Borrowings: Measured using present value techniques based on current market rates for similar instruments. |
| ● | Goodwill: Arises from synergies expected from the acquisition and is not amortizable for tax purposes. |
These fair value estimates are preliminary and subject to change as additional information becomes available during the measurement period.
3. INVESTMENT SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated fair value of investment securities at September 30, 2025 and December 31, 2024 consisted of the following, in thousands:
| Available-for-Sale | September 30, 2025 | |||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | |||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| Debt securities: | ||||||||||||||||
| U.S. Government-sponsored agencies collateralized by mortgage obligations - residential | ( | ) | ||||||||||||||
| U.S. Government- sponsored agencies collateralized by mortgage obligations - commercial | ( | ) | ||||||||||||||
| Obligations of states and political subdivisions | ( | ) | ||||||||||||||
| $ | $ | $ | ( | ) | $ | |||||||||||
Unrealized losses on available-for-sale investment securities totaling $
| Available-for-Sale | December 31, 2024 | |||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | |||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| Debt securities: | ||||||||||||||||
| U.S. Government-sponsored agencies collateralized by mortgage obligations - residential | ( | ) | ||||||||||||||
| U.S. Government- sponsored agencies collateralized by mortgage obligations - commercial | ( | ) | ||||||||||||||
| Obligations of states and political subdivisions | ( | ) | ||||||||||||||
| $ | $ | $ | ( | ) | $ | |||||||||||
Unrealized losses on available-for-sale investment securities totaling $
There were no transfers of available-for-sale investment securities during the nine months ended September 30, 2025 and twelve months ended December 31, 2024. There were
Investment securities with unrealized losses at September 30, 2025 and December 31, 2024 are summarized and classified according to the duration of the loss period as follows, in thousands:
| September 30, 2025 | Less than 12 Months | 12 Months or More | Total | |||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
| Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
| Debt securities: | ||||||||||||||||||||||||
| U.S. Government-sponsored agencies collateralized by mortgage obligations - residential | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| U.S. Government- sponsored agencies collateralized by mortgage obligations - commercial | ||||||||||||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| December 31, 2024 | Less than 12 Months | 12 Months or More | Total | |||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
| Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
| Debt securities: | ||||||||||||||||||||||||
| U.S. Government-sponsored agencies collateralized by mortgage obligations - residential | ||||||||||||||||||||||||
| U.S. Government- sponsored agencies collateralized by mortgage obligations - commercial | ||||||||||||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
At September 30, 2025, the Company held
Unrealized losses on investments in obligations of U.S. government agencies and U.S. government sponsored agencies are caused by interest rate increases.
Obligations of states and political subdivisions: Management reviewed the collectability of the obligations of the states and political subdivisions taking into consideration such factors as the financial condition of the issuers, credit ratings, and other information. Management believes the unrealized losses on the obligations of states and political subdivisions are attributable to changes in the investment spreads and interest rates and not changes in the credit quality of the issuers.
| Amortized Cost | Estimated Fair Value | |||||||
| Within one year | $ | $ | ||||||
| After one year through five years | ||||||||
| After five years through ten years | ||||||||
| After ten years | ||||||||
| Investment securities not due at a single maturity date: | ||||||||
| U.S. Government-sponsored agencies collateralized by mortgage obligations - residential | ||||||||
| U.S. Government- sponsored agencies collateralized by mortgage obligations - commercial | ||||||||
| $ | $ | |||||||
Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.
Investment securities with amortized costs totaling $
4. LOANS AND THE ALLOWANCE FOR CREDIT LOSSES
Outstanding loans are summarized below, in thousands:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Commercial | $ | $ | ||||||
| Agricultural | ||||||||
| Real estate – residential | ||||||||
| Real estate – commercial | ||||||||
| Real estate – construction and land development | ||||||||
| Equity lines of credit (Equity LOC) | ||||||||
| Auto | ||||||||
| Other | ||||||||
| Total loans | ||||||||
| Deferred loan costs, net | ||||||||
| Loans, amortized cost basis | ||||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Total net loans | $ | $ | ||||||
Salaries and employee benefits totaling $
The Company assigns a risk rating to all loans and periodically, but not less than annually, performs detailed reviews of all criticized and classified loans over $100,000 to identify credit risks and to assess the overall collectability of the portfolio. These risk ratings are also subject to examination by independent specialists engaged by the Company and the Company’s regulators. During these internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the fair values of collateral securing these loans. These credit quality indicators are used to assign a risk rating to each individual loan.
The risk ratings can be grouped into three major categories, defined as follows:
Special Mention – Loans classified as special mention have 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 institution’s credit position at some future date.
Substandard – A substandard loan is not adequately protected by the current sound worth and paying capacity of the borrower or the value of the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Well defined weaknesses include a project's lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time or the project's failure to fulfill economic expectations. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful – Loans classified doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.
Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass-rated loans.
For other loans, which are primarily consumer loans and automobile loans the Company evaluates credit quality based on the aging status of the loan and by payment activity. Non-performing loans consist of nonaccrual loans and loans past due 90 days or more and still accruing.
Other Real Estate Owned
Other real estate owned relates to real estate acquired in full or partial settlement of loan obligations. On September 30, 2025, other real estate owned totaled $
The following table presents the amortized cost basis of the loan portfolio allocated by management's internal risk ratings or payment activity at the dates indicated, in thousands:
| Amortized Cost Basis by Origination Year and Risk Grades - As of September 30, 2025 | ||||||||||||||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving Loans Book Amortized Cost Basis | Revolving Loans Converted to Term Amortized Cost Basis | Total - Amortized Cost Basis | |||||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Total Commercial loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | - | $ | ||||||||||||||||||||||||||
| Agricultural | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Total Agricultural | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Real Estate - Residential | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Total Real Estate - Residential | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Real Estate -Commercial | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Total Real Estate -Commercial | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Real Estate -Construction | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||
| Total Real Estate -Construction | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Equity LOC | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Total Equity LOC | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Auto | ||||||||||||||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Non-performing | ||||||||||||||||||||||||||||||||||||
| Total Auto | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Non-performing | ||||||||||||||||||||||||||||||||||||
| Total Other | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Non-performing | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total Loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Term Loans | ||||||||||||||||||||||||||||||||||||
| Amortized Cost Basis by Origination Year and Risk Grades - As of December 31, 2024 | ||||||||||||||||||||||||||||||||||||
| (in thousands) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Revolving Loans Book Balance Basis | Revolving loans converted to term Book Balance Basis | Total | |||||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Total Commercial loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Agricultural | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Total Agricultural | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Real Estate - Residential | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Total Real Estate - Residential | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Real Estate -Commercial | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Total Real Estate -Commercial | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Real Estate -Construction | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Total Real Estate -Construction | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Equity LOC | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Total Equity LOC | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Auto | ||||||||||||||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Non-performing | ||||||||||||||||||||||||||||||||||||
| Total Auto | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Non-performing | ||||||||||||||||||||||||||||||||||||
| Total Other | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Non-performing | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total Loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
The following table shows the ending balance of nonaccrual loans by loan category as of the date indicated:
| Non-Performing Loans | ||||||||||||||||||||||||
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||
| (in thousands) | Nonaccrual with no allowance for credit losses | Total nonaccrual | Past due 90 days or more and still accruing | Nonaccrual with no allowance for credit losses | Total nonaccrual | Past due 90 days or more and still accruing | ||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Agricultural | ||||||||||||||||||||||||
| Real estate – residential | ||||||||||||||||||||||||
| Real estate – commercial | ||||||||||||||||||||||||
| Real estate – construction & land development | ||||||||||||||||||||||||
| Equity lines of credit | ||||||||||||||||||||||||
| Auto | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Total Gross Loans | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The Company places loans 90 days or more past due on nonaccrual status unless the loan is well secured and in the process of collection. A loan is considered to be in the process of collection if, based on a probable specific event, it is expected that the loan will be repaid or brought current. Generally, this collection period would not exceed 90 days. When a loan is placed on nonaccrual status the Company's general policy is to reverse and charge against current income previously accrued but unpaid interest. Interest income on such loans is subsequently recognized only to the extent that cash is received, and future collection of principal is deemed by management to be probable. Where the collectability of the principal or interest on a loan is considered to be doubtful by management, it is placed on nonaccrual status prior to becoming 90 days delinquent.
The following tables show interest reversed against interest income for loans placed on nonaccrual status during the three and nine months ended September 30, 2025 and 2024.
| Three months ended: | ||||||||
| (in thousands) | September 30, 2025 | September 30, 2024 | ||||||
| Commercial | $ | $ | ||||||
| Agricultural | ||||||||
| Real estate – residential | ||||||||
| Real estate – commercial | ||||||||
| Equity lines of credit | ||||||||
| Auto | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
| Nine months ended: | ||||||||
| (in thousands) | September 30, 2025 | September 30, 2024 | ||||||
| Commercial | $ | $ | ||||||
| Agricultural | ||||||||
| Real estate – residential | ||||||||
| Real estate – commercial | ||||||||
| Equity lines of credit | ||||||||
| Auto | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
The following table presents the amortized cost basis of loans at September 30, 2025, that were both experiencing financial difficulty and modified during the three months ended September 30, 2025, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.
| Term Extension | ||||||||
| (in thousands) | Amortized Cost Basis | Total Class of Financing Receivable | ||||||
| Agricultural | % | |||||||
| Real estate – commercial | % | |||||||
| Total | $ | 2,308 | % | |||||
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty as of September 30, 2025:
| Weighted-Average Term Extension (in months) | ||||
| Agricultural | ||||
| Real estate – commercial | ||||
| Total | ||||
The following table presents the amortized cost basis of loans at September 30, 2025, that were both experiencing financial difficulty and modified during the nine months ended September 30, 2025, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.
| Term Extension | ||||||||
| (in thousands) | Amortized Cost Basis | Total Class of Financing Receivable | ||||||
| Agricultural | % | |||||||
| Real estate – commercial | % | |||||||
| Total | $ | 7,953 | % | |||||
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty as of September 30, 2025:
| Weighted-Average Term Extension (in months) | ||||
| Agricultural | ||||
| Real estate – commercial | ||||
| Total | ||||
The following table presents the amortized cost basis of loans at September 30, 2024, that were both experiencing financial difficulty and modified during the three months ended September 30, 2024, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.
| Term Extension | ||||||||
| (in thousands) | Amortized Cost Basis | Total Class of Financing Receivable | ||||||
| Agricultural | % | |||||||
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty as of September 30, 2024:
| Weighted-Average Term Extension (in months) | ||||
| Agricultural | ||||
The following table presents the amortized cost basis of loans at September 30, 2024, that were both experiencing financial difficulty and modified during the nine months ended September 30, 2024, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.
| Term Extension | ||||||||
| (in thousands) | Amortized Cost Basis | Total Class of Financing Receivable | ||||||
| Commercial | % | |||||||
| Agricultural | % | |||||||
| Total | $ | % | ||||||
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty as of September 30, 2024:
| Weighted-Average Term Extension (in months) | ||||
| Commercial | ||||
| Agricultural | ||||
| Total | ||||
Loans with payment defaults by borrowers experiencing financial difficulty during the nine months ended September 30, 2025, which had material modifications in rate, term or principal forgiveness during the twelve months prior to default totaled $
The following tables show the allocation of the allowance for credit losses at the dates indicated, in thousands:
| Nine Months Ended September 30, 2025: | Commercial | Agricultural | Real Estate-Residential | Real Estate-Commercial | Real Estate-Construction | Equity LOC | Auto | Other | Total | |||||||||||||||||||||||||||
| Allowance for credit losses | ||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||
| Initial allowance on acquired PCD loans | ||||||||||||||||||||||||||||||||||||
| Provision for (recovery of) credit losses | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Three Months Ended September 30, 2025: | ||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | ||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||
| Initial allowance on acquired PCD loans | ||||||||||||||||||||||||||||||||||||
| Provision for (recovery of) credit losses | ( | ) | ||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Nine Months Ended September 30, 2024: | ||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | ||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||
| Provision for (recovery of) credit losses | ( | ) | ||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Three Months Ended September 30, 2024: | ||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | ||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||
| Provision for (recovery of) credit losses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
The following tables summarize the activity in the reserve for unfunded commitments, which is recorded on the balance sheet within other liabilities, for the three and nine months ended September 30, 2025 and 2024.
| Three months ended: | ||||||||
| (in thousands) | September 30, 2025 | September 30, 2024 | ||||||
| Beginning balance | $ | $ | ||||||
| Provision on acquired loan commitments | ||||||||
| Recovery of provision for credit losses | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
| Nine months ended: | ||||||||
| (in thousands) | September 30, 2025 | September 30, 2024 | ||||||
| Beginning balance | $ | $ | ||||||
| Provision on acquired loans commitments | ||||||||
| Recovery of provision for credit losses | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
The following tables show an aging analysis of the loan portfolio by the time past due, in thousands:
| Total | ||||||||||||||||||||||||||||
| September 30, 2025 | 90 Days | Past Due | ||||||||||||||||||||||||||
| 30-59 Days | 60-89 Days | and Still | and | |||||||||||||||||||||||||
| Past Due | Past Due | Accruing | Nonaccrual | Nonaccrual | Current | Total | ||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Agricultural | ||||||||||||||||||||||||||||
| Real estate – residential | ||||||||||||||||||||||||||||
| Real estate – commercial | ||||||||||||||||||||||||||||
| Real estate - construction & land | ||||||||||||||||||||||||||||
| Equity Lines of Credit | ||||||||||||||||||||||||||||
| Auto | ||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||
| December 31, 2024 | 90 Days | Past Due | ||||||||||||||||||||||||||
| 30-59 Days | 60-89 Days | and Still | and | |||||||||||||||||||||||||
| Past Due | Past Due | Accruing | Nonaccrual | Nonaccrual | Current | Total | ||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Agricultural | ||||||||||||||||||||||||||||
| Real estate – residential | ||||||||||||||||||||||||||||
| Real estate - commercial | ||||||||||||||||||||||||||||
| Real estate - construction & land | ||||||||||||||||||||||||||||
| Equity Lines of Credit | ||||||||||||||||||||||||||||
| Auto | ||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
The following tables present the amortized cost basis of collateral dependent loans by class of loans at September 30, 2025 in thousands:
| Commercial -1st | SFR-1st | SFR-2nd | ||||||||||||||||||||||||||||||||||
| Equipment | Crops | Livestock | Farmland | Deed | Deed | Deed | Land | Total | ||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Agricultural | ||||||||||||||||||||||||||||||||||||
| Real estate – residential | ||||||||||||||||||||||||||||||||||||
| Real estate – commercial | ||||||||||||||||||||||||||||||||||||
| Equity Lines of Credit | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
The following tables present the amortized cost basis of collateral dependent loans by class of loans at December 31, 2024 in thousands:
| Commercial -1st | SFR-1st | SFR-2nd | SFR-3rd | |||||||||||||||||||||||||
| Equipment | Crops | Deed | Deed | Deed | Deed | Total | ||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Agricultural | ||||||||||||||||||||||||||||
| Real estate – residential | ||||||||||||||||||||||||||||
| Real estate – commercial | ||||||||||||||||||||||||||||
| Real estate - construction & land | ||||||||||||||||||||||||||||
| Equity Lines of Credit | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
5. COMMITMENTS AND CONTINGENCIES
The Company is party to claims and legal proceedings arising in the ordinary course of business. In the opinion of the Company’s management, the amount of ultimate liability with respect to such proceedings will not have a material adverse effect on the financial condition or result of operations of the Company taken as a whole. In the normal course of business, there are various outstanding commitments to extend credit, which are not reflected in the financial statements, including loan commitments of $
Of the loan commitments outstanding at September 30, 2025, $
Stand-by letters of credit are conditional commitments written to guarantee the performance of a customer to a third party. These guarantees are primarily related to the purchases of inventory by commercial customers and are typically short-term in nature. Credit risk is similar to that involved in extending loan commitments to customers and accordingly, evaluation and collateral requirements similar to those for loan commitments are used. Stand-by letters of credit on September 30, 2025, totaled $
6. EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, result in the issuance of common stock which shares in the earnings of the Company. The treasury stock method has been applied to determine the dilutive effect of stock options in computing diluted earnings per share.
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (In thousands, except per share data) | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Net Income: | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Earnings Per Share: | ||||||||||||||||
| Basic earnings per share | $ | $ | $ | $ | ||||||||||||
| Diluted earnings per share | $ | $ | $ | $ | ||||||||||||
| Weighted Average Number of Shares Outstanding: | ||||||||||||||||
| Basic shares | ||||||||||||||||
| Effect of dilutive stock options and restricted stock | ||||||||||||||||
| Diluted shares | ||||||||||||||||
There were
7. STOCK-BASED COMPENSATION
In May 2022, the Company’s shareholders approved the 2022 Equity Incentive Plan (the “2022 Plan”), which provides for the grant of up to
In May 2013, the Company established the 2013 Stock Option Plan (the "2013 Plan") for which
Options granted during the nine months ended September 30, 2025 consisted of
| 2025 | 2024 | |||||||
| Expected life of stock options (in years) | ||||||||
| Risk free interest rate | % | % | ||||||
| Annualized Volatility | % | % | ||||||
| Dividend yields | % | % | ||||||
| Weighted-average fair value of options granted during the nine months ended September 30, 2025 and 2024 | $ | $ | ||||||
A summary of the activity within the 2013 Plan follows:
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term in Years | Intrinsic Value | |||||||||||||
| Options outstanding at January 1, 2024 | $ | |||||||||||||||
| Options exercised | ( | ) | ||||||||||||||
| Options cancelled | ( | ) | ||||||||||||||
| Options outstanding at December 31, 2024 | $ | |||||||||||||||
| Options cancelled | ( | ) | $ | |||||||||||||
| Options exercised | ( | ) | ||||||||||||||
| Options outstanding at September 30, 2025 | $ | $ | ||||||||||||||
| Options exercisable at September 30, 2025 | $ | $ | ||||||||||||||
A summary of the activity within the 2022 Plan follows:
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term in Years | Intrinsic Value | |||||||||||||
| Options outstanding at January 1, 2024 | $ | |||||||||||||||
| Options granted | ||||||||||||||||
| Options cancelled | ( | ) | ||||||||||||||
| Options exercised | ( | ) | ||||||||||||||
| Options outstanding at December 31, 2024 | $ | |||||||||||||||
| Options granted | 30,803 | 31.09 | ||||||||||||||
| Options cancelled | ( | ) | ||||||||||||||
| Options exercised | ( | ) | ||||||||||||||
| Options outstanding at September 30, 2025 | $ | $ | ||||||||||||||
| Options exercisable at September 30, 2025 | $ | $ | ||||||||||||||
| Options expected to vest after September 30, 2025 | $ | $ | ||||||||||||||
As of September 30, 2025, there was $
| Information related to the stock options plans during the three months ended September 30, 2025 and 2024 |
| 2025 | 2024 | |||||||
| Fair value of options vested | $ | $ | ||||||
| Intrinsic value of options exercised | $ | $ | ||||||
| Cash received from option exercises | $ | $ | ||||||
| Tax benefit from option exercises | $ | $ | ||||||
| Compensation cost | $ | $ | ||||||
| Tax benefit associated with compensation cost | $ | $ | ||||||
| Information related to the stock options plans during the nine months ended September 30, 2025 and 2024 |
| 2025 | 2024 | |||||||
| Fair value of options vested | $ | $ | ||||||
| Intrinsic value of options exercised | $ | $ | ||||||
| Cash received from option exercises | $ | $ | ||||||
| Tax benefit from option exercises | $ | $ | ||||||
| Compensation cost | $ | $ | ||||||
| Tax benefit associated with compensation cost | $ | $ | ||||||
During the nine months ended September 30, 2024, the Company granted
8. INCOME TAXES
The Company files its income taxes on a consolidated basis with its subsidiary. Income tax expense is the total of current year income tax due or refundable and the change in deferred tax assets and liabilities.
Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the reported amount of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. A valuation allowance is recognized if, based on the weight of available evidence, management believes it is more likely than not that some portion or all of the deferred tax assets will not be realized. On the consolidated balance sheet, net deferred tax assets are included in accrued interest receivable and other assets.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
Interest expense and penalties associated with unrecognized tax benefits, if any, are classified as income tax expense in the consolidated statements of income. There have been no significant changes to unrecognized tax benefits or accrued interest and penalties for the nine months ended September 30, 2025 and 2024.
9. FAIR VALUE MEASUREMENT
FASB ASC 820, “Fair Value Measurement and Disclosures,” defines fair value 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. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
The Company measures fair value under the fair value hierarchy described below.
Level 1: Quoted prices for identical instruments traded in active exchange markets.
Level 2: Quoted prices (unadjusted) for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable or can be corroborated by observable market data.
Level 3: Model based techniques that use one significant assumption not observable in the market. These unobservable assumptions reflect the Company’s estimates of assumptions that market participants would use on pricing the asset or liability. Valuation techniques include management judgment and estimation which may be significant.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Management monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period.
Management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities or total earnings.
Fair Value of Financial Instruments
FASB ASC 825, Financial Instruments, requires disclosure about fair value of financial instruments, including those financial assets and financial liabilities that are not required to be measured and reported at fair value on a recurring or nonrecurring basis. ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The carrying amounts and estimated fair values of the Company’s financial instruments are presented in the following tables whether or not recognized on the Consolidated Balance Sheets at fair value.
The carrying amounts and estimated fair values of financial instruments, at September 30, 2025 follows in thousands:
| Fair Value Measurements at September 30, 2025, Using: | ||||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | Total Fair Value | ||||||||||||||||
| Financial assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | - | $ | - | $ | |||||||||||||
| Investment securities | - | |||||||||||||||||||
| Loans, net | ||||||||||||||||||||
| FHLB stock | ||||||||||||||||||||
| FRB Stock | ||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Deposits | ||||||||||||||||||||
| Repurchase agreements | ||||||||||||||||||||
| Borrowings | ||||||||||||||||||||
The carrying amounts and estimated fair values of financial instruments, at December 31, 2024 follows, in thousands:
| Fair Value Measurements at December 31, 2024, Using: | ||||||||||||||||||||
| Financial assets: | Carrying Value | Level 1 | Level 2 | Level 3 | Total Fair Value | |||||||||||||||
| Cash and cash equivalents | $ | $ | $ | - | $ | - | $ | |||||||||||||
| Investment securities | - | - | ||||||||||||||||||
| Loans, net | - | - | ||||||||||||||||||
| FHLB stock | - | - | ||||||||||||||||||
| FRB Stock | - | - | ||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Deposits | - | |||||||||||||||||||
| Repurchase agreements | - | - | ||||||||||||||||||
| Borrowings | - | - | ||||||||||||||||||
The methods and assumptions used to estimate the fair value of each class of financial instruments not measured at fair value are as follows:
Cash and cash equivalents - The carrying values of cash and due from banks are of such short duration that carrying value reasonably approximates fair value.
Loans - Loans are generally valued by discounting expected cash flows using market inputs with adjustments based on cohort level assumptions for certain loan types as well as internally developed estimates at a business segment level. Due to the significance of the unobservable market inputs and assumptions, as well as the absence of a liquid secondary market for most loans, these loans are classified as Level 3. Nonaccrual loans are written down and reported at their estimated recovery value which approximates their fair value and classified as Level 3.
FHLB/FRB stock -The carrying value of restricted equity investments approximates fair value based on the redemption provisions of the issuer and classified as Level 2.
Deposits - The estimated fair value of deposits with no stated maturity, such as demand deposit accounts, money market accounts, and savings accounts was the amount payable on demand at the reporting date. The fair value of time deposits was estimated based on a discounted cash flow technique using Level 3 inputs appropriate to the contractual maturity.
Repurchase agreements - The fair value of the repurchase agreement is based on Level 2 inputs. The primary inputs used in the valuation include the market interest rate and the credit quality of the underlying securities.
Borrowings - The cash flows were calculated using the contractual features of the borrowing and then discounted using observable market rates.
Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments and other factors. Those estimates that are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision are included in Level 3. Changes in assumptions could significantly affect the fair values presented.
These estimates do not reflect any premium or discount that could result from offering the Company's entire holdings of a particular financial instrument for sale at one time, nor do they attempt to estimate the value of anticipated future business related to the instruments. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates.
The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2025 and December 31, 2024, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:
Assets and liabilities measured at fair value on a recurring basis at September 30, 2025 are summarized below, in thousands:
| Fair Value Measurements at | ||||||||||||||||
| September 30, 2025 Using | ||||||||||||||||
| Quoted | ||||||||||||||||
| Prices in | ||||||||||||||||
| Active | Significant | |||||||||||||||
| Markets for | Other | Significant | ||||||||||||||
| Identical | Observable | Unobservable | ||||||||||||||
| Assets | Inputs | Inputs | ||||||||||||||
| Total Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Government-sponsored agencies collateralized by mortgage obligations- residential | ||||||||||||||||
| U.S. Government agencies collateralized by mortgage obligations-commercial | ||||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Assets and liabilities measured at fair value on a recurring basis at December 31, 2024 are summarized below, in thousands:
| Fair Value Measurements at | ||||||||||||||||
| December 31, 2024 Using | ||||||||||||||||
| Quoted | ||||||||||||||||
| Prices in | ||||||||||||||||
| Active | Significant | |||||||||||||||
| Markets for | Other | Significant | ||||||||||||||
| Identical | Observable | Unobservable | ||||||||||||||
| Assets | Inputs | Inputs | ||||||||||||||
| Total Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Government-sponsored agencies collateralized by mortgage obligations - residential | ||||||||||||||||
| U.S. Government-agencies collateralized by mortgage obligations - commercial | ||||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
The fair value of securities available-for-sale equals quoted market price, if available. If quoted market prices are not available, fair value is determined using quoted market prices for similar securities or matrix pricing. There were no changes in the valuation techniques used during 2025 or 2024. Transfers between hierarchy measurement levels are recognized by the Company as of the beginning of the reporting period. Changes in fair market value are recorded in other comprehensive income.
Assets and liabilities measured at fair value on a non-recurring basis at September 30, 2025 are summarized below, in thousands:
| Fair Value Measurements at | ||||||||||||||||||||
| September 30, 2025 Using | ||||||||||||||||||||
| Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Losses Nine Months Ended September 30, 2025 | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Collateral-dependent loans | ||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Agricultural | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
| Other Real Estate Owned: | ||||||||||||||||||||
| RE – Residential | $ | $ | $ | $ | $ | |||||||||||||||
| Equity lines of credit | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2024 are summarized below, in thousands:
| Fair Value Measurements at | ||||||||||||||||||||
| December 31, 2024 Using | ||||||||||||||||||||
| Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Losses Nine Months Ended September 30, 2024 | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Collateral-dependent loans | ||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Other Real Estate Owned: | ||||||||||||||||||||
| RE – Residential | $ | $ | $ | $ | $ | |||||||||||||||
The following methods were used to estimate fair value.
Collateral-Dependent Loans: The Bank does not record loans at fair value on a recurring basis. However, from time to time, fair value adjustments are recorded on these loans to reflect partial write-downs, through charge-offs or specific reserve allowances, that are based on fair value estimates of the underlying collateral. The fair value estimates for collateral-dependent loans are generally based on recent real estate appraisals or broker opinions, obtained from independent third parties, which are frequently adjusted by management to reflect current conditions and estimated selling costs (Level 3). Impairment charges recognized during the three and nine months ended September 30, 2025, related to the above collateral dependent loans, totaled $
Other Real Estate: Nonrecurring adjustments to certain real estate properties classified as other real estate owned are measured at the lower of carrying amount or fair value, less costs to sell. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized. Fair values are generally based on third party appraisals of the property which are commonly adjusted by management to reflect current conditions and selling costs (Level 3).
Appraisals for both collateral-dependent loans and other real estate are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Loan Administration Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On a quarterly basis, the Company compares the actual selling price of similar collateral that has been liquidated to the most recent appraised value for unsold properties to determine what additional adjustment, if any, should be made to the appraisal value to arrive at fair value. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.
The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2025 and December 31, 2024 (dollars in thousands):
| Range | Range | |||||||||||||||||
| Fair Value | Fair Value | Valuation | (Weighted Average) | (Weighted Average) | ||||||||||||||
| Description | 9/30/2025 | 12/31/2024 | Technique | Significant Unobservable Input | 9/30/2025 | 12/31/2024 | ||||||||||||
| Collateral-dependent loans: | ||||||||||||||||||
| Commercial | $ | $ | Third Party appraisals | Management Adjustments to Reflect Current Conditions and Selling Costs | 37% - 100% (78%) | 53 | % | |||||||||||
| Agricultural | Third Party appraisals | Management Adjustments to Reflect Current Conditions and Selling Costs | 2% - 98% (44%) | |||||||||||||||
| Total | $ | $ | ||||||||||||||||
| Other Real Estate: | ||||||||||||||||||
| RE – Residential | $ | $ | Third Party appraisals | Management Adjustments to Reflect Current Conditions and Selling Costs | 60 | % | % | |||||||||||
| Equity lines of credit | Third Party appraisals | Management Adjustments to Reflect Current Conditions and Selling Costs | % | |||||||||||||||
| $ | $ | |||||||||||||||||
| 10. OTHER COMPREHENSIVE LOSS |
| The changes in the accumulated balances for each component of other comprehensive loss, net of tax for the nine months ended September 30, 2024 and September 30, 2025 were as follows: |
| Unrealized |
Accumulated |
|||||||
| Losses |
Comprehensive |
|||||||
| on AFS Securities |
Loss, net of tax |
|||||||
| Beginning Balance, January 1, 2024 |
$ | ( |
) | $ | ( |
) | ||
| Current year-to-date other comprehensive income |
||||||||
| Ending balance, September 30, 2024 |
$ | ( |
) | $ | ( |
) | ||
| Beginning Balance, January 1, 2025 |
$ | ( |
) | $ | ( |
) | ||
| Current year-to-date other comprehensive income |
||||||||
| Ending balance, September 30, 2025 |
$ | ( |
) | $ | ( |
) | ||
| Reclassifications out of accumulated other comprehensive loss for the nine months ended September 30, 2025 and September 30, 2024, were as follows: |
| Amounts Reclassified from Accumulated Other Comprehensive Loss |
|||||||||
| Details about Accumulated Other Comprehensive (Loss) Components |
Nine Months Ended September 30, 2025 |
Nine Months Ended September 30, 2024 |
Affected Line Item on the Statement of Income |
||||||
| Fair value hedge: |
|||||||||
| Termination of fair value hedge |
$ | $ | Non-Interest Income |
||||||
| Tax effect |
( |
) | Provision for income taxes |
||||||
| Investment securities: |
|||||||||
| Loss on sale of investment securities |
Non-Interest Income |
||||||||
| Tax effect |
( |
) | ( |
) | Provision for income taxes |
||||
| Total reclassifications for the period |
$ | $ | Net income |
||||||
| Three Months Ended September 30, 2025 | Three Months Ended September 30, 2024 | ||||||||
| Fair value hedge: |
|||||||||
| Termination of fair value hedge |
$ | $ | Non-Interest Income |
||||||
| Tax effect |
( |
) | Provision for income taxes |
||||||
| Investment securities: |
|||||||||
| Loss on sale of investment securities |
( |
) | Non-Interest Income |
||||||
| Tax effect |
( |
) | Provision for income taxes |
||||||
| Total reclassifications for the period |
$ | $ | ( |
) | Net income |
||||
11. SUBORDINATED DEBENTURES
Plumas Bancorp has outstanding subordinated debentures with a principal amount of $
12. BUSINESS COMBINATIONS - ACQUISITION OF CONERSTONE COMMUNITY BANCORP
On July 1, 2025, pursuant to a previously announced Agreement and Plan of Reorganization and Merger dated as of January 18, 2025 (the “Merger Agreement”) between the Company and Cornerstone Community Bancorp (“Cornerstone”), Cornerstone merged with and into the Company with the Company continuing as the surviving corporation (the “Merger”). Immediately after the Merger, Cornerstone Community Bank ("CCB") the wholly owned bank subsidiary of Cornerstone, merged with and into Plumas Bank, with the Plumas Bank continuing as the surviving bank. The Merger and Bank Merger are collectively referred to as the “Transaction.”
As part of its business strategy, the Company regularly reviews its business strategies and opportunities to enhance the value of its franchise, including through acquisitions. The Transaction is consistent with the Company’s business strategy, which will (1) expand Plumas’s geographic presence in existing and new markets in Northern California, (2) diversify and bring new expertise to Plumas’s lending business, and (3) strengthen the Company’s talent base.
Pursuant to the terms of the Merger Agreement, upon the completion of the Merger, each share of Cornerstone common stock outstanding immediately prior was converted into the right to receive
Immediately after the Transaction, the newly combined company, operating as Plumas Bancorp with its banking subsidiary, Plumas Bank, had total assets of approximately $
The transaction was accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The following table summarizes the preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date in thousands:
.
| Identifiable Assets: | ( in thousands) | |||
| Cash and cash equivalents | $ | |||
| Investment Securities | ||||
| Loans | ||||
| Core deposit intangible | ||||
| Bank premises and equipment | ||||
| Bank owned life insurance | ||||
| Other assets | ||||
| Total identifiable assets acquired | $ | |||
| Liabilities: | ||||
| Deposits: | ||||
| Non-interest bearing | $ | |||
| Interest bearing | ||||
| Savings accounts | ||||
| Money market accounts | ||||
| Time accounts | ||||
| Total deposits | ||||
| FHLB borrowings | ||||
| Subordinated debentures | ||||
| Other liabilities | ||||
| Total liabilities assumed | $ | |||
| Net identifiable assets | $ |
| Book value of net assets acquired from Cornerstone | $ | |||
| Fair value adjustments: | ||||
| Loans (net of Cornerstone's deferred costs/fees and allowance) | ( | ) | ||
| Bank premises and equipment | ( | ) | ||
| Core deposit intangible asset | ||||
| Subordinated debentures | ||||
| Time Deposits | ( | ) | ||
| Other | ( | ) | ||
| Total purchase accounting adjustments | $ | |||
| Deferred tax asset (tax effect of purchase accounting adjustments at 29.56% plus tax on cash paid on termination of stock options) | ||||
| Fair value of net identifiable assets acquired from Cornerstone | $ | |||
| Merger consideration (cash payments of $16.1 million and $45.2 million in stock) | ||||
| Less: fair value of net assets acquired from Cornerstone | ( | ) | ||
| Goodwill recognized | $ |
As a result of the Acquisition, we recorded $
The results of operations of Cornerstone have been included in the Company’s consolidated financial statements since the acquisition date. It is impracticable to disclose Cornerstone’s separate revenue and net income since the acquisition because its operations were fully integrated into the Company’s existing business structure immediately upon acquisition, and separate financial information is not maintained.
The following unaudited pro forma financial information presents the combined results of Plumas Bancorp and Cornerstone as if the acquisition had occurred on January 1, 2024, in thousands. Acquisition expenses totaling $
| Period Ended | Net Interest Income | Net Income | ||
| Three Months Ended Sept 30, 2025 | $ | | $ | |
| Nine Months Ended Sept 30, 2025 | $ | | $ | |
| Three Months Ended Sept 30, 2024 | $ | | $ | |
| Nine Months Ended Sept 30, 2024 | $ | | $ | |
| During the three months ended September 30, 2024, Cornerstone recorded a provision for credit losses of $ |
Pro Forma Adjustments Included for the Nine Months Ended September 30, 2024:
| ● | Amortization of acquired intangibles | $ | |||
| ● | Accretion of discount on loans | $ | |||
| ● | Accretion of premium on time deposits acquired | $ | |||
| ● | Amortization of discount on subordinated debentures | $ | |||
| ● | Income tax benefit of adjustments | $ |
ART I – FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain matters discussed in this Quarterly Report are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Such risks and uncertainties include, among others, (1) significant increases in competitive pressures in the financial services industry; (2) changes in the interest rate environment resulting in reduced margins; (3) general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality; (4) changes in regulatory environment; (5) loss of key personnel; (6) fluctuations in the real estate market; (7) changes in business conditions and inflation; (8) operational risks including data processing systems failures or fraud; and (9) changes in securities markets. Therefore, the information set forth herein should be carefully considered when evaluating the business prospects of Plumas Bancorp (the “Company”).
When the Company uses in this Quarterly Report the words “anticipate”, “estimate”, “expect”, “project”, “intend”, “commit”, “believe” and similar expressions, the Company intends to identify forward-looking statements. Such statements are not guarantees of performance and are subject to certain risks, uncertainties and assumptions, including those described in this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected, projected, intended, committed or believed. The future results and stockholder values of the Company may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond the Company’s ability to control or predict. For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
INTRODUCTION
The following discussion and analysis sets forth certain statistical information relating to the Company as of September 30, 2025 and December 31, 2024 and for the three and nine-month periods ended September 30, 2025 and 2024. This discussion should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto included in Plumas Bancorp’s Annual Report filed on Form 10-K for the year ended December 31, 2024.
Plumas Bancorp trades on The NASDAQ Capital Market under the ticker symbol “PLBC”.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no changes to the Company’s critical accounting policies from those disclosed in the Company’s 2024 Annual Report to Shareholders on Form 10-K.
BISINESS COMBINATIONS - ACQUISTION OF CONERSTONE COMMUNITY BANCORP
On July 1, 2025 (the “Closing Date”), Plumas Bancorp (the “Company”) completed its previously announced acquisition of Cornerstone Community Bancorp (“Cornerstone”) pursuant to an Agreement and Plan of Merger and Reorganization, dated as of January 28, 2025, by and between the Company and Cornerstone (the “Merger Agreement”). Total book value of assets acquired from Cornerstone, excluding fair value adjustments, were $658 million, gross loans totaled $478 million, and deposits totaled $580 million. Goodwill associated with the acquisition of Cornerstone was $18.7 million; the core deposit intangible was $11.6 million. In addition, the Company recorded a discount on the acquired loans totaling $15.8 million. With the completion of the merger, Plumas Bank adds four branches in Anderson, Red Bluff and Redding (two branches), California.
Pursuant to the Merger Agreement, on the Closing Date, Cornerstone merged with and into the Company (the “Merger”) with the Company continuing as the surviving corporation. Immediately following the Merger, Cornerstone’s subsidiary, Cornerstone Community Bank (CCB) merged with and into the Company’s subsidiary, Plumas Bank with Plumas Bank as the surviving bank. Pursuant to the terms of the Merger Agreement, upon the completion of the Merger, each share of Cornerstone common stock outstanding immediately prior was converted into the right to receive 0.6608 shares of common stock of the Company and $9.75 cash, with cash paid in lieu of fractional shares. The total aggregate consideration delivered to holders of Cornerstone common stock in the Merger was 1,003,718 shares of Company common stock and $14.8 million cash. In addition, in accordance with the Merger Agreement, the Company paid approximately $1.3 million to holders of options to purchase Cornerstone common stock that were terminated in connection with the Merger. The Company also assumed options to purchase 35,000 shares of Cornerstone common stock representing, on an as-converted basis, options to purchase 30,803 shares of the Company’s common stock.
As a result of and upon the completion of the Merger, the Company assumed Cornerstone’s obligations with respect to an aggregate principal amount of $12 million of subordinated notes, comprised of (a) $2 million in aggregate principal amount of 4.75% Fixed to Floating Rate Subordinated Notes due November 30, 2035 (the “2035 Notes”) and (b) $10 million in aggregate principal amount of 4.75% Fixed-to-Floating Rate Subordinated Notes due November 30, 2030 (the “2030 Notes”). The 2035 Notes, which were issued in 2020, have a fixed interest rate of 4.75% for the first ten years and thereafter a quarterly variable interest rate equal to the then current three-month term Secured Overnight Financing Rate (“SOFR”) plus 4.14%. The 2030 Notes, which were issued in 2020, have a fixed interest rate of 4.75% for the first five years and thereafter a quarterly variable interest rate equal to the then current three-month term SOFR plus 4.52%.
Our financial statements are prepared in conformity with accounting principles generally accepted in the United States (GAAP). In connection with the acquisition, the Company incurred a variety of non-recurring expenses which are summarized on the following page under the heading “Reconciliation of Non-GAAP Disclosure”. The non-recurring expenses for the three and nine months ended September 30, 2025 were $6.2 million and $7.3 million, respectively. Excluding these expenses, non-GAAP net income for the third quarter of 2025 would have been $9.5 million, resulting in diluted earnings per share of $1.35 and return on average assets of 1.66% and non-GAAP net income for the nine months ended September 30, 2025 would have been $23.8 million, resulting in diluted earnings per share of $3.74 and return on average assets of 1.72% .
In addition, during the third quarter of 2025, the Company incurred expenses/income related to the amortization/accretion of various Fair Value (FV) marks required under GAAP. The following table presents the effect on pretax earnings of the amortization/accretion of the FV marks recorded during the three months ended September 30, 2025 and the projected effect for the three months ended December 31, 2025, and twelve months ended December 31, 2026. Positive numbers would increase pretax income and negative are a decrease in pretax income.
| (in thousands) |
|||
| Actual |
Projected |
Projected |
|
| Three Months |
Three Months |
Twelve Months |
|
| Ending |
Ending |
Ending |
|
| Amortization/accretion of Fair Value marks |
9/30/2025 |
12/31/2025 |
12/31/2026 |
| Core Deposit Intangible |
$ (571) |
$ (557) |
$ (2,082) |
| Discount on acquired loans |
455 |
336 |
1,290 |
| Premium/discount on acquired time deposits |
651 |
(61) |
(92) |
| Discount on acquired debentures |
(84) |
(58) |
(23) |
| Total amortization/accretion of Fair Value marks |
$ 451 |
$ (340) |
$ (907) |
The projected accretion of the discount on acquired loans is based on the acquired loans contractual payment schedules and may differ significantly from the actual accretion during the projected periods. The accretion of the premium on time deposits of $651 thousand was accelerated with the payoff of $38.5 million in brokered deposits during the three months ended September 30, 2025. This resulted in a $160 thousand discount going forward which will be amortized as an increase in interest expense over the remaining life of the time deposits acquired.
NON-GAAP FINANCIAL MEASURES
In addition to results presented in accordance with generally accepted accounting principles in the GAAP, Management has presented these non-GAAP financial measures because it believes that they provide useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP.
| Reconciliation of Non-GAAP Disclosure |
|||||
| Non-GAAP measure (excluding merger related activities). |
|||||
| (Unaudited. In thousands, except per share data) |
|||||
| GAAP |
Non-GAAP |
GAAP |
Non-GAAP |
||
| For the Three Months Ended |
For the Nine Months Ended |
||||
| 9/30/2025 |
9/30/2025 |
9/30/2025 |
9/30/2025 |
||
| Income before tax |
$6,915 |
$6,915 |
$25,623 |
$25,623 |
|
| Exclude merger related items: |
|||||
| Investment banking, legal and other expenses |
N/A |
879 |
N/A |
1,929 |
|
| CECL Day 1 loan loss allowance on acquired non-PCD loans |
N/A |
4,972 |
N/A |
4,972 |
|
| Unfunded commitment liability related to acquired loans |
N/A |
351 |
N/A |
351 |
|
| Total merger related items |
N/A |
6,202 |
N/A |
7,252 |
|
| Adjusted income before tax |
6,915 |
13,117 |
25,623 |
32,875 |
|
| Provision for income taxes |
1,769 |
3,602 |
6,977 |
9,121 |
|
| Net Income |
$5,146 |
$9,515 |
$18,646 |
$23,754 |
|
| Diluted shares outstanding |
7,031 |
7,031 |
6,353 |
6,353 |
|
| Average assets |
2,268,029 |
2,268,029 |
1,843,153 |
1,843,153 |
|
| Diluted earnings per share |
$0.73 |
$1.35 |
$2.94 |
$3.74 |
|
| Return on average assets |
0.90% |
1.66% |
1.35% |
1.72% |
|
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED September 30, 2025
Net Income. The Company recorded net income of $18.6 million for the nine months ended September 30, 2025, down from net income of $20.9 million for the nine months ended September 30, 2024. Increases of $7.2 million in net interest income and $1.2 million in non-interest income, and a decline of $0.5 million in the provision for income taxes were offset by an increase of $5.1 million in the provision for credit losses and an increase of $6.0 million in non-interest expense. The annualized return on average assets was 0.90% for the three months ended September 30, 2025, down from 1.84% for the three months ended September 30, 2024. The annualized return on average equity decreased from 18.1% during the third quarter of 2024 to 8.5% during the current quarter.
Net-interest income increased from $54.7 million during the nine months ended September 30, 2024, to $61.9 million during the current period. The provision for credit losses increased from $1.4 million during the nine months ended September 30, 2024, to $6.5 million during the current nine-month period.
Non-interest income increased by $1.2 million from $6.6 million during the nine months ended September 30, 2024 to $7.8 million during the nine months ended September 30, of 2025 mostly related to a legal settlement totaling $1.1 million received in the first quarter of 2025. This settlement related to the Dixie Fire in August of 2021 which swept through the town of Greenville, California. The fire caused severe damage to the Greenville area, including the telecommunications infrastructure which adversely affected our ability to service our customers in this area during the last few years.
Non-interest expense increased by $6.0 million from $31.6 million during the nine months ended September 30, 2024, to $37.6 million during the current nine-month period. Of this amount $1.9 million relates to costs associated with our acquisition of Cornerstone. Merger transaction costs that facilitate the merger are not deductible for income tax purposes. Of the $1.9 million in merger related costs, $946 thousand is estimated to be not deductible for state and federal income tax.
The provision for income taxes decreased from $7.5 million, or 26.4% of pre-tax income, during the nine months ended September 30, 2024 to $7.0 million, or 27.2% of pre-tax income, during the current nine-month period.
The following is a detailed discussion of each component of the change in net income.
Net interest income before provision for credit losses. Driven by growth in the loan portfolio, the acquisition of Cornerstone and repayment of Bank Term Funding Program (BTFP) borrowings, net interest income increased by $7.2 million from $54.7 million during the nine months ended September 30, 2024, to $61.9 million for the nine months ended September 30, 2025. The increase in net interest income includes an increase of $8.0 million in interest income partially offset by an increase of $0.8 million in interest expense. See "Short-term Borrowing Arrangements" for a discussion of BTFP borrowing activity.
Interest and fees on loans increased by $9.0 million, mostly related to an increase in average balance. The average balance of loans during the nine months ended September 30, 2025, was $1.2 billion, an increase of $189 million from $982 million during the same period in 2024. The average yield on loans increased by 3 basis points from 6.21% during the first nine months of 2024 to 6.24% during the current period.
Interest on investment securities increased by $536 thousand related to an increase in yield of 17 basis points to 4.09% partially offset by a $736 thousand decline in average balance. The increase in investment yields is consistent with the increase in market rates and the restructuring of the investment portfolio in February of 2024. Average investment securities declined from $457 million during the nine months ended September 30, 2024, to $456 million during the current period.
Interest on cash balances declined by $1.6 million related to both a decline in balance and a decline in yield. The rate earned on cash balances declined by 99 basis points to 4.5% and the average balance declined from $97.2 million during the first nine months of 2024 to $72.2 million during the current period. The decline in rate is consistent with the decline in rate earned on Federal Reserve Bank of San Francisco (FRB) balances.
Related to an increase in interest bearing deposits, an increase in the cost of these deposits and the acquisition of CCB partially offset by a $3.7 million decline in interest on the Bank Term Funding Program (BTFP) borrowings, interest expense increased from $8.3 million during the nine months ended September 30, 2024 to $9.1 million during the current period. The average rate paid on interest bearing liabilities was 1.43% during both periods. All BTFP borrowings were paid off during 2024. Interest expense recognized on the BTFP borrowings for the three and nine months ended September 30, 2024, was $1.2 million and $3.7 million, respectively.
Interest paid on deposits increased by $4.0 million and is broken down by product type as follows: money market accounts - $3.4 million, savings deposits - $220 thousand and time deposits - $380 thousand. The average rate paid on interest-bearing deposits increased from 0.85% during the nine months ended September 30, 2024, to 1.35% during the current period. Average interest-bearing deposits totaled $796 million during the nine months ended September 30, 2025, an increase of $157 million from $639 million during the nine months ended September 30, 2024.
Net interest margin for the nine months ended September 30, 2025, increased 11 basis points to 4.87%, up from 4.76% for the same period in 2024.
The following table presents for the nine-month periods indicated the distribution of consolidated average assets, liabilities and shareholders' equity. It also presents the amounts of interest income from interest earning assets and the resultant annualized yields expressed in both dollars and annualized yield percentages, as well as the amounts of interest expense on interest bearing liabilities and the resultant cost expressed in both dollars and annualized rate percentages. Average balances are based on daily averages. Nonaccrual loans are included in the calculation of average loans while nonaccrued interest thereon is excluded from the computation of yields earned:
| For the Nine Months Ended |
For the Nine Months Ended |
|||||||||||||||||||||||
| September 30, 2025 |
September 30, 2024 |
|||||||||||||||||||||||
| Average |
Average |
|||||||||||||||||||||||
| Balance |
Interest |
Yield/ |
Balance |
Interest |
Yield/ |
|||||||||||||||||||
| (in thousands) |
(in thousands) |
Rate |
(in thousands) |
(in thousands) |
Rate |
|||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Loans (2) (3) |
$ | 1,171,116 | $ | 54,643 | 6.24 | % | $ | 982,191 | $ | 45,639 | 6.21 | % | ||||||||||||
| Taxable investment securities |
381,124 | 12,133 | 4.26 | % | 369,893 | 11,423 | 4.13 | % | ||||||||||||||||
| Non-taxable investment securities (1) |
75,084 | 1,815 | 3.23 | % | 87,051 | 1,989 | 3.05 | % | ||||||||||||||||
| Interest-bearing deposits |
72,208 | 2,429 | 4.50 | % | 97,196 | 3,998 | 5.49 | % | ||||||||||||||||
| Total interest-earning assets |
1,699,532 | 71,020 | 5.59 | % | 1,536,331 | 63,049 | 5.48 | % | ||||||||||||||||
| Cash and due from banks |
29,379 | 26,978 | ||||||||||||||||||||||
| Other assets |
114,242 | 85,536 | ||||||||||||||||||||||
| Total assets |
$ | 1,843,153 | $ | 1,648,845 | ||||||||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||
| Money market deposits |
$ | 335,889 | 4,891 | 1.95 | % | $ | 216,699 | $ | 1,501 | 0.93 | % | |||||||||||||
| Savings deposits |
311,187 | 752 | 0.32 | % | 327,263 | 532 | 0.22 | % | ||||||||||||||||
| Time interest-bearing deposits |
149,218 | 2,421 | 2.17 | % | 95,350 | 2,041 | 2.86 | % | ||||||||||||||||
| Total deposits |
796,294 | 8,064 | 1.35 | % | 639,312 | 4,074 | 0.85 | % | ||||||||||||||||
| Other borrowings |
20,789 | 713 | 4.59 | % | 117,136 | 4,210 | 4.80 | % | ||||||||||||||||
| Repurchase agreements & other |
37,863 | 347 | 1.23 | % | 18,820 | 33 | 0.23 | % | ||||||||||||||||
| Total interest-bearing liabilities |
854,946 | 9,124 | 1.43 | % | 775,268 | 8,317 | 1.43 | % | ||||||||||||||||
| Non-interest-bearing deposits |
743,628 | 678,057 | ||||||||||||||||||||||
| Other liabilities |
39,596 | 33,845 | ||||||||||||||||||||||
| Shareholders' equity |
204,983 | 161,675 | ||||||||||||||||||||||
| Total liabilities & equity |
$ | 1,843,153 | $ | 1,648,845 | ||||||||||||||||||||
| Cost of funding interest-earning assets (4) |
0.72 | % | 0.72 | % | ||||||||||||||||||||
| Net interest income and margin (5) |
$ | 61,896 | 4.87 | % | $ | 54,732 | 4.76 | % | ||||||||||||||||
| (1) |
Not computed on a tax-equivalent basis. |
| (2) |
Average nonaccrual loan balances of $7.3 million for 2025 and $4.4 million for 2024 are included in average loan balances for computational purposes. |
| (3) |
Net loan origination costs included in loan interest income for the nine-month period ended September 30, 2025 and 2024 were $776,000 and $1,090,000, respectively. |
| (4) |
Total annualized interest expense divided by the average balance of total earning assets. |
| (5) |
Annualized net interest income divided by the average balance of total earning assets. |
The following table sets forth changes in interest income and interest expense for the nine-months ended September 30, 2025, and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates:
| 2025 over 2024 change in net interest income |
||||||||||||||||
| for the nine months ended September 30, |
||||||||||||||||
| (in thousands) |
||||||||||||||||
| Volume (1) |
Rate (2) |
Mix (3) |
Total |
|||||||||||||
| Interest-earning assets: |
||||||||||||||||
| Loans |
$ | 8,771 | $ | 231 | $ | 2 | $ | 9,004 | ||||||||
| Taxable investment securities |
346 | 363 | 1 | 710 | ||||||||||||
| Non-taxable investment securities |
(273 | ) | 117 | (18 | ) | (174 | ) | |||||||||
| Interest-bearing deposits |
(1,027 | ) | (725 | ) | 183 | (1,569 | ) | |||||||||
| Total interest income |
7,817 | (14 | ) | 168 | 7,971 | |||||||||||
| Interest-bearing liabilities: |
||||||||||||||||
| Money market deposits |
825 | 1,655 | 910 | 3,390 | ||||||||||||
| Savings deposits |
(26 | ) | 259 | (13 | ) | 220 | ||||||||||
| Time deposits |
1,152 | (492 | ) | (280 | ) | 380 | ||||||||||
| Other borrowings |
(3,459 | ) | (189 | ) | 151 | (3,497 | ) | |||||||||
| Repurchase agreements & other |
33 | 140 | 141 | 314 | ||||||||||||
| Total interest expense |
(1,475 | ) | 1,373 | 909 | 807 | |||||||||||
| Net interest income |
$ | 9,292 | $ | (1,387 | ) | $ | (741 | ) | $ | 7,164 | ||||||
| (1) |
The volume change in net interest income represents the change in average balance divided by the previous year’s rate. |
|
| (2) |
The rate change in net interest income represents the change in rate divided by the previous year’s average balance. |
|
| (3) |
The mix change in net interest income represents the change in average balance multiplied by the change in rate. |
Provision for credit losses. During the first nine months of 2025, we recorded a provision for credit losses of $6.5 million, consisting of a provision for credit losses on loans of $6.3 million and an increase in the reserve for unfunded commitments of $211 thousand. The provision includes growth in the loan portfolio, a $5.0 million Current Expected Credit Losses (CECL) day 1 provision on non-Purchased Credit Deteriorated (non-PCD) loans acquired from CCB and the reserve for unfunded commitments on loans acquired from CCB. This compares to a provision for credit losses of $1.3 million consisting of a provision for credit losses on loans of $1.5 million and a decrease in the reserve for unfunded commitments of $129 thousand during the nine months ended September 30, 2024. See “Analysis of Asset Quality and Allowance for Loan Losses” for a discussion of loan quality trends and the provision for credit losses.
Non-interest income. During the nine months ended September 30, 2025, non-interest income totaled $7.8 million, an increase of $1.2 million from the nine months ended September 30, 2024. The largest component of this increase was a legal settlement totaling $1.1 million related to the Dixie Fire in August of 2021. This settlement is included in Other in the following table.
The following table describes the components of non-interest income for the nine-month periods ended September 30, 2025 and 2024, dollars in thousands:
| For the Nine Months Ended |
||||||||||||||||
| September 30, |
||||||||||||||||
| 2025 |
2024 |
Dollar Change |
Percentage Change |
|||||||||||||
| Interchange revenue |
2,386 | 2,340 | 46 | 2.0 | % | |||||||||||
| Service charges on deposit accounts |
$ | 2,303 | $ | 2,224 | $ | 79 | 3.6 | % | ||||||||
| Loan servicing fees |
490 | 564 | (74 | ) | (13.1 | )% | ||||||||||
| Earnings on life insurance policies |
478 | 305 | 173 | 56.7 | % | |||||||||||
| FHLB Dividends |
463 | 409 | 54 | 13.2 | % | |||||||||||
| Gain on sale of buildings |
- | 19,854 | (19,854 | ) | (100.0 | )% | ||||||||||
| Loss on sale of investment securities |
(371 | ) | (19,817 | ) | 19,446 | 96.8 | % | |||||||||
| Other |
2,073 | 700 | 1,373 | 196.1 | % | |||||||||||
| Total non-interest income |
$ | 7,822 | $ | 6,579 | $ | 1,243 | 18.9 | % | ||||||||
Non-interest expense. During the nine months ended September 30, 2025, total non-interest expense increased by $6.0 million from $31.6 million during the nine months ended September 30, 2024, to $37.6 million during the current period. The largest components of this increase were salary and benefit expenses of $2.7 million, merger related expenses of $1.9 million, and occupancy and equipment expenses of $908 thousand. The increase in salary and benefit expense included an increase in salary expense of $1.8 million primarily related to the acquisition of CCB and to a lesser extent merit and promotional salary increases. Other significant increases in salary and benefit expense were $569 thousand in bonus expense, $186 thousand in health insurance costs, $174 thousand in payroll taxes and $150 thousand in accrued vacation. The increase in occupancy and equipment expenses mostly relates to the acquisition of CCB and an increase in rent related to the February 2024 sales/leaseback transaction.
The following table describes the components of non-interest expense for the nine-month periods ended September 30, 2025 and 2024, dollars in thousands:
| For the Nine Months Ended |
||||||||||||||||
| September 30, |
||||||||||||||||
| 2025 |
2024 |
Dollar Change |
Percentage Change |
|||||||||||||
| Salaries and employee benefits |
$ | 18,851 | $ | 16,129 | $ | 2,722 | 16.9 | % | ||||||||
| Occupancy and equipment |
6,535 | 5,627 | 908 | 16.1 | % | |||||||||||
| Outside service fees |
4,008 | 3,430 | 578 | 16.9 | % | |||||||||||
| Merger and acquisition expenses |
1,929 | - | 1,929 | 100.0 | % | |||||||||||
| Advertising and shareholder relations |
818 | 706 | 112 | 15.9 | % | |||||||||||
| Professional fees |
760 | 1,113 | (353 | ) | (31.7 | )% | ||||||||||
| Armored car and courier |
725 | 651 | 74 | 11.4 | % | |||||||||||
| Amortization of Core Deposit Intangible |
702 | 153 | 549 | 358.8 | % | |||||||||||
| Deposit insurance |
650 | 562 | 88 | 15.7 | % | |||||||||||
| Business development |
597 | 506 | 91 | 18.0 | % | |||||||||||
| Director compensation and expense |
516 | 569 | (53 | ) | (9.3 | )% | ||||||||||
| Telephone and data communication |
452 | 614 | (162 | ) | (26.4 | )% | ||||||||||
| Loan collection expenses |
231 | 323 | (92 | ) | (28.5 | )% | ||||||||||
| Other |
838 | 1,234 | (396 | ) | (32.1 | )% | ||||||||||
| Total non-interest expense |
$ | 37,612 | $ | 31,617 | $ | 5,995 | 19.0 | % | ||||||||
Provision for income taxes. The provision for income taxes decreased from $7.5 million, or 26.4% of pre-tax income, during the nine months ended September 30, 2024 to $7.0 million, or 27.2% of pre-tax income, during the current nine-month period. The percentages for 2025 and 2024 differ from statutory rates as tax exempt items of income, such as earnings on Bank owned life insurance and municipal securities interest, decrease taxable income while non-deductible merger transaction costs incurred during the current period increase taxable income.
RESULTS OF OPERATIONS FOR THE three MONTHS ENDED September 30, 2025
Net Income. The Company recorded net income of $5.1 million for the three months ended September 30, 2025, down from net income of $7.8 million for the three months ended September 30, 2024. An increase of $6.3 million in net interest income and a decline of $1.1 million in the provision for income taxes was offset by an increase of $5.8 million in the provision for credit losses and an increase of $4.3 million in non-interest expense. The annualized return on average assets was 0.90% for the three months ended September 30, 2025, down from 1.84% for the three months ended September 30, 2024. The annualized return on average equity decreased from 18.1% during the third quarter of 2024 to 8.5% during the current quarter.
Net interest income increased from $18.9 million during the three months ended September 30, 2024, to $25.2 million during the current quarter. The provision for credit losses increased from a recovery of $400 thousand during the third quarter of 2024 to $5.4 million during the current quarter.
Non-interest income totaled $2.2 million during the three months ended September 30, 2024, and 2025.
Non-interest expense increased by $4.3 million from $10.8 million during the third quarter of 2024 to $15.1 million during the current quarter. Of this amount, $879 thousand relates to costs associated with our acquisition of Cornerstone Community Bancorp. Merger transaction costs that facilitate the merger are not deductible for income tax purposes. Of the $879 thousand in merger related costs, $145 thousand is estimated to be not deductible for state and federal income tax.
The provision for income taxes decreased from $2.9 million, 26.7% of pre-tax income, during the three months ended September 30, 2024 to $1.8 million, or 25.6% of pre-tax income, during the current quarter.
The following is a detailed discussion of each component of the change in net income.
Net interest income before provision for credit losses. Net interest income was $25.2 million for the three months ended September 30, 2025, an increase of $6.3 million from the same period in 2024. The increase in net interest income includes an increase of $7.9 million in interest income partially offset by an increase of $1.6 million in interest expense.
Interest and fees on loans increased by $8.0 million related to growth in the loan portfolio, mostly related to the acquisition of CCB and to a much lesser extent an increase in yield. Average loan balances increased by $475 million, while the average yield on loans increased by 14 basis points from 6.21% during the third quarter of 2024 to 6.35% during the current quarter. The increase in loan yield includes an increase in SBA fixed rate loans, which currently have a weighted average rate of 8.2%, the repricing of loans that are priced off the 5-year Treasury and a decline in our lower yielding auto loan portfolio. Loans that are priced off the 5-year Treasury are primarily commercial real estate loans; their rate is adjusted every five years.
Interest on investment securities increased by $453 thousand as yield on these securities increased by 7 basis points to 4.06% and the average balance increased by $35 million from $447 million during the three months ended September 30, 2024, to $482 million during the current quarter.
Interest on cash balances decreased by $518 thousand related to a decline in average balance of $19 million and a decrease in average rate paid on cash balances of 94 basis points from 5.44% during the third quarter of 2024 to 4.50% during the current quarter. This decline in yield was related to a decline in rate paid on balances held at the FRB. The average rate earned on FRB balances decreased from 5.33% during the third quarter of 2024 to 4.36% during the current quarter.
Interest expense increased by $1.6 million to $4.6 million, mostly related to the acquisition of Cornerstone. The average rate paid on interest bearing liabilities increased from 1.52% during the 2024 quarter to 1.67% during the three months ended September 30, 2025.
Interest paid on deposits increased by $2.3 million and the increase is broken down by product type as follows: money market accounts - $1.8 million, savings deposits - $112 thousand and time deposits - $396 thousand. The average balance of money market accounts during the current quarter was $439 million, an increase of $216 million from $223 million during the three months ended September 30, 2024. The average rate paid on money market accounts increased 105 basis points to 2.22%. The increase is primarily related to higher rate money market accounts acquired in the acquisition of CCB. The increase in interest on savings accounts was driven by an increase in the average rate paid of 15 basis points to 37 basis points. The increase in interest on time deposits includes an increase in average balance of $140 million, partially offset by a decline in average rate paid of 106 basis points to 1.87%. The increase in the average balance of time deposits mostly relates to the acquisition of CCB. The decline in the rate paid on time deposits resulted from a reduction in interest expense of $651 thousand related to the amortization of the fair value mark on time deposits acquired in the acquisition of CCB. This amortization was accelerated with the payoff of $38.5 million in brokered deposits.
The average rate paid on interest-bearing deposits increased from 0.97% during the third quarter of 2024 to 1.56% during the current quarter. The average balance of interest-bearing deposits increased from $646 million during the three months ended September 30, 2024, to $990 million during the current quarter.
Interest on repurchase agreements and other borrowings, exclusive of the BTFP, increased by $566 thousand from $173 thousand during the three months ended September 30, 2024 to $739 thousand during the current quarter. Interest expense on the BTFP was $1.2 million during the three months ended September 30, 2024. See “Repurchase Agreements” for a discussion of the increase in the balance of this liability.
Net interest margin for the three months ended September 30, 2025, was 4.83%, up from 4.76% for the same period in 2024.
The following table presents for the three-month periods indicated the distribution of consolidated average assets, liabilities and shareholders' equity. It also presents the amounts of interest income from interest earning assets and the resultant annualized yields expressed in both dollars and annualized yield percentages, as well as the amounts of interest expense on interest bearing liabilities and the resultant cost expressed in both dollars and annualized rate percentages. Average balances are based on daily averages. Nonaccrual loans are included in the calculation of average loans while nonaccrued interest thereon is excluded from the computation of yields earned:
| For the Three Months Ended |
For the Three Months Ended |
|||||||||||||||||||||||
| September 30, 2025 |
September 30, 2024 |
|||||||||||||||||||||||
| Average |
Average |
|||||||||||||||||||||||
| Balance |
Interest |
Yield/ |
Balance |
Interest |
Yield/ |
|||||||||||||||||||
| (in thousands) |
(in thousands) |
Rate |
(in thousands) |
(in thousands) |
Rate |
|||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Loans (2) (3) |
$ | 1,476,275 | $ | 23,635 | 6.35 | % | $ | 1,001,505 | $ | 15,635 | 6.21 | % | ||||||||||||
| Taxable investment securities |
404,241 | 4,293 | 4.21 | % | 370,051 | 3,885 | 4.18 | % | ||||||||||||||||
| Non-taxable investment securities (1) |
77,621 | 641 | 3.28 | % | 76,817 | 596 | 3.09 | % | ||||||||||||||||
| Interest-bearing deposits |
108,325 | 1,228 | 4.50 | % | 127,640 | 1,746 | 5.44 | % | ||||||||||||||||
| Total interest-earning assets |
2,066,462 | 29,797 | 5.72 | % | 1,576,013 | 21,862 | 5.52 | % | ||||||||||||||||
| Cash and due from banks |
34,689 | 27,480 | ||||||||||||||||||||||
| Other assets |
166,878 | 86,001 | ||||||||||||||||||||||
| Total assets |
$ | 2,268,029 | $ | 1,689,494 | ||||||||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||
| Money market deposits |
$ | 439,020 | $ | 2,462 | 2.22 | % | $ | 223,229 | $ | 657 | 1.17 | % | ||||||||||||
| Savings deposits |
311,258 | 290 | 0.37 | % | 323,347 | 178 | 0.22 | % | ||||||||||||||||
| Time deposits |
239,549 | 1,132 | 1.87 | % | 99,815 | 736 | 2.93 | % | ||||||||||||||||
| Total interest-bearing deposits |
989,827 | 3,884 | 1.56 | % | 646,391 | 1,571 | 0.97 | % | ||||||||||||||||
| Other borrowings |
32,168 | 422 | 5.20 | % | 117,065 | 1,413 | 4.80 | % | ||||||||||||||||
| Repurchase agreements & other |
74,556 | 317 | 1.69 | % | 17,943 | 8 | 0.18 | % | ||||||||||||||||
| Total interest-bearing liabilities |
1,096,551 | 4,623 | 1.67 | % | 781,399 | 2,992 | 1.52 | % | ||||||||||||||||
| Non-interest-bearing deposits |
886,592 | 697,079 | ||||||||||||||||||||||
| Other liabilities |
43,524 | 39,249 | ||||||||||||||||||||||
| Shareholders' equity |
241,362 | 171,767 | ||||||||||||||||||||||
| Total liabilities & equity |
$ | 2,268,029 | $ | 1,689,494 | ||||||||||||||||||||
| Cost of funding interest-earning assets (4) |
0.89 | % | 0.76 | % | ||||||||||||||||||||
| Net interest income and margin (5) |
$ | 25,174 | 4.83 | % | $ | 18,870 | 4.76 | % | ||||||||||||||||
| (1) |
Not computed on a tax-equivalent basis. |
| (2) |
Average nonaccrual loan balances of $13.8 million for 2025 and $3.7 million for 2024 are included in average loan balances for computational purposes. |
| (3) |
Net loan origination costs included in loan interest income for the three-month period ended September 30, 2025 and 2024 were $305,000 and $408,000, respectively. |
| (4) |
Total annualized interest expense divided by the average balance of total earning assets. |
| (5) |
Annualized net interest income divided by the average balance of total earning assets. |
The following table sets forth changes in interest income and interest expense for the three-months ended September 30, 2025, and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates:
| 2025 over 2024 change in net interest income |
||||||||||||||||
| for the three months ended September 30, |
||||||||||||||||
| (in thousands) |
||||||||||||||||
| Volume (1) |
Rate (2) |
Mix (3) |
Total |
|||||||||||||
| Interest-earning assets: |
||||||||||||||||
| Loans |
$ | 7,432 | $ | 356 | $ | 212 | $ | 8,000 | ||||||||
| Taxable investment securities |
360 | 35 | 13 | 408 | ||||||||||||
| Non-taxable investment securities |
6 | 36 | 3 | 45 | ||||||||||||
| Interest-bearing deposits |
(265 | ) | (304 | ) | 51 | (518 | ) | |||||||||
| Total interest income |
7,533 | 123 | 279 | 7,935 | ||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||
| Money market deposits |
637 | 593 | 575 | 1,805 | ||||||||||||
| Savings deposits |
(7 | ) | 123 | (4 | ) | 112 | ||||||||||
| Time deposits |
1,033 | (266 | ) | (371 | ) | 396 | ||||||||||
| Other borrowings |
(1,028 | ) | 119 | (82 | ) | (991 | ) | |||||||||
| Repurchase agreements & other |
25 | 68 | 216 | 309 | ||||||||||||
| Total interest expense |
660 | 637 | 334 | 1,631 | ||||||||||||
| Net interest income |
$ | 6,873 | $ | (514 | ) | $ | (55 | ) | $ | 6,304 | ||||||
| (1) |
The volume change in net interest income represents the change in average balance divided by the previous year’s rate. |
|
| (2) |
The rate change in net interest income represents the change in rate divided by the previous year’s average balance. |
|
| (3) |
The mix change in net interest income represents the change in average balance multiplied by the change in rate. |
Provision for credit losses. During the third quarter of 2025 we recorded a provision for credit losses of $5.4 million, consisting of a provision for credit losses on loans of $5.1 million and an increase in the reserve for unfunded commitments of $251 thousand. The provision includes growth in the loan portfolio, a $5.0 million CECL day 1 provision on non-PCD loans acquired from CCB and an increase in the reserve for unfunded commitments on loans acquired from CCB. See “Analysis of Asset Quality and Allowance for Loan Losses” for a discussion of loan quality trends and the provision for credit losses.
Non-interest income. Non-interest income totaled $2.2 million an increase of $11 thousand from the third quarter of 2024. The largest increase was an increase of $157 thousand in earnings on bank owned life insurance (BOLI) acquired from CCB. In addition, several other categories of non-interest income increased mostly related to the acquisition of CCB. The largest decrease was a $628 thousand loss generated on the disposition of CCB’s investment portfolio which was partially offset by a $254 thousand gain on termination of an interest rate swap acquired from CCB.
The following table describes the components of non-interest income for the three-month periods ended September 30, 2025 and 2024, dollars in thousands:
| For the Three Months Ended |
||||||||||||||||
| September 30, |
||||||||||||||||
| 2025 |
2024 |
Dollar Change |
Percentage Change |
|||||||||||||
| Interchange revenue |
$ | 912 | $ | 818 | $ | 94 | 11.5 | % | ||||||||
| Service charges on deposit accounts |
816 | 766 | 50 | 6.5 | % | |||||||||||
| Earnings on life insurance policies |
261 | 104 | 157 | 151.0 | % | |||||||||||
| FHLB Dividends |
191 | 136 | 55 | 40.4 | % | |||||||||||
| Loan servicing fees |
156 | 176 | (20 | ) | (11.4 | )% | ||||||||||
| Loss on sale of investment securities |
(374 | ) | - | (374 | ) | (100.0 | )% | |||||||||
| Other |
286 | 237 | 49 | 20.7 | % | |||||||||||
| Total non-interest income |
$ | 2,248 | $ | 2,237 | $ | 11 | 0.5 | % | ||||||||
Non-interest expense. During the three months ended September 30, 2025, total non-interest expense increased by $4.3 million from $10.8 million during the third quarter of 2024 to $15.1 million during the current quarter. The largest components of this increase were merger related expenses of $879 thousand and salary and benefit expenses of $1.9 million. The increase in salary and benefit expense includes an increase in salary expense of $1.3 million mostly related to former CCB employees. Other significant increases in salary and benefits include $312 thousand in bonus expense, $217 thousand in commissions related to an increase in SBA loan fundings and an increase in the accrued vacation liability of $150 thousand. We view the increase in the accrued vacation as a non-recurring expense. Other large increases in non-interest expense, which largely relate to the acquisition of CCB, include $483 thousand in occupancy and equipment costs, $470 thousand in outside services and $564 thousand in amortization of core deposit intangible.
The following table describes the components of non-interest expense for the three-month periods ended September 30, 2025 and 2024, dollars in thousands:
| For the Three Months Ended |
||||||||||||||||
| September 30, |
||||||||||||||||
| 2025 |
2024 |
Dollar Change |
Percentage Change |
|||||||||||||
| Salaries and employee benefits |
$ | 7,418 | $ | 5,481 | $ | 1,937 | 35.3 | % | ||||||||
| Occupancy and equipment |
2,471 | 1,988 | 483 | 24.3 | % | |||||||||||
| Outside service fees |
1,584 | 1,114 | 470 | 42.2 | % | |||||||||||
| Merger and acquisition expenses |
879 | - | 879 | 100.0 | % | |||||||||||
| Amortization of Core Deposit Intangible |
615 | 51 | 564 | 1105.9 | % | |||||||||||
| Professional fees |
312 | 345 | (33 | ) | (9.6 | )% | ||||||||||
| Deposit insurance |
288 | 191 | 97 | 50.8 | % | |||||||||||
| Armored car and courier |
284 | 228 | 56 | 24.6 | % | |||||||||||
| Advertising and shareholder relations |
282 | 247 | 35 | 14.2 | % | |||||||||||
| Business development |
242 | 143 | 99 | 69.2 | % | |||||||||||
| Director compensation and expense |
195 | 203 | (8 | ) | (3.9 | )% | ||||||||||
| Telephone and data communication |
154 | 188 | (34 | ) | (18.1 | )% | ||||||||||
| Loan collection expenses |
109 | 102 | 7 | 6.9 | % | |||||||||||
| Other |
301 | 543 | (242 | ) | (44.6 | )% | ||||||||||
| Total non-interest expense |
$ | 15,134 | $ | 10,824 | $ | 4,310 | 39.8 | % | ||||||||
Provision for income taxes. The provision for income taxes decreased by $1.1 million from $2.9 million, or 26.7% of pre-tax income, during the three months ended September 30, 2024, to $1.8 million, or 25.6% of pre-tax income, during the current quarter. The percentages for 2025 and 2024 differ from statutory rates as tax exempt items of income such as earnings on Bank owned life insurance and municipal securities interest decrease taxable income while non-deductible merger transaction costs incurred during the current quarter effectively increase taxable income.
FINANCIAL CONDITION
Mostly related to the acquisition of Cornerstone, total assets increased by $606 million from $1.6 billion on December 31, 2024, to $2.2 billion on September 30, 2025. The largest components of this increase were increases in net loans of $475 million, investment securities of $47 million, accrued interest receivable and other assets of $31 million, Goodwill of $19 million, BOLI of $17 million, premises and equipment of $12 million and cash and cash equivalents of $5 million. Increases in liabilities include $448 million in deposits, $72 million in repurchase agreements, $12 million in borrowings and $6 million in accrued interest payable and other liabilities. Total shareholders' equity increased by $68 million. The increase in premises and equipment, BOLI and cash and cash equivalents relates to the acquisition of Cornerstone. A detailed discussion of each of the other changes follows.
Loan Portfolio. Gross loans increased by approximately $481 million, or 47%, and totaled $1.5 billion on September 30, 2025, and $1.0 billion on December 31, 2024. The largest increases in loans were $334 million in commercial real estate loans, $84 million in commercial loans, $35 million in agricultural loans, and $22 million in residential loans. Decreases in loan balances totaled $24 million consisting of a decline in automobile loans of $20 million and a decline in construction loans of $4 million. Although the Company offers a broad array of financing options, it continues to concentrate its focus on small to medium sized commercial businesses. These loans offer diversification as to industries and types of businesses, thus limiting material exposure in any industry concentrations. The Company offers both fixed and floating rate loans and obtains collateral in the form of real property, business assets and deposit accounts, but looks to business and personal cash flows as its primary source of repayment. In the fourth quarter of 2023 we terminated our indirect automobile loan program. Ending this program, which was our lowest yielding loan segment, also improved our loan loss risk profile since this program had historically higher charge-off rates. Terminating this program also improved our consumer compliance risk profile.
As shown in the following table the Company's largest lending categories are commercial real estate loans, commercial loans, agricultural loans, and equity lines of credits.
| Percent of |
Percent of |
|||||||||||||||
| Loans in Each |
Loans in Each |
|||||||||||||||
| Balance at End |
Category to |
Balance at End |
Category to |
|||||||||||||
| (dollars in thousands) |
of Period |
Total Loans |
of Period |
Total Loans |
||||||||||||
| 09/30/2025 |
09/30/2025 |
12/31/2024 |
12/31/2024 |
|||||||||||||
| Commercial |
$ | 161,667 | 10.8 | % | $ | 77,444 | 7.6 | % | ||||||||
| Agricultural |
154,107 | 10.3 | % | 118,866 | 11.7 | % | ||||||||||
| Real estate – residential |
33,657 | 2.2 | % | 11,539 | 1.1 | % | ||||||||||
| Real estate – commercial |
980,694 | 65.5 | % | 646,378 | 63.7 | % | ||||||||||
| Real estate – construction and land development |
49,199 | 3.3 | % | 53,503 | 5.3 | % | ||||||||||
| Equity Lines of Credit |
53,283 | 3.6 | % | 37,888 | 3.7 | % | ||||||||||
| Auto |
45,142 | 3.0 | % | 64,734 | 6.4 | % | ||||||||||
| Other |
18,745 | 1.3 | % | 5,072 | 0.5 | % | ||||||||||
| Total Gross Loans |
$ | 1,496,494 | 100 | % | $ | 1,015,424 | 100 | % | ||||||||
The Company’s real estate related loans, including real estate mortgage loans, real estate construction and land development loans, consumer equity lines of credit, and agricultural loans secured by real estate, comprised 80% of the total loan portfolio at September 30, 2025. Moreover, the business activities of the Company currently are focused in the California counties of Butte, Lassen, Modoc, Nevada, Placer, Plumas, Shasta, Sutter and Tehama and in Washoe and Carson City Counties in Northern Nevada. Consequently, the results of operations and financial condition of the Company are dependent upon the general trends in these economies and, in particular, the commercial real estate markets. In addition, the concentration of the Company's operations in these areas of Northeastern California and Northwestern Nevada exposes it to greater risk than other banking companies with a wider geographic base in the event of catastrophes, such as earthquakes, fires and floods in these regions.
Commercial real estate loans (“CRE”) comprised 66% of the lending portfolio at September 30, 2025. CRE loans were 41% investor-owned, 44% owner-occupied, and 15% multi-family. Concentrations by real estate type within the CRE portfolio, excluding multi-family, were 15% Mixed Commercial Real Estate, 14% Office, 13% Retail, 10% Hospitality, 10% Industrial, 8% Gas Stations, 6% Special Purpose, and 5% Mini Storage Facilities, with all remaining concentrations below 5%. There were no rent-controlled properties within the multi-family category. Office facilities are typically small and located in more rural areas. 21% of CRE loans were located in northern Nevada and 60% were located in northern California. Of the $15.0 million in non-accrual balances at September 30, 2025, approximately 12% were CRE. Of the $26.0 million in substandard balances at September 30, 2025 approximately 30% were CRE.
The rates of interest charged on variable rate loans are set at specific increments in relation to the Company's lending rate or other indexes such as the published prime interest rate or U.S. Treasury rates and vary with changes in these indexes. The frequency in which variable rate loans reprice can vary from one day to several years. At September 30, 2025, and December 31, 2024, approximately 80% and 77%, respectively, of the Company's loan portfolio was comprised of variable rate loans. Loans indexed to the prime interest rate were approximately 21% of the Company’s variable rate loan portfolio on September 30, 2025; these loans reprice within one day to three months of a change in the prime rate. The remainder of the Company's variable rate loans mostly consist of commercial real estate loans tied to U.S. Treasury rates and reprice every five years. Approximately 75% of the variable rate loans are indexed to the five-year T-Bill rate and reprice every five years. While real estate mortgage, agricultural, commercial and consumer lending remain the foundation of the Company's historical loan mix, some changes in the mix have occurred due to the changing economic environment and the resulting change in demand for certain loan types
Analysis of Asset Quality and Allowance for Credit Losses. The Company attempts to minimize credit risk through its underwriting and credit review policies. The Company’s credit review process includes internally prepared credit reviews as well as contracting with an outside firm to conduct periodic credit reviews. The Company’s management and lending officers evaluate the loss exposure of classified and nonaccrual loans on a quarterly basis, or more frequently as loan conditions change. The Management Asset Resolution Committee (MARC) reviews the asset quality of criticized and past due loans monthly and reports the findings to the full Board of Directors. In management's opinion, this loan review system helps facilitate the early identification of potential criticized loans. MARC also provides guidance for the maintenance and timely disposition of OREO properties including developing financing and marketing programs to incent individuals to purchase OREO. MARC consists of the Bank’s Chief Executive Officer, Chief Financial Officer and Chief Credit Officer, and the activities are governed by a formal written charter. The MARC meets monthly and reports to the Board of Directors.
The allowance for credit losses is established through charges to earnings in the form of the provision for credit losses. Loan losses are charged to, and recoveries are credited to, the allowance for credit losses. The allowance for credit losses is maintained at a level deemed appropriate by management to provide for known and inherent risks in the loan portfolio.
To estimate the Allowance for Credit Loss (ACL), the Company elected to use the Discounted Cash Flow (DCF) methodology. This method uses loan level repayment terms to determine expected cash flows which are then discounted by various assumptions such as prepayment or curtailment rates, Probability of Default and Loss Given Default rates.
The ACL is measured on the loan’s amortized cost over the remaining contractual lives of the loan portfolios, adjusted for industry average prepayment and curtailment rates. The Company established a 12-month term for forecasting economic conditions followed by a 24-month straight line reversion to historical average conditions as its basis for the probability of loan default. The probability of default rate is determined by reviewing loans with similar risk characteristics that are combined to form loan pools which are statistically correlated with historical credit losses, defaults and various economic metrics, including California Unemployment rates, California Housing Prices and California Gross Domestic Product. Pool balances that are determined to have probable default are then adjusted for expected Loss Given Default. The Company selected the Frye Jacobs Index as its basis for Loss Given Default. Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and annual back-testing of model performance to actual realized results.
At January 1, 2023, the adoption and implementation date of ASC Topic 326, September 30, 2025, and December 31, 2024, the Company utilized a reasonable and supportable forecast period of approximately four quarters and obtained the forecast data from publicly available sources. The Company also considered the impact of portfolio concentrations, changes in underwriting practices, and other risk factors that might influence its loss estimation process. Management believes that the allowance for credit losses at September 30, 2025, appropriately reflected expected credit losses inherent in the loan portfolio at that date.
In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. The Company's policy is that loans designated as nonaccrual no longer share risk characteristics similar to other loans evaluated collectively and as such, all nonaccrual loans, in excess of $100,000, are individually evaluated for reserves. As of September 30, 2025 and December 31, 2024, the Bank's nonaccrual loans comprised the entire population of loans individually evaluated. The Company's policy is that nonaccrual loans, in excess of $100,000, also represent the subset of loans where borrowers are experiencing financial difficulty where an evaluation of the source of repayment is required to determine if the nonaccrual loans should be categorized as collateral dependent. Nonaccrual loans with a balance less than or equal to $100,000 are evaluated collectively and consist primarily of automobile loans.
The following table provides certain information for the dates indicated with respect to the Company's allowance for credit losses as well as charge-off and recovery activity.
| For the Nine Months Ended |
For the Year Ended |
|||||||||||||||||||
| (dollars in thousands) |
September 30, |
December 31, |
||||||||||||||||||
| 2025 |
2024 |
2024 |
2023 |
2022 |
||||||||||||||||
| Balance at beginning of period |
$ | 13,196 | $ | 12,867 | $ | 12,867 | $ | 10,717 | $ | 10,352 | ||||||||||
| Purchase of PCD loans |
315 | - | - | - | - | |||||||||||||||
| Impact of CECL Adoption |
- | - | - | 529 | - | |||||||||||||||
| Adjusted balance |
13,511 | 12,867 | 12,867 | 11,246 | 10,352 | |||||||||||||||
| Charge-offs: |
||||||||||||||||||||
| Commercial |
190 | 65 | 302 | 123 | 207 | |||||||||||||||
| Agricultural |
11 | - | - | - | - | |||||||||||||||
| Real estate – residential |
- | - | - | - | - | |||||||||||||||
| Real estate – commercial |
- | - | - | - | 19 | |||||||||||||||
| Real estate – construction and land development |
- | - | - | - | - | |||||||||||||||
| Equity Lines of Credit |
19 | - | - | - | - | |||||||||||||||
| Auto |
408 | 1,292 | 1,643 | 1,550 | 1,195 | |||||||||||||||
| Other |
102 | 65 | 94 | 129 | 40 | |||||||||||||||
| Total charge-offs |
730 | 1,422 | 2,039 | 1,802 | 1,461 | |||||||||||||||
| Recoveries: |
||||||||||||||||||||
| Commercial |
22 | 21 | 25 | 44 | 27 | |||||||||||||||
| Agricultural |
- | - | - | - | - | |||||||||||||||
| Real estate – residential |
49 | 3 | 4 | 3 | 3 | |||||||||||||||
| Real estate – commercial |
- | 1 | 1 | 2 | ||||||||||||||||
| Real estate – construction and land development |
- | - | - | - | - | |||||||||||||||
| Equity Lines of Credit |
- | - | - | - | - | |||||||||||||||
| Auto |
430 | 642 | 928 | 746 | 482 | |||||||||||||||
| Other |
10 | 20 | 35 | 54 | 12 | |||||||||||||||
| Total recoveries |
511 | 686 | 993 | 848 | 526 | |||||||||||||||
| Net charge-offs |
219 | 736 | 1,046 | 954 | 935 | |||||||||||||||
| Provision for credit losses - loans |
6,272 | 1,475 | 1,375 | 2,575 | 1,300 | |||||||||||||||
| Balance at end of period |
$ | 19,564 | $ | 13,606 | $ | 13,196 | $ | 12,867 | $ | 10,717 | ||||||||||
| Net charge-offs during the period to average loans (annualized for the nine-month periods) |
0.03 | % | 0.10 | % | 0.11 | % | 0.10 | % | 0.11 | % | ||||||||||
| Allowance for credit losses to total loans |
1.30 | % | 1.35 | % | 1.30 | % | 1.34 | % | 1.18 | % | ||||||||||
The following table provides a breakdown of the allowance for credit losses at September 30, 2025,and December 31, 2024:
| Percent of |
Percent of |
|||||||||||||||
| Loans in Each |
Loans in Each |
|||||||||||||||
| Balance at End |
Category to |
Balance at End |
Category to |
|||||||||||||
| (dollars in thousands) |
of Period |
Total Loans |
of Period |
Total Loans |
||||||||||||
| 9/30/2025 |
9/30/2025 |
12/31/2024 |
12/31/2024 |
|||||||||||||
| Commercial |
$ | 2,476 | 10.8 | % | $ | 1,265 | 7.6 | % | ||||||||
| Agricultural |
3,256 | 10.3 | % | 1,802 | 11.7 | % | ||||||||||
| Real estate – residential |
265 | 2.2 | % | 102 | 1.1 | % | ||||||||||
| Real estate – commercial |
11,079 | 65.5 | % | 7,459 | 63.7 | % | ||||||||||
| Real estate – construction and land development |
726 | 3.3 | % | 815 | 5.3 | % | ||||||||||
| Equity Lines of Credit |
600 | 3.6 | % | 460 | 3.7 | % | ||||||||||
| Auto |
839 | 3.0 | % | 1,215 | 6.4 | % | ||||||||||
| Other |
323 | 1.3 | % | 78 | 0.5 | % | ||||||||||
| Total |
$ | 19,564 | 100 | % | $ | 13,196 | 100 | % | ||||||||
The following table sets forth the amount of the Company's nonperforming assets as of the dates indicated.
| At |
||||||||||||||||
| September 30, |
At December 31, |
|||||||||||||||
| 2025 |
2024 |
2023 |
2022 |
|||||||||||||
| (dollars in thousands) |
||||||||||||||||
| Nonaccrual loans |
$ | 15,029 | $ | 4,105 | $ | 4,820 | $ | 1,172 | ||||||||
| Loans past due 90 days or more and still accruing |
- | - | - | - | ||||||||||||
| Total nonperforming loans |
15,029 | 4,105 | 4,820 | 1,172 | ||||||||||||
| Other real estate owned |
114 | 91 | 357 | 0 | ||||||||||||
| Other vehicles owned |
26 | 111 | 138 | 18 | ||||||||||||
| Total nonperforming assets |
$ | 15,169 | $ | 4,307 | $ | 5,315 | $ | 1,190 | ||||||||
| Interest income forgone on nonaccrual loans |
$ | 881 | $ | 301 | $ | 257 | $ | 121 | ||||||||
| Interest income recorded on a cash basis on nonaccrual loans |
$ | - | $ | - | $ | - | $ | - | ||||||||
| Nonperforming loans to total loans |
1.00 | % | 0.40 | % | 0.50 | % | 0.13 | % | ||||||||
| Nonperforming assets to total assets |
0.68 | % | 0.27 | % | 0.33 | % | 0.07 | % | ||||||||
The Company places loans 90 days or more past due on nonaccrual status unless the loan is well secured and in the process of collection. A loan is considered to be in the process of collection if, based on a probable specific event, it is expected that the loan will be repaid or brought current. Generally, this collection period would not exceed 90 days. When a loan is placed on nonaccrual status the Company's general policy is to reverse and charge against current income previously accrued but unpaid interest. Interest income on such loans is subsequently recognized only to the extent that cash is received and future collection of principal is deemed by management to be probable. Where the collectability of the principal or interest on a loan is considered to be doubtful by management, it is placed on nonaccrual status prior to becoming 90 days delinquent.
Nonperforming assets (which are comprised of nonperforming loans, other real estate owned (“OREO”) and repossessed vehicle holdings) at September 30, 2025, were $15.2 million, up from $4.3 million at December 31, 2024. Nonperforming assets as a percentage of total assets increased to 0.68% at September 30, 2025, up from 0.27% at December 31, 2024. OREO totaled $114 thousand at September 30, 2025, and $91 thousand December 31, 2024. Nonperforming loans were $15.0 million at September 30, 2025 and $4.1 million at December 31, 2024. Nonperforming loans as a percentage of total loans increased to 1.00% at September 30, 2025, up from 0.40% at December 31, 2024. The increase in nonperforming loans is mostly related to one agricultural loan relationship of 15 loans totaling $9.8 million. The borrower on these loans was unable to meet his commitments under modified loan agreements, and therefore during the second quarter of 2025, we placed the loans on nonaccrual status. Interest reversed on these loans during the nine months ended September 30, 2025, was $344 thousand and specific loan loss reserves totaling $870 thousand were reserved against the loans at September 30, 2025.
During the nine months ended September 30, 2025, we recorded a provision for credit losses of $6.5 million, consisting of a provision for credit losses on loans of $6.3 million and an increase in the reserve for unfunded commitments of $211 thousand. The provision includes growth in the loan portfolio, CECL day 1 provision on non-PCD loans acquired from CCB and the reserve for unfunded commitments on loans acquired from CCB. This compares to a provision for credit losses of $1.3 million consisting of a provision for credit losses on loans of $1.5 million and a decrease in the reserve for unfunded commitments of $129 thousand during the nine months ended September 30, 2024.
Net charge-offs totaled $219 thousand and $736 thousand during the nine months ended September 30, 2025, and 2024, respectively. The allowance for credit losses totaled $19.6 million at September 30, 2025, and $13.6 million at September 30, 2024. The allowance for credit losses as a percentage of total loans was 1.30% on September 30, 2025, and December 31, 2024.
The following table provides a summary of the change in the number and balance of OREO properties for the nine months ended September 30, 2025 and 2024 (dollars in thousands):
| Nine Months Ended September 30, |
||||||||||||||||
| # |
2025 |
# |
2024 |
|||||||||||||
| Beginning Balance |
1 | $ | 91 | 1 | $ | 357 | ||||||||||
| Additions |
1 | 50 | 1 | 141 | ||||||||||||
| Dispositions |
- | - | 1 | (357 | ) | |||||||||||
| Provision from change in OREO valuation |
- | (27 | ) | - | - | |||||||||||
| Ending Balance |
2 | $ | 114 | 1 | $ | 141 | ||||||||||
Investment Portfolio and Federal Reserve Balances. Total investment securities were $484.7 million as of September 30, 2025, and $437.7 million at December 31, 2024. Unrealized losses on available-for-sale investment securities totaling $23,411,000 were recorded, net of $6,920,000 in tax benefit, as accumulated other comprehensive loss within shareholders' equity at September 30, 2025. During the nine months ended September 30, 2025, the Company sold 90 available-for-sale investment securities for proceeds of $88,009,000, recording a $625,000 loss on sale. The Company realized a gain on sale from fifteen of these securities totaling $36,000 and a loss on sale of 75 securities totaling $661,000. These sales mostly relate to the sale of the investment portfolio acquired from CCB.
Unrealized losses on available-for-sale investment securities totaling $35.7 million were recorded, net of $10.6 million in tax benefits, as accumulated other comprehensive loss within shareholders' equity at December 31, 2024. During the first quarter of 2024 we sold $116 million in investment securities having a weighted average tax equivalent yield of 2.24% recording a $19.8 million loss on sale. Beginning in December 2023 and ending on March 27, 2024 we purchased $120 million in investment securities having a weighted average tax equivalent yield of 5.25%. These sales and purchases were made as part of an investment restructure the losses of which were offset by the gain recorded on the sales/leaseback.
The investment portfolio at September 30, 2025, consisted of $390 million in securities of U.S. Government-sponsored agencies and U.S. Government agencies, and 174 municipal securities totaling $95 million. The investment portfolio at December 31, 2024, consisted of $350 million in securities of U.S. Government-sponsored agencies and U.S. Government agencies, and 170 municipal securities totaling $88 million.
There were no Federal funds sold at September 30, 2025, and December 31, 2024; however, the Bank maintained interest earning balances at the Federal Reserve Bank totaling $48 million at September 30, 2025, and $47 million at December 31, 2024. The balance on September 30, 2025, earns interest at the rate of 4.15%.
The Company classifies its investment securities as available-for-sale or held-to-maturity. Currently all securities are classified as available-for-sale. Securities classified as available-for-sale may be sold to implement the Company's asset/liability management strategies and in response to changes in interest rates, prepayment rates and similar factors.
Deposits. Deposits totaled $1.8 billion on September 30, 2025, an increase of $448 million from December 31, 2024. The increase in deposits includes $163 million in non-interest-bearing demand deposits, $166 million in money market accounts and $120 million in time deposits. Savings deposits declined by $1 million. On September 30, 2025, 47% of the Company’s deposits were in the form of non-interest-bearing demand deposits. At September 30, 2025, brokered deposits consist of a $10 million time deposit acquired from CCB. The rate paid on this deposit is 3.80%.
The following table shows the distribution of deposits by type at September 30, 2025 and December 31, 2024.
| Percent of |
Percent of |
|||||||||||||||
| Deposits in Each |
Deposits in Each |
|||||||||||||||
| Balance at End |
Category to |
Balance at End |
Category to |
|||||||||||||
| (dollars in thousands) |
of Period |
Total Deposits |
of Period |
Total Deposits |
||||||||||||
| Distribution of Deposits by Type |
09/30/2025 | 09/30/2025 | 12/31/2024 | 12/31/2024 | ||||||||||||
| Non-interest bearing |
$ | 862,085 | 47.4 | % | $ | 699,401 | 51.0 | % | ||||||||
| Money Market |
433,832 | 23.8 | % | 267,582 | 19.5 | % | ||||||||||
| Savings |
309,030 | 17.0 | % | 309,929 | 22.6 | % | ||||||||||
| Time |
214,589 | 11.8 | % | 94,189 | 6.9 | % | ||||||||||
| Total Deposits |
$ | 1,819,536 | 100 | % | $ | 1,371,101 | 100 | % | ||||||||
Deposits represent the Bank's primary source of funds. Deposits are primarily core deposits in that they are demand, savings and time deposits generated from local businesses and individuals. These sources are considered to be relatively stable, long-term relationships thereby enhancing steady growth of the deposit base without major fluctuations in overall deposit balances. The Company experiences, to a small degree, some seasonality with the slower growth period between November through April, and the higher growth period from May through October. To assist in meeting any funding demands, the Company maintains several borrowing agreements as described below.
The Company estimates that it has approximately $724 million in uninsured deposits which includes uninsured deposits of Plumas Bancorp. Of this amount, $162 million represents deposits that are collateralized such as deposits of states, municipalities and tribal accounts. Uninsured amounts are estimated based on the portion of the account balances in excess of FDIC insurance limits.
The following table presents the maturity distribution of the portion of time deposits in excess of the FDIC insurance limit.
| Maturity Distribution of Estimated Uninsured Time Deposits |
||||||||
| September 30, |
December 31, | |||||||
| (dollars in thousands) |
2025 |
2024 | ||||||
| Remaining maturity: |
||||||||
| Three months or less |
$ | 24,944 | $ | 11,697 | ||||
| After three through nine months |
14,216 | 6,712 | ||||||
| After six through twelve months |
9,975 | 4,452 | ||||||
| After twelve months |
56,619 | 61 | ||||||
| Total |
$ | 105,754 | $ | 22,922 | ||||
Short-term Borrowing Arrangements. The Company is a member of the Federal Home Loan Bank of San Francisco (FHLB) and can borrow up to $272 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $462 million. The Company is also eligible to borrow at the Federal Reserve Bank (FRB) Discount Window. At September 30, 2025, the Company could borrow up to $63 million at the Discount Window secured by investment securities with a fair value of $72 million. In addition to its FHLB borrowing line and the Discount Window, the Company has unsecured short-term borrowing agreements with two of its correspondent banks in the amounts of $50 million and $20 million. There were no outstanding borrowings to the FHLB, FRB Discount Window or the correspondent banks at September 30, 2025 and December 31, 2024.
The Federal Reserve Board, on March 12, 2023, announced the creation of the BTFP. At September 30, 2024, the Company had outstanding borrowings under the BTFP totaling $60 million. All BTFP borrowings were paid off during 2024. Interest expense recognized on the BTFP borrowings for the three and nine-months ended September 30, 2024, was $1.2 million and $3.7 million, respectively.
Note Payable. Plumas Bancorp has outstanding borrowings of $15 million with a correspondent bank. This loan matures on January 25, 2035, and can be prepaid at any time. During the initial three years the loan functions as an interest only revolving line of credit. Beginning on January 25, 2026 the loan converts into a term loan requiring semi-annual principal and interest payments and no further advances can be made. This borrowing bears interest at a fixed rate of 3.85% for the first 5 years and then beginning January 25, 2027 at a floating interest rate linked to WSJ Prime Rate for the remaining eight-year term. Interest expense recognized on this loan for the three and nine-months ended September 30, 2025, was $148 thousand and $438 thousand, respectively. This compares to interest of $164 thousand and $477 thousand during the three and nine months ended September 30, 2024.
The Note is secured by the common stock of the Bank. The Loan Agreement contains certain financial and non-financial covenants, which include, but are not limited to, a minimum leverage ratio at the Bank, a minimum total risk-based capital ratio at the Bank, a maximum Texas Ratio at the Bank, a minimum level of Tier 1 capital at the Bank and a return on average assets needed to generate a 1.25X debt service coverage ratio. The Loan Agreement also contains customary events of default, including, but not limited to, failure to pay principal or interest, the commencement of certain bankruptcy proceedings, and certain adverse regulatory events affecting the Company or the Bank. Upon the occurrence of an event of default under the Loan Agreement, the Company’s obligations under the Loan Agreement may be accelerated. The Company was in compliance with all covenants related to the Term Note at September 30, 2025.
Subordinated Debentures. As a result of and upon the completion of the Merger, the Company assumed Cornerstone’s obligations with respect to an aggregate principal amount of $12 million of subordinated notes, comprised of (a) $2 million in aggregate principal amount of 4.75% Fixed to Floating Rate Subordinated Notes due November 30, 2035 (the “2035 Notes”) and (b) $10 million in aggregate principal amount of 4.75% Fixed-to-Floating Rate Subordinated Notes due November 30, 2030 (the “2030 Notes”). The 2035 Notes, which were issued in 2020, have a fixed interest rate of 4.75% for the first ten years and thereafter a quarterly variable interest rate equal to the then current three-month term Secured Overnight Financing Rate (“SOFR”) plus 4.14%. The 2030 Notes, which were issued in 2020, have a fixed interest rate of 4.75% for the first five years and thereafter a quarterly variable interest rate equal to the then current three-month term SOFR plus 4.52%. It is the Company’s intention to redeem the 2030 notes on December 30, 2025. Interest expense recognized on the subordinated notes for the three and nine-months ended September 30, 2025, was $225 thousand.
Repurchase Agreements. The Bank offers a repurchase agreement product for its larger customers which use securities sold under agreements to repurchase as an alternative to interest-bearing deposits. Securities sold under agreements to repurchase totaling $93.9 million and $22.1 million at September 30, 2025, and December 31, 2024, respectively, are secured by U.S. Government agency securities with a carrying amount of $104.3 million and $38.5 million at September 30, 2025 and December 31, 2024, respectively. The increase in repurchase agreements is mostly related to the acquisition of CCB. CCB maintained reciprocal deposits with several customers. During July 2025, we converted these deposits to repurchase agreements. Interest expense recognized on repurchase agreements for the three and nine-months ended September 30, 2025, was $317 thousand and $347 thousand, respectively. This compares to interest of $8 thousand and $26 thousand during the three and nine months ended September 30, 2024.
Shareholders’ Equity. Shareholders’ equity increased by $68 million from $178 million at December 31, 2024 to $246 million at September 30, 2025. The $68 million increase includes earnings during the nine-month period of $18.6 million, common stock and stock options issued in the acquisition of Cornerstone totaling $45.2 million, a decrease in accumulated other comprehensive loss of $8.7 million and restricted stock and stock option activity totaling $1.2 million. These items were partially offset by the payment of cash dividends totaling $5.6 million.
It is the policy of the Company to periodically distribute excess retained earnings to the shareholders through the payment of cash dividends. Such dividends help promote shareholder value and capital adequacy by enhancing the marketability of the Company’s stock. All authority to provide a return to the shareholders in the form of a cash or stock dividend or split rests with the Board of Directors. The Board will periodically, but on no regular schedule, review the appropriateness of a cash dividend payment. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. The Company paid a quarterly cash dividend of $0.30 per share on August 15, 2025, May 15, 2025 and February 17, 2025 and a quarterly cash dividend of $0.27 per share on February 15, 2024, May 15, 2024, August 15, 2024, and November 15, 2024.
Capital Standards. The Company uses a variety of measures to evaluate its capital adequacy. Management reviews these capital measurements on a monthly basis and takes appropriate action to ensure that they are within established internal and external guidelines. The FDIC has promulgated risk-based capital guidelines for all state non-member banks such as the Bank. These guidelines establish a risk-adjusted ratio relating capital to different categories of assets and off-balance sheet exposures.
In July, 2013, the federal bank regulatory agencies adopted rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. depository organizations, sometimes called “Basel III,” that increased the minimum regulatory capital requirements for bank holding companies and depository institutions and implemented strict eligibility criteria for regulatory capital instruments. The Basel III capital rules include a minimum common equity Tier 1 ratio of 4.5%, a Tier 1 capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a minimum leverage ratio of 4.0% (calculated as Tier 1 capital to average consolidated assets). The minimum capital levels required to be considered “well capitalized” include a common equity Tier 1 ratio of 6.5%, a Tier 1 risk-based capital ratio of 8.0%, a total risk-based capital ratio of 10.0% and a leverage ratio of 5.0%. In addition, the Basel III capital rules require that banking organizations maintain a capital conservation buffer of 2.5% above the minimum capital requirements in order to avoid restrictions on their ability to pay dividends, repurchase stock or pay discretionary bonuses. Including the capital conservation buffer of 2.5%, the Basel III capital rules require the following minimum ratios for a bank holding company or bank to be considered well capitalized: a common equity Tier 1 capital ratio of 7.0%, a Tier 1 capital ratio of 8.5%, and a total capital ratio of 10.5%. At September 30, 2025, the Company’s and the Bank’s capital ratios exceeded the thresholds necessary to be considered “well capitalized” under the Basel III framework.
Under the FRB’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement (the “Policy Statement”), qualifying bank holding companies with less than $3 billion in consolidated assets are exempt from the Basel III consolidated capital rules. The Company qualifies for treatment under the Policy Statement and is not currently subject to the Basel III consolidated capital rules at the bank holding company level. The Basel III capital rules continue to apply to the Bank.
In 2019, the federal bank regulators issued a rule establishing a “community bank leverage ratio” (the ratio of a bank’s tier 1 capital to average total consolidated assets) that qualifying institutions with less than $10 billion in assets may elect to use in lieu of the generally applicable leverage and risk-based capital requirements under Basel III. A qualifying banking organization that elects to use the new ratio will be considered to have met all applicable federal regulatory capital and leverage requirements, including the minimum capital levels required to be considered “well capitalized,” if it maintains a community bank leverage ratio exceeding 9%. The new rule became effective on January 1, 2020. Plumas Bank has chosen not to opt into the community bank leverage ratio at this time.
| Minimum Amount of Capital Required |
||||||||||||||||||||||||
| To be Well-Capitalized |
||||||||||||||||||||||||
| For Capital |
Under Prompt |
|||||||||||||||||||||||
| Actual |
Adequacy Purposes (1) |
Corrective Provisions |
||||||||||||||||||||||
| Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
|||||||||||||||||||
| September 30, 2025 |
||||||||||||||||||||||||
| Common Equity Tier 1 Ratio |
$ | 238,755 | 14.3 | % | $ | 75,321 | 4.5 | % | $ | 108,796 | 6.5 | % | ||||||||||||
| Tier 1 Leverage Ratio |
238,755 | 10.6 | % | 90,431 | 4.0 | % | 113,039 | 5.0 | % | |||||||||||||||
| Tier 1 Risk-Based Capital Ratio |
238,755 | 14.3 | % | 100,427 | 6.0 | % | 133,903 | 8.0 | % | |||||||||||||||
| Total Risk-Based Capital Ratio |
259,289 | 15.5 | % | 133,903 | 8.0 | % | 167,390 | 10.0 | % | |||||||||||||||
| December 31, 2024 |
||||||||||||||||||||||||
| Common Equity Tier 1 Ratio |
$ | 199,308 | 17.3 | % | $ | 51,981 | 4.5 | % | $ | 75,084 | 6.5 | % | ||||||||||||
| Tier 1 Leverage Ratio |
199,308 | 11.9 | % | 66,856 | 4.0 | % | 83,570 | 5.0 | % | |||||||||||||||
| Tier 1 Risk-Based Capital Ratio |
199,308 | 17.3 | % | 69,308 | 6.0 | % | 92,411 | 8.0 | % | |||||||||||||||
| Total Risk-Based Capital Ratio |
213,124 | 18.5 | % | 92,411 | 8.0 | % | 115,514 | 10.0 | % | |||||||||||||||
(1) Does not include amounts required to maintain the capital conservation buffer under the new capital rules.
Management believes that Plumas Bank currently meets all its capital adequacy requirements.
The current and projected capital positions of the Bank and the impact of capital plans and long-term strategies are reviewed regularly by management. The Company policy is to maintain the Bank’s ratios above the prescribed well-capitalized ratios at all times.
Off-Balance Sheet Arrangements
Loan Commitments. In the normal course of business, there are various commitments outstanding to extend credits that are not reflected in the financial statements. Commitments to extend credit and letters of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Annual review of commercial credit lines, letters of credit and ongoing monitoring of outstanding balances reduces the risk of loss associated with these commitments. As of September 30, 2025, the Company had $276 million in unfunded loan commitments and $1.6 million in letters of credit. This compares to $155 million in unfunded loan commitments at December 31, 2024 and no letters of credit. Of the $276 million in unfunded loan commitments, $193 million and $83 million represent commitments to commercial and consumer customers, respectively. Of the total unfunded commitments at September 30, 2025, $125 million were secured by real estate, of which $51 million was secured by commercial real estate and $74 million was secured by residential real estate mostly in the form of equity lines of credit. The commercial loan commitments not secured by real estate primarily represent business lines of credit, while the consumer loan commitments not secured by real estate primarily represent revolving credit card lines and overdraft protection lines. Since some of the commitments are expected to expire without being drawn upon the total commitment amounts do not necessarily represent future cash requirements.
Operating Leases. The Company’s leases twelve branches. Our Yuba City branch is classified as owned; however, it is subject to a long-term land lease. The Company also leases two lending offices and two administrative offices. The expiration dates of the leases vary, with the first such lease expiring during 2026 and the last such lease expiring during 2044. Including variable lease expense, total rent expense for the nine months ended September 30, 2025, and 2024 was $2.6 million and $2.2 million, respectively.
Liquidity
The Company manages its liquidity to provide the ability to generate funds to support asset growth, meet deposit withdrawals (both anticipated and unanticipated), fund customers' borrowing needs and satisfy maturity of short-term borrowings. The Company’s liquidity needs are managed using assets or liabilities, or both. On the asset side, in addition to cash and due from banks, the Company maintains an investment portfolio which includes unpledged U.S. Government-sponsored agency securities that are classified as available-for-sale. On the liability side, liquidity needs are managed by offering competitive rates on deposit products and the use of established lines of credit.
The Company is a member of the Federal Home Loan Bank of San Francisco (FHLB) and can borrow up to $272 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $462 million. The Company is also eligible to borrow at the Federal Reserve Bank (FRB) Discount Window. At September 30, 2025, the Company could borrow up to $63 million at the Discount Window secured by investment securities with a fair value of $72 million. In addition to its FHLB borrowing line and the Discount Window, the Company has unsecured short-term borrowing agreements with two of its correspondent banks in the amounts of $50 million and $20 million. There were no outstanding borrowings to the FHLB, FRB Discount Window or the correspondent banks at September 30, 2025 and December 31, 2024.
Deposits represent the Bank's primary source of funds. Deposits are primarily core deposits in that they are demand, savings and time deposits generated from local businesses and individuals. These sources are considered to be relatively stable, long- term relationships thereby enhancing steady growth of the deposit base without major fluctuations in overall deposit balances. The Company experiences, to a small degree, some seasonality with the slower growth period between November through April, and the higher growth period from May through October. The Company estimates that it has approximately $724 million in uninsured deposits which includes uninsured deposits of Plumas Bancorp. Of this amount, $162 million represents deposits that are collateralized such as deposits of states, municipalities and tribal accounts. Uninsured amounts are estimated based on the portion of the account balances in excess of FDIC insurance limits.
The Company’s securities portfolio, Discount Window advances, FHLB advances, and cash and due from banks serve as the primary sources of liquidity, providing adequate funding for loans during periods of high loan demand. During periods of decreased lending, funds obtained from the maturing or sale of investments, loan payments, and new deposits are invested in short-term earning assets, such as cash held at the FRB and investment securities, to serve as a source of funding for future loan growth. Management believes that the Company’s available sources of funds, including borrowings, will provide adequate liquidity for its operations in the foreseeable future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of September 30, 2025. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2025.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2025 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/or its subsidiary are a party to claims and legal proceedings arising in the ordinary course of business. In the opinion of the Company's management, the amount of ultimate liability with respect to such proceedings will not have a material adverse effect on the financial condition or results of operations of the Company taken as a whole.
Item 1A. RISK FACTORS
In addition to the other information set forth in this Form 10-Q you should carefully consider the risk factors that appeared under Item 1A, “Risk Factors” in the Company’s 2024 Annual Report. There are no material changes from the risk factors included within the Company’s 2024 Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None.
(c) None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following documents are included or incorporated by reference in this Quarterly Report on Form 10Q:
| 2.1 | Agreement and Plan of Merger and Reorganization dated as of January 28, 2025, by and between Plumas Bancorp and Cornerstone Community Bancorp included as Exhibit 2.1 to the Registrant's 8-K filed on January 29, 2025, which is incorporated by this reference herein. |
| 3.1 |
Articles of Incorporation as amended of Registrant included as Exhibit 3.1 to the Registrant’s Form S-4, File No. 333-84534, which is incorporated by reference herein. |
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| 3.2 |
Bylaws of Registrant as amended on August 16, 2023 included as Exhibit 3.1 to the Registrant’s Form 8-K for August 17, 2023, which is incorporated by reference herein. |
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| 3.3 |
Amendment of the Articles of Incorporation of Registrant dated November 1, 2002, is included as Exhibit 3.3 to the Registrant’s 10-Q for September 30, 2005, which is incorporated by this reference herein. |
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| 3.4 |
Amendment of the Articles of Incorporation of Registrant dated August 17, 2005, is included as Exhibit 3.4 to the Registrant’s 10-Q for September 30, 2005, which is incorporated by this reference herein. |
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| 4 |
Specimen form of certificate for Plumas Bancorp included as Exhibit 4 to the Registrant’s Form S-4, File No. 333-84534, which is incorporated by reference herein. |
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| 4.1 | Description of Securities of Plumas Bancorp Registered Under Section 12 of the Exchange Act, is included as Exhibit 4.1 to the Registrant's 10-K for December 31, 2023, which is incorporated by this reference herein. |
| 10.1 | Completion of Acquisition, Creation of a Direct Financial Obligation, and Director Appointment as of June 30, 2025 is included in the Registrant's 8-K filed on July 2, 2025. |
| 10.2 | Change of Control Agreements as of July 21, 2025, included as Exhibit 10.1 to the Registrant's 8-K filed on July 22, 2025, which is incorporated by this reference herein. |
| 10.3 | Schedule of Executive Officers Party to the Change of Control Agreements as of July 21, 2025, included as Exhibit 10.2 to the Registrant's 8-K filed on July 22, 2025, which is incorporated by this reference herein. |
| 10.4 | Amended and Restated Change of Control Agreements as of August 22, 2025, included as Exhibit 10.1 to the Registrant's 8-K filed on August 22, 2025, which is incorporated by this reference herein. |
| 10.5 | Schedule of Executive Officers Party to the Amended and Restated Change of Control Agreements as of August 22, 2025, included as Exhibit 10.2 to the Registrant's 8-K filed on August 22, 2025, which is incorporated by this reference herein. |
| 10.6 | Form of Indemnification Agreement (Plumas Bancorp) is included as Exhibit 10.1 to the Registrant’s 8-K filed on August 20,2020 which is incorporated by this reference herein. |
| 10.7 | Form of Indemnification Agreement (Plumas Bank) is included as Exhibit 10.2 to the Registrant’s 8-K filed on August 20,2020 which is incorporated by this reference herein. |
| 31.1* |
Rule 13a-14(a) [Section 302] Certification of Principal Financial Officer dated August 6, 2025. |
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| 31.2* |
Rule 13a-14(a) [Section 302] Certification of Principal Executive Officer dated August 6, 2025. |
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| 32.1* |
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated August 6, 2025. |
| 32.2* |
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated August 6, 2025. |
| 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 |
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| 101.CAL* |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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| 101.DEF* |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
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| 101.LAB* |
Inline XBRL Taxonomy Extension Label Linkbase Document |
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| 101.PRE* |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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| * |
Filed herewith |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| PLUMAS BANCORP |
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| (Registrant) |
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| Date: November 5, 2025 |
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/s/ Richard L. Belstock |
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Richard L. Belstock |
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Chief Financial Officer |
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/s/ Andrew J. Ryback |
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Andrew J. Ryback |
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Director, President and Chief Executive Officer |
FAQ
How did PLBC’s Q3 2025 profit compare to last year?
What drove balance sheet growth for PLBC in Q3 2025?
How did credit costs affect PLBC’s results?
What were PLBC’s non‑interest expenses in Q3 2025?
Did PLBC issue shares during 2025?
How did securities impact PLBC’s comprehensive income?
