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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025

Commission file number: 000-33063

SIERRA BANCORP

(Exact name of Registrant as specified in its charter)


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

86 North Main Street, Porterville, California 93257

(Address of principal executive offices) (Zip Code)

(559) 782-4900

(Registrant’s telephone number, including area code)

Not Applicable

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

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

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

BSRR

The NASDAQ Stock Market LLC

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

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

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


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

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

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

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

As of July 30, 2025, the registrant had 13,590,273 shares of common stock outstanding, including 210,385 shares of unvested restricted stock.

Table of Contents

FORM 10-Q

Table of Contents


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

	Item 2. Management’s Discussion & Analysis of Financial Condition & Results of Operations				36
		Forward-Looking Statements			36
		Critical Accounting Policies			37
		Overview of the Results of Operations and Financial Condition			37
		Earnings Performance			39
			Net Interest Income and Net Interest Margin		39
			Provision for Credit Losses on Loans		44
			Noninterest Income and Noninterest Expense		45
			Provision for Income Taxes		47
		Balance Sheet Analysis			47
			Earning Assets		47
				Investments	47
				Loan Portfolio	49
				Nonperforming Assets	51
				Allowance for Credit Losses on Loans	51
				Off-Balance Sheet Arrangements	52
			Other Assets		53
			Deposits and Interest-Bearing Liabilities		54
				Deposits	54
				Other Interest-Bearing Liabilities	54
			Noninterest-Bearing Liabilities		55
		Liquidity and Market Risk Management			55
		Capital Resources			58

	Item 3. Quantitative & Qualitative Disclosures about Market Risk				59

	Item 4. Controls and Procedures				59

Part II - Other Information					59
	Item 1. - Legal Proceedings				59
	Item 1A. - Risk Factors				59
	Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds				60
	Item 3. - Defaults upon Senior Securities				60
	Item 4. - Mine Safety Disclosures				60
	Item 5. - Other Information				60
	Item 6. - Exhibits				61

Signatures					63

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements

SIERRA BANCORP

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)


	June 30, 2025		December 31, 2024
ASSETS	(unaudited)		(audited)
Cash and due from banks	$	112,905	$	79,616
Interest-bearing deposits in banks		17,107		21,048
Total cash & cash equivalents		130,012		100,664
Investment securities
Available-for-sale, net of zero allowance for credit losses		668,834		655,967
Held-to-maturity, net of allowance for credit losses of $15		298,484		305,514
Total investment securities		967,318		961,481
Loans, net:
Gross loans		2,434,605		2,331,341
Deferred loan costs, net		4		93
Allowance for credit losses on loans		(21,680)		(24,830)
Net loans		2,412,929		2,306,604
Premises and equipment, net		15,285		15,431
Goodwill		27,357		27,357
Other intangible assets, net		294		618
Bank-owned life insurance		67,686		53,153
Operating right-of-use asset		26,623		28,465
Other assets		122,798		120,498
Total assets	$	3,770,302	$	3,614,271

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing	$	1,065,742	$	1,007,208
Interest-bearing		1,908,727		1,884,460
Total deposits		2,974,469		2,891,668
Repurchase agreements		126,509		108,860
Other borrowings		154,400		80,000
Long-term debt		49,438		49,393
Subordinated debentures		35,928		35,838
Allowance for credit losses on unfunded loan commitments		810		710
Operating lease liability		22,794		24,059
Other liabilities		50,247		66,441
Total liabilities		3,414,595		3,256,969

Commitments and contingent liabilities (Note 7)

Shareholders' equity
Common stock, no par value; 24,000,000 shares authorized; 13,681,828 and 14,223,046 shares issued and outstanding at June 30, 2025, and December 31, 2024, respectively		105,045		108,965
Additional paid-in capital		4,968		4,509
Retained earnings		274,354		275,085
Accumulated other comprehensive loss, net		(28,660)		(31,257)
Total shareholders' equity		355,707		357,302
Total liabilities and shareholders' equity	$	3,770,302	$	3,614,271

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

Table of Contents

SIERRA BANCORP

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2025, and 2024

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


	Three months ended June 30,				Six months ended June 30,
	2025		2024		2025		2024
Interest and dividend income
Loans, including fees	$	31,634	$	28,518	$	61,783	$	53,945
Taxable securities		9,295		12,787		18,435		26,090
Tax-exempt securities		1,577		1,592		3,153		3,581
Federal funds sold and other		211		598		799		839
Total interest income		42,717		43,495		84,170		84,455
Interest expense
Deposits		9,326		11,032		18,697		20,676
Federal funds purchased and repurchase agreements		596		68		667		354
Federal Home Loan Bank advances		1,057		1,040		1,873		2,167
Long-term debt		430		430		860		861
Subordinated debentures		655		755		1,308		1,510
Total interest expense		12,064		13,325		23,405		25,568
Net interest income		30,653		30,170		60,765		58,887
Credit loss expense - loans		1,210		921		3,171		1,018
Credit loss (benefit) expense - unfunded commitments		(10)		(20)		100		10
Net interest income after credit loss expense		29,453		29,269		57,494		57,859
Noninterest income
Service charges and fees on deposit accounts		5,855		6,184		11,436		11,909
Net gain (loss) on sale of securities available-for-sale		1		—		124		(2,883)
Net (loss) gain on sale of fixed assets		(19)		—		(22)		3,799
Increase in cash surrender value of life insurance		1,316		523		1,051		1,738
Other income		1,400		923		2,606		1,656
Total noninterest income		8,553		7,630		15,195		16,219
Noninterest expense
Salaries and employee benefits		12,544		12,029		25,547		25,226
Occupancy and equipment costs		3,142		3,152		6,120		6,177
Other		8,081		7,511		14,517		15,815
Total noninterest expense		23,767		22,692		46,184		47,218
Income before taxes		14,239		14,207		26,505		26,860
Provision for income taxes		3,606		3,944		6,771		7,267
Net income	$	10,633	$	10,263	$	19,734	$	19,593

PER SHARE DATA
Book value	$	26.00	$	24.19	$	26.00	$	24.19
Cash dividends	$	0.25	$	0.23	$	0.50	$	0.46
Earnings per share basic	$	0.78	$	0.72	$	1.44	$	1.36
Earnings per share diluted	$	0.78	$	0.71	$	1.43	$	1.35
Average shares outstanding, basic		13,563,910		14,300,267		13,692,003		14,404,368
Average shares outstanding, diluted		13,637,252		14,381,426		13,777,006		14,467,477

Total shareholders' equity (in thousands)	$	355,707	$	350,020	$	355,707	$	350,020
Shares outstanding		13,681,828		14,466,873		13,681,828		14,466,873
Dividends paid (in thousands)	$	3,449	$	3,352	$	6,963	$	6,748

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

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SIERRA BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2025, and 2024

(dollars in thousands, unaudited)


	Three months ended June 30,				Six months ended June 30,
	2025		2024		2025		2024
Net income	$	10,633	$	10,263	$	19,734	$	19,593
Other comprehensive income, net of tax:
Unrealized gain on securities:
Unrealized holding gain arising during period		315		1,703		3,810		4,580
Less: reclassification adjustment for (gains) losses included in net income ⁽¹⁾		(1)		—		(124)		2,883
Tax effect		(93)		(504)		(1,089)		(2,206)
Other comprehensive income, net of tax		221		1,199		2,597		5,257
Comprehensive income	$	10,854	$	11,462	$	22,331	$	24,850

(1)

Amounts are included in net gains on investment securities available-for-sale on the Consolidated Statements of Income in noninterest income. There were no income tax expenses associated with the reclassification adjustment for the three months ended June 30, 2025, and 2024. Income tax expenses (benefits) associated with the reclassification adjustment for the six months ended June 30, 2025, and 2024 were $37 thousand and $(852) thousand, respectively.

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

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SIERRA BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2025, and 2024

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


								Accumulated
				Additional				Other
	Common Stock			Paid In		Retained		Comprehensive		Shareholders'
	Shares	Amount		Capital		Earnings		(Loss) Income		Equity
Balance, March 31, 2024	14,645,298	$	109,295	$	4,815	$	262,906	$	(31,922)	$	345,094
Net income	—		—		—		10,263		—		10,263
Other comprehensive income, net of tax	—		—		—		—		1,199		1,199
Restricted stock forfeited / cancelled	(257)		—		—		—		—		—
Stock based compensation - stock options	—		—		11		—		—		11
Stock based compensation - restricted stock	—		—		510		—		—		510
Stock repurchase	(178,168)		(1,329)		—		(2,339)		—		(3,668)
Excise tax on stock repurchase	—		(37)		—		—		—		(37)
Cash dividends - $0.23 per share	—		—		—		(3,352)		—		(3,352)
Balance, June 30, 2024	14,466,873	$	107,929	$	5,336	$	267,478	$	(30,723)	$	350,020

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

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

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SIERRA BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2025, and 2024

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


								Accumulated
				Additional				Other
	Common Stock			Paid In		Retained		Comprehensive		Shareholders'
	Shares	Amount		Capital		Earnings		(Loss) Income		Equity
Balance, December 31, 2023	14,793,832	$	110,446	$	4,581	$	259,050	$	(35,980)	$	338,097
Net income	—		—		—		19,593		—		19,593
Other comprehensive income, net of tax	—		—		—		—		5,257		5,257
Restricted stock granted	36,114		—		—		—		—		—
Restricted shares withheld for taxes	(5,062)		(38)		—		(64)		—		(102)
Restricted stock forfeited / cancelled	(906)		—		—		—		—		—
Restricted stock vested in period	—		253		(253)		—		—		—
Stock based compensation - stock options	—		—		25		—		—		25
Stock based compensation - restricted stock	—		—		983		—		—		983
Stock repurchase	(357,105)		(2,663)		—		(4,353)		—		(7,016)
Excise tax on stock repurchase	—		(69)		—		—		—		(69)
Cash dividends - $0.46 per share	—		—		—		(6,748)		—		(6,748)
Balance, June 30, 2024	14,466,873	$	107,929	$	5,336	$	267,478	$	(30,723)	$	350,020

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

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

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SIERRA BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2025, AND 2024

(dollars in thousands, unaudited)


		Six months ended June 30,
	2025		2024
Cash flows from operating activities:
Net income	$	19,734	$	19,593
Adjustments to reconcile net income to net cash provided by operating activities:
(Gain) loss on sales of securities		(124)		2,883
Realized gain on securities transaction		—		(66)
Loss (gain) on disposal of fixed assets		22		(3,799)
Stock based compensation expense		1,041		1,008
Provision for credit losses on loans		3,171		1,018
Provision for credit losses on unfunded commitments		100		10
Depreciation and amortization		1,050		1,057
Net (accretion) amortization on securities premiums and discounts		(153)		614
Net accretion of premiums/discounts for loans acquired		(149)		(158)
Increase in cash surrender value of life insurance policies		(1,051)		(1,738)
Amortization of core deposit intangible		324		438
Increase in interest receivable and other assets		(2,689)		(11,614)
Decrease in other liabilities		(17,587)		(2,301)
Deferred income tax benefit		(338)		(289)
Decrease in value of restricted bank equity securities		—		293
Excise tax on stock repurchases		(111)		—
Amortization of debt issuance costs		45		44
Net amortization of variable interest entities		1,480		608
Net cash provided by operating activities		4,765		7,601
Cash flows from investing activities:
Maturities and calls of securities available for sale		11,000		35,713
Proceeds from sales of securities available for sale		—		233,187
Purchases of securities available for sale		(247,255)		(29,126)
Principal pay downs on securities available for sale		234,381		73,852
Loan (originations) and payments, net		(109,347)		(149,884)
Purchases of premises and equipment		(836)		(787)
Proceeds from sale of premises and equipment		—		4,518
Proceeds from sales of foreclosed assets		—		2,732
Purchase of bank-owned life insurance		(127)		(175)
Purchase of split dollar life insurance policies		(15,000)		—
Proceeds from BOLI death benefit		1,645		54
Net cash (used in) provided by investing activities		(125,539)		170,084
Cash flows from financing activities:
Increase in deposits		82,801		181,187
Increase (decrease) in Fed funds purchased		40,000		(130,000)
Increase (decrease) in short-term Federal Home Loan Bank advances		34,400		(150,500)
Increase in customer repurchase agreements		17,649		40,882
Cash dividends paid		(6,963)		(6,748)
Repurchase of common stock, net		(18,276)		(7,118)
Stock options exercised		511		—
Net cash provided by (used in) financing activities		150,122		(72,297)

Increase in cash and cash equivalents		29,348		105,388
Cash and cash equivalents
Beginning of period		100,664		78,602
End of period	$	130,012	$	183,990
Supplemental disclosure of cash flow information:
Interest paid	$	26,210	$	23,140

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

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SIERRA BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2025

(Unaudited)

Note 1 – The Business of Sierra Bancorp

Sierra Bancorp (the “Company”) is a California corporation headquartered in Porterville, California, and is a registered bank holding company under federal banking laws. The Company was formed to serve as the holding company for Bank of the Sierra (the “Bank”) and has been the Company’s sole shareholder since August 2001. The Company exists primarily for the purpose of holding the stock of the Bank and of such other subsidiaries it may acquire or establish. As of June 30, 2025, the Company’s only other subsidiaries were Sierra Statutory Trust II, Sierra Capital Trust III, and Coast Bancorp Statutory Trust II, which were formed solely to facilitate the issuance of capital trust pass-through securities (“TRUPS”). Pursuant to the Financial Accounting Standards Board (“FASB”) standard on the consolidation of variable interest entities, these trusts are not reflected on a consolidated basis in the Company’s financial statements. References herein to the “Company” include Sierra Bancorp and its consolidated subsidiary, the Bank, unless the context indicates otherwise.

Bank of the Sierra, a California state-chartered bank headquartered in Porterville, California, offers a wide range of retail and commercial banking services via branch offices located throughout California’s South San Joaquin Valley, the Central Coast, Ventura County, the Sacramento area, and neighboring communities. The Bank was incorporated in September 1977 and opened for business in January 1978 as a one-branch bank with $1.5 million in capital. The Company’s growth in the ensuing years has largely been organic in nature but includes four whole-bank acquisitions: Sierra National Bank in 2000, Santa Clara Valley Bank in 2014, Coast National Bank in 2016, and Ojai Community Bank in October 2017. As of the filing date of this report the Bank operates 35 full-service branches and an online branch and maintains ATMs at all but one branch location as well as at seven non-branch locations. Moreover, the Bank has specialized lending units which focus on commercial and industrial, commercial real estate, and mortgage warehouse borrowers. To support organic growth in the commercial lending sectors the Bank opened a loan production office in Templeton, CA in April 2022. The Company had total assets of $3.8 billion at June 30, 2025. The Company’s deposit accounts, which totaled $3.0 billion at June 30, 2025, are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to maximum insurable amounts.

Note 2 – Basis of Presentation

The accompanying interim unaudited consolidated financial statements have been prepared in a condensed format as allowed under U.S. generally accepted accounting principles (“GAAP”). Therefore, these financial statements do not include all of the information and footnotes required for complete, audited financial statements as presented in the Company’s Annual Report on Form 10-K. The information furnished in these interim statements reflects all adjustments that are, in the opinion of Management, necessary for a fair statement of the results for such periods. Such adjustments can generally be considered as normal and recurring unless otherwise disclosed in this Form 10-Q. In preparing the accompanying financial statements, Management has taken subsequent events into consideration, through August 1, 2025, and recognized them where appropriate. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for any other quarter, or for the full year. Certain amounts reported for 2024 have been reclassified to be consistent with the reporting for 2025, none of which impacted net income or shareholders’ equity. The interim financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the Securities and Exchange Commission (the “SEC”).

Segment information

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

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The chief operating decision maker makes operating decisions and assesses performance based on an ongoing review of the Company’s community banking activities (loan and deposit products), which constitutes the Company’s only operating segment for financial reporting purposes. The Company’s single segment is managed on a consolidated basis by the chief operating decision maker, which is the Executive Committee, consisting of the chief executive officer, chief financial officer, chief risk officer, chief credit officer, chief operating officer, and chief banking officer. The accounting policies of the community banking segment are the same as those described in the summary of significant accounting policies of the Company. The chief operating decision maker uses consolidated expense information to manage the operations of the segment. The consolidated expense information is the same as is reported on the income statement as consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets.

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

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

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

Note 3 – Current Accounting Developments

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

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” ASU 2023-07 expands segment disclosure requirements for public entities to require disclosure of significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. ASU 2023-07 was adopted by the Company on January 1, 2024, and did not have a significant impact on the financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state, and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state, and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. ASU 2023-09 is effective for the Company for annual periods beginning after December 15, 2024, though early adoption is permitted. ASU 2023-09 is not expected to have a significant impact on the financial statements.

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

Note 4 – Share Based Compensation

On March 17, 2023, the Company’s Board of Directors approved and adopted the 2023 Equity Compensation Plan (the “2023 Plan”), which became effective May 24, 2023, the date approved by the Company’s shareholders. The 2023 Plan replaced the Company’s 2017 Stock Incentive Plan (the “2017 Plan”). Options to purchase 161,593 shares granted under the 2017 Plan and options to purchase 56,897 shares that were granted under the 2007 Plan were still outstanding as of June 30, 2025 and remain unaffected by that plan’s expiration. The 2023 Plan provides for the issuance of various types of equity awards, including options, stock appreciation rights, restricted stock awards, restricted share units, performance share awards, dividend equivalents, or any combination thereof. Such awards may be granted to officers and employees as well as non-employee directors, which may be granted on such terms and conditions as are established by the Board of Directors or the Compensation Committee in its discretion. The total number of shares of the Company’s authorized but unissued stock reserved for issuance pursuant to awards under the 2023 Plan was initially 360,000 shares, and the number remaining available for grant as of June 30, 2025 was 251,739. Any unexercised, unvested, or undistributed portion of any expired, cancelled, terminated, or forfeited awards under the Company’s 2017 Plan are added to the number of shares available to grant under the 2023 Plan. There were 55,781 unvested Restricted Stock Awards issued under the 2017 Plan and 154,604 unvested Restricted Stock Awards issued under the 2023 Equity Compensation Plan at June 30, 2025, and are included in shares outstanding. The potential dilutive impact of unexercised stock options and unvested restricted stock is discussed below in Note 5, Earnings per Share.

Pursuant to FASB’s standards on stock compensation, the value of each stock option and restricted stock award is reflected in the income statement as employee compensation or directors’ expense by amortizing its grant date fair value over the vesting period of the option or award. The Company utilized a Black-Scholes model to determine grant date fair values for options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Forfeitures are reflected in compensation costs as they occur for both types of awards. A pre-tax charge of $0.5 million was reflected in the Company’s income statement during the second quarters of 2025 and 2024, as expense related to stock options and restricted stock awards. For the first half of both, 2025 and 2024, the charges totaled $1.0 million.

Restricted Stock Grants

The Company’s Restricted Stock Awards are awards of either time-vested or performance-based shares. The Restricted Stock Awards are non-transferable shares of common stock and are available to be granted to the Company’s employees and directors. The vesting period of Restricted Stock Awards is determined at the time the awards are issued, and different awards may have different vesting terms or performance measures, provided, however, that no installment of any Restricted Stock Award shall become vested less than one year from the grant date. Restricted Stock Awards are valued utilizing the fair value of the Company’s stock at the grant date. These awards are expensed on a straight-line basis over the vesting period and consider the probability of meeting the performance criteria. There were 62,692 shares granted to employees of the Company during the first six months of 2025. As of June 30, 2025, there was $2.9 million of unamortized compensation cost related to unvested Restricted Stock Awards granted under the 2017 and 2023 plans. That cost is expected to be amortized over a weighted average period of 2.2 years.

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The Company’s restricted stock award activity for the six months ended June 30, 2025, and 2024 is summarized below (unaudited):


	Six months ended June 30,
	2025			2024
	Shares		Weighted Average Grant-Date Fair Value	Shares		Weighted Average Grant-Date Fair Value
Unvested shares, January 1,	173,970	$	20.75	238,179	$	20.30
Granted	62,692		30.94	36,114		19.10
Vested	(23,273)		20.77	(11,224)		22.57
Forfeited	(3,004)		19.97	(906)		24.26
Unvested shares, June 30,	210,385	$	24.07	262,163	$	20.00

Stock Option Grants

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

The Company’s stock option activity during the six months ended June 30, 2025, and 2024 are summarized below (dollars in thousands, except per share data, unaudited):


	Six months ended June 30,
	2025						2024
	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value⁽¹⁾		Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value⁽¹⁾
Outstanding at January 1,	239,600	$	26.50		$	580	343,449	$	25.02		$	447
Exercised	(21,110)	$	24.23		$	158	—	$	—		$	—
Forfeited/Expired	—	$	—		$	—	(11,000)	$	27.43		$	—
Outstanding at June 30,	218,490	$	26.72	3.31	$	649	332,449	$	24.94	3.72	$	433
Exercisable at June 30,	218,490	$	26.72	3.31	$	649	332,249	$	24.87	3.65	$	433

(1)

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

Note 5 – Earnings per Share

The computation of earnings per share, as presented in the Consolidated Statements of Income, is based on the weighted average number of shares outstanding during each period, excluding unvested restricted stock awards. There were 13,563,910 weighted average shares outstanding during the second quarter of 2025 and 14,300,267 during the second quarter of 2024, while there were 13,692,003 weighted average shares outstanding during the first six months of 2025 and 14,404,368 during the first six months of 2024.

Diluted earnings per share calculations include the effect of the potential issuance of common shares, which for the Company is limited to shares that would be issued on the exercise of “in-the-money” stock options, and unvested restricted stock awards. For the second quarter of 2025, calculations under the treasury stock method resulted in the equivalent of 73,342 shares being added to basic weighted average shares outstanding for purposes of determining diluted earnings per share, while 265,885 shares were excluded from the calculation due to being underwater and thus anti-dilutive. For the second quarter of 2024 the equivalent of 81,159 shares were added in calculating diluted earnings per share, while 260,924 anti-dilutive shares were not factored into the computation. Likewise, for the first half of 2025 the equivalent of 85,003

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shares were added to basic weighted average shares outstanding in calculating diluted earnings per share and a weighted average of 47,798 options that were anti-dilutive for the period were not included, compared to the addition of the equivalent of 63,109 shares and non-inclusion of 265,107 anti-dilutive options in calculating diluted earnings per share for first half of 2024.

Note 6 – Comprehensive Income

As presented in the Consolidated Statements of Comprehensive Income, comprehensive income includes net income and other comprehensive income. The Company’s only source of other comprehensive income is unrealized gains and losses on available-for-sale investment securities. Investment gains or losses that were realized and reflected in net income of the current period, which had previously been included in other comprehensive income as unrealized holding gains or losses in the period in which they arose, are considered to be reclassification adjustments that are excluded from other comprehensive income in the current period.

Note 7 – Commitments and Contingent Liabilities

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


	June 30, 2025		December 31, 2024
Commitments to extend credit	$	666,179	$	636,447
Standby letters of credit	$	5,200	$	5,046

Commitments to extend credit consist primarily of the unused or unfunded portions of the following: mortgage warehouse lines, home equity lines of credit, commercial real estate construction loans, where disbursements are made over the course of construction; commercial revolving lines of credit, unsecured personal lines of credit and formalized (disclosed) deposit account overdraft lines. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments are expected to expire without being drawn upon, the unused portions of committed amounts do not necessarily represent future cash requirements. Standby letters of credit are issued by the Company to guarantee the performance of a customer to a third party, and the credit risk involved in issuing letters of credit is essentially the same as the risk involved in extending loans to customers. Included in unused commitments are mortgage warehouse lines which are in the form of repo lines and are unconditionally cancellable. Unused commitments on mortgage warehouse lines were $334.6 million at June 30, 2025, and $311.6 million at December 31, 2024.

The allowance for credit losses (ACL) on unfunded commitments is estimated using the same reserve or coverage rates calculated on collectively evaluated loans following the application of a funding rate to the amount of the unfunded commitment. The funding rate represents Management’s estimate of the amount of the current unfunded commitment that will be funded over the remaining contractual life of the commitment and is based on historical data. The ACL on unfunded loan commitments is located within liabilities on the consolidated balance sheet while any related provision (benefit) expense is recorded as a provision (benefit) for credit losses.

At June 30, 2025, the Company was also utilizing a letter of credit in the amount of $127.9 million issued by the Federal Home Loan Bank (“FHLB”) on the Company’s behalf as security for certain deposits and to facilitate certain credit arrangements with the Company’s customers. That letter of credit is backed by loans which are pledged to the FHLB by the Company.

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

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

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

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

●

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

●

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

●

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

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

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Fair Value of Financial Instruments

(dollars in thousands, unaudited)


		June 30, 2025
			Fair Value Measurements
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

Financial assets:
Cash and cash equivalents	$	130,012	$	130,012	$	—	$	—	$	130,012
Investment securities available-for-sale	$	668,834	$	—	$	588,724	$	80,110	$	668,834
Investment securities held-to-maturity	$	298,484	$	—	$	281,702	$	—	$	281,702
Loans held for investment	$	2,412,929	$	—	$	—	$	2,300,109	$	2,300,109

Financial liabilities:
Deposits	$	2,974,469	$	1,065,742	$	1,907,758	$	—	$	2,973,500
Repurchase agreements	$	126,509	$	—	$	102,537	$	—	$	102,537
Other borrowings	$	154,400	$	—	$	153,660	$	—	$	153,660
Long-term debt	$	49,438	$	—	$	47,588	$	—	$	47,588
Subordinated debentures	$	35,928	$	—	$	35,371	$	—	$	35,371


		December 31, 2024
			Fair Value Measurements
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

Financial assets:
Cash and cash equivalents	$	100,664	$	100,664	$	—	$	—	$	100,664
Securities available-for-sale	$	655,967	$	—	$	600,314	$	55,653	$	655,967
Securities held-to-maturity	$	305,514	$	—	$	291,028	$	—	$	291,028
Loans held for investment	$	2,306,604	$	—	$	11,529	$	2,161,917	$	2,173,446

Financial liabilities:
Deposits	$	2,891,668	$	1,007,208	$	1,904,840	$	—	$	2,912,048
Repurchase agreements	$	108,860	$	—	$	91,585	$	—	$	91,585
Other borrowings	$	80,000	$	—	$	79,054	$	—	$	79,054
Long-term debt	$	49,393	$	—	$	46,713	$	—	$	46,713
Subordinated debentures	$	35,838	$	—	$	35,299	$	—	$	35,299

For financial asset categories carried on the consolidated balance sheet at fair value as of June 30, 2025, and December 31, 2024, the Company used the following methods and significant assumptions:

●

Investment securities: Fair values are determined by obtaining quoted prices on nationally recognized securities exchanges or by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities by relying on their relationship to other benchmark quoted securities. For securities where quoted prices or market prices of similar securities are not available, fair values are estimated using broker expertise and other market indicators (Level 3). For bonds that are hand priced, actual recent trades for the exact bond are used in determining the price, adjusted for changes in market conditions since the time of the observable trade. For bonds, where no recent observable trades have occurred, our brokers consider recent trades made for similar bonds, issued by banks with similar financial position or credit and adjusted for changes in conditions since the time of the observable trades.

●

Collateral dependent individually evaluated loans: Collateral dependent individually evaluated loans are measured based on the fair value of collateral when foreclosure is probable, or repayment is expected through the

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sale or operation of collateral and borrower is experiencing financial difficulty. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on Management’s historical knowledge, changes in market conditions from the time of the valuation, and Management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Collateral-dependent loans are evaluated on a quarterly basis and adjusted in accordance with the allowance for credit losses policy.

Fair Value Measurements – Recurring

(dollars in thousands, unaudited)


	Fair Value Measurements at June 30, 2025, using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Realized Gain/(Loss) (Level 3)
Securities:
U.S. government agencies	$	—	$	50,356	$	—	$	50,356	$	—
Mortgage-backed securities		—		178,451		—		178,451		—
State and political subdivisions		—		39,492		—		39,492		—
Corporate bonds		—		—		80,110		80,110		—
Collateralized loan obligations		—		320,425		—		320,425		—
Total available-for-sale securities	$	—	$	588,724	$	80,110	$	668,834	$	—


	Fair Value Measurements at December 31, 2024, using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Realized Gain/(Loss) (Level 3)
Securities:
U.S. government agencies	$	—	$	50,153	$	—	$	50,153	$	—
Mortgage-backed securities		—		93,503		—		93,503		—
State and political subdivisions		—		40,803		—		40,803		—
Corporate bonds		—		2,909		55,653		58,562		—
Collateralized loan obligations		—		412,946		—		412,946		—
Total available-for-sale securities	$	—	$	600,314	$	55,653	$	655,967	$	—

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The following tables present quantitative information about recurring level 3 fair value measurements at June 30, 2025, and December 31, 2024 (dollars in thousands):

Range

Fair

Valuation

Unobservable

Weighted

June 30, 2025

Value

Technique(s)

Input(s)

Min

Max

Average

Corporate Bonds

80,110

Broker estimate

Risk profile

N/A

Market conditions

Range

Fair

Valuation

Unobservable

Weighted

December 31, 2024

Value

Technique(s)

Input(s)

Min

Max

Average

Corporate Bonds

55,653

New issue pricing

Risk appetite

N/A

Secondary market pricing

Market volatility

Credit quality of issuer

Credit spread

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

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2025, and 2024:


Fair Value Measurements - Level 3 Recurring
(dollars in thousands, unaudited)
	Corporate Bonds
	2025		2024
Balance of recurring Level 3 assets at January 1,	$	55,653	$	52,040
Total gains or losses for the period:
Included in other comprehensive income		798		3,565
Purchases		20,750		—
Transfers into Level 3		2,909		—
Balance of recurring Level 3 assets at June 30,	$	80,110	$	55,605

Certain Corporate Bonds with a fair value of $2.9 million as of December 31, 2024 were transferred out of Level 2 and into Level 3 because of a lack of observable market data for these investments due to a decrease in the market activity for these securities.

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Fair Value Measurements – Nonrecurring

(dollars in thousands, unaudited)


	Fair Value Measurements at June 30, 2025, using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Individually evaluated collateral dependent loans
Real estate:
Commercial real estate	$	—	$	—	$	184	$	184
Total assets measured on a nonrecurring basis	$	—	$	—	$	184	$	184


	Fair Value Measurements at December 31, 2024, using

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Individually evaluated collateral dependent loans
Commercial real estate	$	—	$	11,529	$	—	$	11,529
Total assets measured on a nonrecurring basis	$	—	$	11,529	$	—	$	11,529

The table above includes collateral-dependent loan balances for which a specific reserve has been established. Information on the Company’s total collateral-dependent loan balances and specific loss reserves associated with those balances is included in Note 10 below.

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

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The following table presents quantitative information about level 3 fair value measurements for assets measured at fair value on a non-recurring basis at June 30, 2025 (dollars in thousands, unaudited):

Range

Fair

Valuation

Unobservable

Weighted

June 30, 2025

Value

Technique(s)

Input(s)

Min

Max

Average

Collateral-dependent individually evaluated loans, net of ACL

Real estate

184

Sales comparison approach

Selling costs

10.00%

Adjust to comparables

N/A

Total

184

Note 9 – Investments

Investment Securities

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

Amortized Cost and Estimated Fair Value

(dollars in thousands, unaudited)


	June 30, 2025
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
Available-for-sale
U.S. government agencies	$	50,763	$	3	$	(410)	$	—	$	50,356
Mortgage-backed securities		179,930		933		(2,412)		—		178,451
State and political subdivisions		47,975		3		(8,486)		—		39,492
Corporate bonds		85,635		73		(5,598)		—		80,110
Collateralized loan obligations		320,030		644		(249)		—		320,425
Total available-for-sale securities	$	684,333	$	1,656	$	(17,155)	$	—	$	668,834

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value		Allowance for Credit Losses
Held-to-maturity
U.S. government agencies	$	4,678	$	—	$	(426)	$	4,252	$	—
Mortgage-backed securities		122,149		2		(9,454)		112,697		—
State and political subdivisions		171,672		73		(6,992)		164,753		(15)
Total held-to-maturity securities	$	298,499	$	75	$	(16,872)	$	281,702	$	(15)

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	December 31, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
Available-for-sale
U.S. government agencies	$	50,761	$	—	$	(608)	$	—	$	50,153
Mortgage-backed securities		97,113		116		(3,726)		—		93,503
State and political subdivisions		48,119		7		(7,323)		—		40,803
Corporate bonds		66,308		—		(7,746)		—		58,562
Collateralized loan obligations		411,729		1,217		—		—		412,946
Total available-for-sale securities	$	674,030	$	1,340	$	(19,403)	$	—	$	655,967

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value		Allowance for Credit Losses
Held-to-maturity
U.S. government agencies	$	4,819	$	—	$	(592)	$	4,227	$	—
Mortgage-backed securities		128,974		—		(13,986)		114,988		—
State and political subdivisions		171,736		229		(152)		171,813		(15)
Total held-to-maturity securities	$	305,529	$	229	$	(14,730)	$	291,028	$	(15)

An unrealized loss of $25.2 million and $26.3 million, on securities transferred from the available-for-sale to held-to-maturity categorization, remains as of June 30, 2025 and December 31, 2024, respectively, and is included in accumulated other comprehensive income (loss), net of tax. The remaining unrealized loss on the securities transferred from available-for-sale to held-to-maturity, will be accreted over the remaining term of the securities, with the amortized-cost basis of these securities and accumulated comprehensive income (loss) each increasing over time.

The Company elected the practical expedient available under the current expected credit losses (“CECL”) accounting standard to exclude accrued interest receivable from the amortized cost basis of all categorizations of investment securities, and resultingly did not estimate reserves on accrued interest receivable balances, as any past due interest income is reversed on a timely basis. Accrued interest receivable is included in other assets on the Company’s consolidated balance sheet and as of June 30, 2025, measured at $6.4 million and $2.4 million for available-for-sale securities and held-to-maturity securities, respectively. Accrued interest receivable as of December 31, 2024, on these same classes of investment securities measured at $7.5 million and $2.4 million, respectively. During the first three-and-six months of 2025 and 2024, no interest receivable on available-for-sale or held-to-maturity securities was reversed against interest income and the Company did not have any held-to-maturity debt securities past due.

A discounted cash-flow reserve calculation is performed on securities designated as held-to-maturity on a quarterly basis. As of June 30, 2025 and December 31, 2024, an allowance for credit losses of $15 thousand had been established on the Company’s held-to-maturity portfolio. Because of the implicit and explicit guarantees of the U.S. government on the agency and mortgage-backed securities there is no expectation of future losses and no allowance for credit losses has been established for these securities.

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

Held-To-Maturity by Credit Rating

(dollars in thousands, unaudited)


	Held-To-Maturity
	June 30, 2025		December 31, 2024
State and political subdivisions
AAA/Aaa	$	59,397	$	59,408
AA/Aa		110,814		110,858
A/A2		528		533
Not rated		933		937
Total	$	171,672	$	171,736

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

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

Investment Portfolio - Unrealized Losses

(dollars in thousands, unaudited)

June 30, 2025

Less than twelve months

SIERRA BANCORP 10-Q