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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

| For the quarterly period ended March 31, 2025

or

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

| For the transition period from __________ to __________.

Commission file number: 001-09383

WESTAMERICA BANCORPORATION

(Exact Name of Registrant as Specified in Its Charter)

California | 94-2156203
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.)

1108 FIFTH AVENUE, SAN RAFAEL, California 94901

(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code (707) 863-6000

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 | WABC | 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 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 ☐ No ☒

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:

Title of Class | Shares outstanding as of April 30, 2025
Common Stock, No Par Value | 26,180,675

TABLE OF CONTENTS

| Page
Forward Looking Statements | 3
PART I - FINANCIAL INFORMATION |
Item 1 | Financial Statements | 4
| Notes to Unaudited Consolidated Financial Statements | 9
Item 2 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 29
Item 3 | Quantitative and Qualitative Disclosures about Market Risk | 52
Item 4 | Controls and Procedures | 52
PART II - OTHER INFORMATION |
Item 1 | Legal Proceedings | 52
Item 1A | Risk Factors | 52
Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 53
Item 3 | Defaults upon Senior Securities | 53
Item 4 | Mine Safety Disclosures | 53
Item 5 | Other Information | 53
Item 6 | Exhibits | 54
Signatures | 55

-2-

FORWARD-LOOKING STATEMENTS

This report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, future credit quality and performance, the appropriateness of the allowance for credit losses, loan growth or reduction, mitigation of risk in the Company’s loan and investment securities portfolios, income or loss, earnings or loss per share, the payment or nonpayment of dividends, stock repurchases, capital structure and other financial items; (ii) statements of plans, objectives and expectations of the Company or its management or board of directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as "believes", "anticipates", "expects", “estimates”, "intends", "targeted", "projected", “forecast”, "continue", "remain", "will", "should", "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

These forward-looking statements are based on the current knowledge and belief of the management (“Management”) of Westamerica Bancorporation (the “Company”) and include information concerning the Company’s possible or assumed future financial condition and results of operations. A number of factors, some of which are beyond the Company’s ability to predict or control, could cause future results to differ materially from those contemplated.

These factors include but are not limited to (1) the length and severity of any difficulties in the global, national and California economies and the effects of government efforts to address those difficulties; (2) liquidity levels in capital markets; (3) fluctuations in asset values including, but not limited to stocks, bonds, real estate, and commodities; (4) the effect of acquisitions and integration of acquired businesses; (5) economic uncertainty created by civil unrest, terrorist threats and attacks on the United States, the actions taken in response, and the uncertain effect of these events on the local, regional and national economies; (6) changes in the interest rate environment and monetary policy; (7) changes in the regulatory environment; (8) competitive pressure in the banking industry; (9) operational risks including a failure or breach in data processing or security systems or those of third party vendors and other service providers, including as a result of cyber attacks or fraud; (10) volatility of interest rate sensitive loans, deposits and investments, particularly the impact of rising interest rates on the Company’s securities portfolio; (11) asset/liability management risks; (12) liquidity risks including the impact of recent adverse developments in the banking industry; (13) the effect of climate change, natural disasters, including earthquakes, hurricanes, fire, flood, drought, and other disasters, on the uninsured value of the Company’s assets and of loan collateral, the financial condition of debtors and issuers of investment securities, the economic conditions affecting the Company’s market place, and commodities and asset values; (14) changes in the securities markets; (15) the impacts of tariffs, sanctions and trade policies of the United States and its global trading partners and uncertainty regarding the same; (16) inflation and (17) the outcome of contingencies, such as legal proceedings. However, the reader should not consider the above-mentioned factors to be a complete set of all potential risks or uncertainties.

Forward-looking statements speak only as of the date they are made. The Company undertakes no obligation to update any forward-looking statements in this report to reflect circumstances or events that occur after the date forward looking statements are made, except as may be required by law. The reader is directed to Part II – Item 1A “Risk Factors” of this report and other risk factors discussed elsewhere in the Company's annual report on Form 10-K for the year ended December 31, 2024, for further discussion of factors which could affect the Company's business and cause actual results to differ materially from those expressed in any forward-looking statement made in this report.

-3-

PART I - FINANCIAL INFORMATION

Item 1 Financial Statements

WESTAMERICA BANCORPORATION |
CONSOLIDATED BALANCE SHEETS |
(Unaudited) |
|  | At March 31, |  |  | At December 31, |
|  | 2025 |  |  | 2024 |
|  | (In thousands) |
Assets: |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 727,336 |  |  | $ | 601,494 |
Debt securities available for sale |  |  | 3,236,049 |  |  |  | 3,395,810 |
Debt securities held to maturity, net of allowance for credit losses of $1 at March 31, 2025 and December 31, 2024 (Fair value of $813,125 at March 31, 2025 and $807,838 at December 31, 2024) |  |  | 839,348 |  |  |  | 844,634 |
Loans |  |  | 771,030 |  |  |  | 820,300 |
Allowance for credit losses on loans |  |  | (13,914 | ) |  |  | (14,780 | )
Loans, net of allowance for credit losses on loans |  |  | 757,116 |  |  |  | 805,520 |
Premises and equipment, net |  |  | 25,722 |  |  |  | 26,133 |
Identifiable intangibles, net |  |  | 72 |  |  |  | 125 |
Goodwill |  |  | 121,673 |  |  |  | 121,673 |
Other assets |  |  | 259,308 |  |  |  | 280,885 |
Total Assets |  | $ | 5,966,624 |  |  | $ | 6,076,274 |
Liabilities: |  |  |  |  |  |  |  |
Noninterest-bearing deposits |  | $ | 2,241,802 |  |  | $ | 2,333,389 |
Interest-bearing deposits |  |  | 2,632,293 |  |  |  | 2,678,461 |
Total deposits |  |  | 4,874,095 |  |  |  | 5,011,850 |
Securities sold under repurchase agreements |  |  | 113,219 |  |  |  | 120,322 |
Other liabilities |  |  | 56,172 |  |  |  | 54,145 |
Total Liabilities |  |  | 5,043,486 |  |  |  | 5,186,317 |
Contingencies (Note 10) |  |  |  |  |  |  |  |
Shareholders' Equity: |  |  |  |  |  |  |  |
Common stock and additional paid-in-capital Common stock (no par value), authorized: 150,000 shares issued and outstanding: 26,360 at March 31, 2025 and 26,708 at December 31, 2024 |  |  | 470,809 |  |  |  | 476,471 |
Deferred compensation |  |  | 35 |  |  |  | 35 |
Accumulated other comprehensive loss |  |  | (136,768 | ) |  |  | (168,104 | )
Retained earnings |  |  | 589,062 |  |  |  | 581,555 |
Total Shareholders' Equity |  |  | 923,138 |  |  |  | 889,957 |
Total Liabilities and Shareholders' Equity |  | $ | 5,966,624 |  |  | $ | 6,076,274 |

See accompanying notes to unaudited consolidated financial statements.

-4-

WESTAMERICA BANCORPORATION |
CONSOLIDATED STATEMENTS OF INCOME |
(unaudited) |
|  | For the |
|  | Three Months Ended |
|  | March 31, |
|  | 2025 |  |  | 2024 |
|  | (In thousands, |
|  | except per share data) |
Interest and Fee Income: |  |  |  |  |  |  |  |
Loans |  | $ | 10,669 |  |  | $ | 11,324 |
Equity securities |  |  | 195 |  |  |  | 174 |
Debt securities available for sale |  |  | 33,430 |  |  |  | 46,243 |
Debt securities held to maturity |  |  | 8,494 |  |  |  | 8,722 |
Interest-bearing cash |  |  | 6,703 |  |  |  | 2,283 |
Total Interest and Fee Income |  |  | 59,491 |  |  |  | 68,746 |
Interest Expense: |  |  |  |  |  |  |  |
Deposits |  |  | 3,229 |  |  |  | 2,106 |
Bank Term Funding Program borrowings |  |  | - |  |  |  | 843 |
Securities sold under repurchase agreements |  |  | 167 |  |  |  | 52 |
Total Interest Expense |  |  | 3,396 |  |  |  | 3,001 |
Net Interest and Fee Income |  |  | 56,095 |  |  |  | 65,745 |
(Reversal of) Provision for Credit Losses |  |  | (550 | ) |  |  | 300 |
Net Interest and Fee Income After (Reversal of) Provision for Credit Losses |  |  | 56,645 |  |  |  | 65,445 |
Noninterest Income: |  |  |  |  |  |  |  |
Service charges on deposit accounts |  |  | 3,381 |  |  |  | 3,470 |
Merchant processing services |  |  | 2,733 |  |  |  | 2,507 |
Debit card fees |  |  | 1,581 |  |  |  | 1,543 |
Trust fees |  |  | 899 |  |  |  | 794 |
ATM processing fees |  |  | 463 |  |  |  | 591 |
Other service fees |  |  | 429 |  |  |  | 438 |
Life insurance gains |  |  | 102 |  |  |  | - |
Other noninterest income |  |  | 733 |  |  |  | 754 |
Total Noninterest Income |  |  | 10,321 |  |  |  | 10,097 |
Noninterest Expense: |  |  |  |  |  |  |  |
Salaries and related benefits |  |  | 12,126 |  |  |  | 12,586 |
Occupancy and equipment |  |  | 5,038 |  |  |  | 5,040 |
Outsourced data processing services |  |  | 2,697 |  |  |  | 2,536 |
Limited partnership operating losses |  |  | 915 |  |  |  | 1,440 |
Courier service |  |  | 688 |  |  |  | 649 |
Professional fees |  |  | 395 |  |  |  | 402 |
Other noninterest expense |  |  | 3,268 |  |  |  | 3,446 |
Total Noninterest Expense |  |  | 25,127 |  |  |  | 26,099 |
Income Before Income Taxes |  |  | 41,839 |  |  |  | 49,443 |
Provision for income taxes |  |  | 10,802 |  |  |  | 13,026 |
Net Income |  | $ | 31,037 |  |  | $ | 36,417 |
Average Common Shares Outstanding |  |  | 26,642 |  |  |  | 26,674 |
Average Diluted Common Shares Outstanding |  |  | 26,642 |  |  |  | 26,675 |
Per Common Share Data: |  |  |  |  |  |  |  |
Basic earnings |  | $ | 1.16 |  |  | $ | 1.37 |
Diluted earnings |  |  | 1.16 |  |  |  | 1.37 |
Dividends paid |  |  | 0.44 |  |  |  | 0.44 |

See accompanying notes to unaudited consolidated financial statements.

-5-

WESTAMERICA BANCORPORATION |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
(unaudited) |
|  | For the Three Months Ended |
|  | March 31, |
|  | 2025 |  |  | 2024 |
|  | (In thousands) |
Net income |  | $ | 31,037 |  |  | $ | 36,417 |
Other comprehensive income (loss): |  |  |  |  |  |  |  |
Changes in net unrealized losses on debt securities available for sale |  |  | 44,489 |  |  |  | (9,335 | )
Deferred tax (expense) benefit |  |  | (13,153 | ) |  |  | 2,760 |
Changes in net unrealized losses on debt securities available for sale, net of tax |  |  | 31,336 |  |  |  | (6,575 | )
Total comprehensive income |  | $ | 62,373 |  |  | $ | 29,842 |

See accompanying notes to unaudited consolidated financial statements.

-6-

WESTAMERICA BANCORPORATION |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY |
(unaudited) |
|  |  |  |  |  | Common |  |  |  |  |  |  | Accumulated |  |  |  |  |  |  |  |  |
|  | Common |  |  | Stock and |  |  |  |  |  |  | Other |  |  |  |  |  |  |  |  |
|  | Shares |  |  | Additional |  |  | Deferred |  |  | Comprehensive |  |  | Retained |  |  |  |  |
|  | Outstanding |  |  | Paid-in Capital |  |  | Compensation |  |  | (Loss) Income |  |  | Earnings |  |  | Total |
|  | (In thousands except per share data) |
Balance, December 31, 2023 |  |  | 26,671 |  |  | $ | 473,136 |  |  | $ | 35 |  |  | $ | (190,282 | ) |  | $ | 490,005 |  |  | $ | 772,894 |
Net income for the period |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 36,417 |  |  |  | 36,417 |
Other comprehensive loss |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (6,575 | ) |  |  |  |  |  |  | (6,575 | )
Restricted stock activity |  |  | 11 |  |  |  | 505 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 505 |
Stock based compensation |  |  | - |  |  |  | 364 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 364 |
Stock awarded to employees |  |  | - |  |  |  | 31 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 31 |
Retirement of common stock |  |  | (4 | ) |  |  | (82 | ) |  |  |  |  |  |  |  |  |  |  | (128 | ) |  |  | (210 | )
Dividends ($0.44 per share) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (11,735 | ) |  |  | (11,735 | )
Balance, March 31, 2024 |  |  | 26,678 |  |  | $ | 473,954 |  |  | $ | 35 |  |  | $ | (196,857 | ) |  | $ | 514,559 |  |  | $ | 791,691 |
Balance, December 31, 2024 |  |  | 26,708 |  |  | $ | 476,471 |  |  | $ | 35 |  |  | $ | (168,104 | ) |  | $ | 581,555 |  |  | $ | 889,957 |
Net income for the period |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 31,037 |  |  |  | 31,037 |
Other comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 31,336 |  |  |  |  |  |  |  | 31,336 |
Restricted stock activity |  |  | 12 |  |  |  | 623 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 623 |
Stock based compensation |  |  | - |  |  |  | 300 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 300 |
Stock awarded to employees |  |  | 1 |  |  |  | 41 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 41 |
Excise tax on net common stock repurchases |  |  |  |  |  |  | (179 | ) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (179 | )
Retirement of common stock |  |  | (361 | ) |  |  | (6,447 | ) |  |  |  |  |  |  |  |  |  |  | (11,778 | ) |  |  | (18,225 | )
Dividends ($0.44 per share) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (11,752 | ) |  |  | (11,752 | )
Balance, March 31, 2025 |  |  | 26,360 |  |  | $ | 470,809 |  |  | $ | 35 |  |  | $ | (136,768 | ) |  | $ | 589,062 |  |  | $ | 923,138 |

See accompanying notes to unaudited consolidated financial statements.

-7-

WESTAMERICA BANCORPORATION |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(unaudited) |
|  | For the Three Months |
|  | Ended March 31, |
|  | 2025 |  |  | 2024 |
|  | (In thousands) |
Operating Activities: |  |  |  |  |  |  |  |
Net income |  | $ | 31,037 |  |  | $ | 36,417 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization/accretion |  |  | 2,009 |  |  |  | 2,962 |
(Reversal of) provision for credit losses |  |  | (550 | ) |  |  | 300 |
Net amortization of deferred net loan cost (fees) |  |  | 83 |  |  |  | (150 | )
Stock option compensation expense |  |  | 300 |  |  |  | 364 |
Life insurance gains |  |  | (102 | ) |  |  | - |
Net changes in: |  |  |  |  |  |  |  |
Interest income receivable |  |  | 2,483 |  |  |  | 568 |
Income taxes payable |  |  | 5,538 |  |  |  | 9,742 |
Deferred tax asset |  |  | 5,263 |  |  |  | 3,285 |
Other assets |  |  | 827 |  |  |  | 596 |
Interest expense payable |  |  | 155 |  |  |  | 1,009 |
Other liabilities |  |  | (4,649 | ) |  |  | (2,881 | )
Net Cash Provided by Operating Activities |  |  | 42,394 |  |  |  | 52,212 |
Investing Activities: |  |  |  |  |  |  |  |
Net repayments of loans |  |  | 48,871 |  |  |  | 20,787 |
Proceeds from life insurance policies |  |  | 506 |  |  |  | - |
Purchases of debt securities available for sale |  |  | (38,994 | ) |  |  | - |
Proceeds from maturity/calls of debt securities available for sale |  |  | 241,235 |  |  |  | 98,966 |
Proceeds from maturity/calls of debt securities held to maturity |  |  | 6,864 |  |  |  | 11,208 |
Purchases of premises and equipment |  |  | (199 | ) |  |  | (122 | )
Net Cash Provided by Investing Activities |  |  | 258,283 |  |  |  | 130,839 |
Financing Activities: |  |  |  |  |  |  |  |
Net change in deposits |  |  | (137,755 | ) |  |  | (119,342 | )
Net change in borrowings |  |  | (7,103 | ) |  |  | 192,172 |
Retirement of common stock |  |  | (18,225 | ) |  |  | (210 | )
Common stock dividends paid |  |  | (11,752 | ) |  |  | (11,735 | )
Net Cash (Used in) Provided by Financing Activities |  |  | (174,835 | ) |  |  | 60,885 |
Net Change In Cash and Due from Banks |  |  | 125,842 |  |  |  | 243,936 |
Cash and Due from Banks at Beginning of Period |  |  | 601,494 |  |  |  | 190,314 |
Cash and Due from Banks at End of Period |  | $ | 727,336 |  |  | $ | 434,250 |
Supplemental Cash Flow Disclosures: |  |  |  |  |  |  |  |
Supplemental disclosure of noncash activities: |  |  |  |  |  |  |  |
Right-of-use assets acquired in exchange for operating lease liabilities |  | $ | 3,494 |  |  | $ | 2,641 |
Supplemental disclosure of cash flow activities: |  |  |  |  |  |  |  |
Cash paid for amounts included in operating lease liabilities |  |  | 1,636 |  |  |  | 1,632 |
Interest paid for the period |  |  | 3,241 |  |  |  | 1,992 |

See accompanying notes to unaudited consolidated financial statements.

-8-

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission and follow general practices within the banking industry. The results of operations reflect interim adjustments, all of which are of a normal recurring nature and which, in the opinion of Management, are necessary for a fair presentation of the results for the interim periods presented. The interim results for the three months ended March 31, 2025 are not necessarily indicative of the results expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes as well as other information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Note 2: Accounting Policies

The most significant accounting policies followed by the Company are presented in Note 1 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, it is reasonably possible conditions could change materially affecting results of operations and financial conditions. Certain risks, uncertainties and other factors, including those discussed in “Risk Factors” in Part I – Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 may cause actual future results to differ materially from the results discussed in this report on Form 10-Q.

Management continues to evaluate the impacts of inflation, the Federal Reserve’s monetary policy, the impacts of tariffs, international trade tensions, and climate changes on the Company’s business. The banking industry could experience significant volatility as it did with several regional bank failures in 2023. Industrywide concerns could develop related to liquidity, deposit outflows and unrealized losses on investment debt securities. These recent events and concerns could adversely affect the Company’s ability to effectively fund its operations. Any one or a combination of such risk factors, or other factors, could materially adversely affect the Company's business, financial condition, results of operations and prospects. The extent of the impact on the Company’s results of operations, cash flow, liquidity, and financial performance, as well as the Company’s ability to execute near- and long-term business strategies and initiatives, will depend on numerous evolving factors and future developments, which are highly uncertain and cannot be reasonably predicted. Furthermore, the effects could have a material impact on the Company’s results of operations and heighten many of the risk factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Application of accounting principles requires the Company to make certain estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Certain accounting policies inherently have a greater reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants a writedown or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. Fair value is generally determined based on an exit price at which an asset or liability could be exchanged in a current transaction, other than in a forced or liquidation sale. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available. Certain amounts in previous periods have been reclassified to conform to current presentation.

Debt Securities. Debt securities consist of securities of government sponsored entities, states, counties, municipalities, corporations, agency mortgage-backed securities and collateralized loan obligations. Securities transactions are recorded on a trade date basis. The Company classifies its debt securities in one of three categories: trading, available for sale or held to maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Trading securities are recorded at fair value with unrealized gains and losses included in net income. Held to maturity debt securities are those securities which the Company has the ability and intent to hold until maturity. Held to maturity debt securities are recorded at cost, adjusted for the amortization of premiums or accretion of discounts. Securities not included in trading or held to maturity are classified as available for sale debt securities. Available for sale debt securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available for sale debt securities are included in accumulated other comprehensive income. Accrued interest is recorded within other assets and reversed against interest income if it is not received.

-9-

The Company utilizes third-party sources to value its investment securities; securities individually valued using quoted prices in active markets are classified as Level 1 assets in the fair value hierarchy, and securities valued using quoted prices in active markets for similar securities (commonly referred to as “matrix” pricing) are classified as Level 2 assets in the fair value hierarchy. The Company validates the reliability of third-party provided values by comparing individual security pricing for securities between more than one third-party source. When third-party information is not available, valuation adjustments are estimated in good faith by Management and classified as Level 3 in the fair value hierarchy.

The Company follows the guidance issued by the Board of Governors of the Federal Reserve System, “Investing in Securities without Reliance on Nationally Recognized Statistical Rating Agencies” (SR 12-15) and other regulatory guidance when performing investment security pre-purchase analysis or evaluating investment securities for credit loss. Credit ratings issued by recognized rating agencies are considered in the Company’s analysis only as a guide to the historical default rate associated with similarly-rated bonds.

To the extent that debt securities in the held-to-maturity portfolio share common risk characteristics, estimated expected credit losses are calculated in a manner like that used for loans held for investment. That is, for pools of such securities with common risk characteristics, the historical lifetime probability of default and severity of loss in the event of default is derived or obtained from external sources and adjusted for the expected effects of reasonable and supportable forecasts over the expected lives of the securities on those historical credit losses. Expected credit loss on each security in the held-to-maturity portfolio that does not share common risk characteristics with any of the pools of debt securities is individually evaluated and a reserve for credit losses is established based on the Company’s consideration of the history of credit losses, current conditions and reasonable and supportable forecasts, which may indicate that the expectation that nonpayment of the amortized cost basis is or continues to be zero. Therefore, for those securities, the Company does not record expected credit losses.

Available for sale debt securities in unrealized loss positions are evaluated for credit related loss at least quarterly. For available for sale debt securities, a decline in fair value due to credit loss results in recording an allowance for credit losses to the extent the fair value is less than the amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes. Although these evaluations involve significant judgment, an unrealized loss in the fair value of a debt security is generally considered to not be related to credit when the fair value of the security is below the carrying value primarily due to changes in risk-free interest rates, there has not been significant deterioration in the financial condition of the issuer, and the Company does not intend to sell nor does it believe it will be required to sell the security before the recovery of its cost basis.

If the Company intends to sell a debt security or more likely than not will be required to sell the security before recovery of its amortized cost basis, the debt security is written down to its fair value and the write down is charged against the allowance for credit losses with any incremental loss reported in earnings.

Purchase premiums are amortized to the earliest call date and purchase discounts are amortized to maturity as an adjustment to yield using the effective interest method. Unamortized premiums, unaccreted discounts, and early payment premiums are recognized as a component of gain or loss on sale upon disposition of the related security. Interest and dividend income are recognized when earned. Realized gains and losses from the sale of available for sale debt securities are included in earnings using the specific identification method.

Nonmarketable Equity Securities. Nonmarketable equity securities include securities that are not publicly traded, such as Visa Class B-1 common stock, and securities acquired to meet regulatory requirements, such as Federal Reserve Bank stock, which are restricted. These restricted securities are accounted for under the cost method and are included in other assets. The Company reviews those assets accounted for under the cost method at least quarterly. The Company’s review typically includes an analysis of the facts and circumstances of each investment, the expectations for the investment’s cash flows and capital needs, the viability of its business model and any exit strategy. When the review indicates that impairment exists the asset value is reduced to fair value. The Company recognizes the estimated loss in noninterest income. See Note 6 to the unaudited consolidated financial statements for additional information related to nonmarketable equity securities.

-10-

Loans. Loans are stated at the principal amount outstanding, net of unearned discount and unamortized deferred fees and costs. Interest is accrued daily on the outstanding principal balances and included in other assets. Loans which are more than 90 days delinquent with respect to interest or principal, unless they are well secured and in the process of collection, and other loans on which full recovery of principal or interest is in doubt, are placed on nonaccrual status. Interest previously accrued on loans placed on nonaccrual status is charged against interest income. In addition, some loans secured by real estate and commercial loans to borrowers experiencing financial difficulties are placed on nonaccrual status even though the borrowers continue to repay the loans as scheduled. When the ability to fully collect nonaccrual loan principal is in doubt, payments received are applied against the principal balance of the loans on a cost-recovery method until such time as full collection of the remaining recorded balance is expected. Any additional interest payments received after that time are recorded as interest income on a cash basis. Nonaccrual loans are reinstated to accrual status when none of the loan’s principal and interest is past due and improvements in credit quality eliminate doubt as to the full collectability of both principal and interest, or the loan otherwise becomes well secured and in the process of collection. Certain consumer loans or auto receivables are charged off against the allowance for credit losses when they become 120 days past due.

Allowance for Credit Losses. The Company extends loans to commercial and consumer customers primarily in Northern and Central California. These lending activities expose the Company to the risk borrowers will default, causing loan losses. The Company’s lending activities are exposed to various qualitative risks. All loan segments are exposed to risks inherent in the economy and market conditions. Significant risk characteristics related to the commercial loan segment include the borrowers’ business performance and financial condition, and the value of collateral for secured loans. Significant risk characteristics related to the commercial real estate segment include the borrowers’ business performance and the value of properties collateralizing the loans. Significant risk characteristics related to the construction loan segment include the borrowers’ performance in successfully developing the real estate into the intended purpose and the value of the property collateralizing the loans. Significant risk characteristics related to the residential real estate segment include the borrowers’ financial wherewithal to service the mortgages and the value of the property collateralizing the loans. Significant risk characteristics related to the consumer loan segment include the financial condition of the borrowers and the value of collateral securing the loans.

The preparation of the financial statements requires Management to estimate the amount of expected losses over the expected contractual life of the Bank’s existing loan portfolio and establish an allowance for credit losses. Loan agreements generally include a maturity date, and the Company considers the contractual life of a loan agreement to extend from the date of origination to the contractual maturity date. In estimating credit losses, Management must exercise significant judgment in evaluating information deemed relevant. The amount of ultimate losses on the loan portfolio can vary from the estimated amounts. Management follows a systematic methodology to estimate loss potential in an effort to reduce the differences between estimated and actual losses.

The allowance for credit losses is established through provisions for credit losses charged to income. Losses on loans are charged to the allowance for credit losses when all or a portion of the recorded amount of a loan is deemed to be uncollectible. Recoveries of loans previously charged off are credited to the allowance when realized. The Company’s allowance for credit losses is maintained at a level considered adequate to provide for expected losses based on historical loss rates adjusted for current and expected conditions over a forecast period. These include conditions unique to individual borrowers, as well as overall credit loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing economic conditions, or credit protection agreements and other factors.

Loans that share common risk characteristics are segregated into pools based on common characteristics, which is primarily determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. For consumer installment loans, primarily secured by automobiles, historical loss rates are determined using a vintage methodology, which tracks losses based on period of origination. For commercial, construction, and commercial real estate, historical loss rates are determined using an open pool methodology where losses are tracked over time for all loans included in the pool at the historical measurement date. Historical loss rates are adjusted for factors that are not reflected in the historical loss rates that are attributable to national or local economic or industry trends which have occurred but have not yet been recognized in past loan charge-off history, estimated losses based on management’s reasonable and supportable expectation of economic trends over a forecast horizon of up to two years, and other factors that impact credit loss expectations that are not reflected in the historical loss rates. Other factors include, but are not limited to, the effectiveness of the Company’s loan review system, adequacy of lending Management and staff, loan policies and procedures, problem loan trends, and concentrations of credit. At the end of the two-year forecast period loss rates revert immediately to the historical loss rates. The results of this analysis are applied to the amortized cost of the loans included within each pool.

Loans that do not share risk characteristics with other loans in the pools are evaluated individually. A loan is considered “collateral-dependent” when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. A credit loss reserve for collateral-dependent loans is established at the difference between the amortized cost basis in the loan and the fair value of the underlying collateral adjusted for costs to sell. For other individually evaluated loans that are not collateral dependent, a credit loss reserve is established at the difference between the amortized cost basis in the loan and the present value of expected future cash flows discounted at the loan’s effective interest rate. The impact of an expected modification to be made to loans to borrowers experiencing financial difficulty is included in the allowance for credit losses when management determines such modification is likely.

-11-

Accrued interest is recorded in other assets and is excluded from the estimation of expected credit loss. Accrued interest is reversed through interest income when amounts are determined to be uncollectible, which generally occurs when the underlying receivable is placed on nonaccrual status or charged off.

Liability for Off-Balance Sheet Credit Exposures. Off-balance sheet credit exposures relate to letters of credit and unfunded loan commitments for commercial, construction and consumer loans. The Company maintains a separate allowance for credit losses from off-balance sheet credit exposures, which is included within other liabilities on the consolidated statements of financial condition. Increases or reductions to the Company’s allowance for credit losses from off-balance sheet credit exposures are recorded in other expenses. Management estimates the amount of expected losses by estimating expected usage exposures that are not unconditionally cancellable by the Company and applying the loss factors used in the allowance for credit loss methodology to estimate the liability for credit losses related to unfunded commitments. No credit loss estimate is reported for off-balance sheet credit exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement.

Operating Segments. While the chief decision maker monitors the revenue streams of the various products and services, operations are managed, and financial performance is evaluated on a Company-wide basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Recently Adopted Accounting Standards

FASB ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, was issued November 27, 2023. The ASU requires disclosure of certain significant segment expenses and other items, the title and position of the chief operating decision maker and information about how the reported measures of segment profit or loss are used in assessing segment performance. The ASU became effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards

FASB ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, was issued December 14, 2023. The ASU enhances the transparency and decision usefulness of income tax disclosures, primarily related to the rate reconciliation and income taxes paid information. The ASU primarily requires additional disclosures as part of the reconciliation of the effective tax rate to statutory tax rate, the amount of income taxes paid, net of refunds received, and income tax expense disaggregated between federal and state jurisdictions. The ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and is to be applied prospectively, with retrospective application permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.

FASB ASU 2024-03, Income Statement - Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, was issued November 4, 2024. The amendments are intended to improve income statement expense disclosure requirement, primarily through enhanced disclosures about certain costs and expenses included in income statement expense captions. The amendments are effective for annual reporting periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of the amendments on our financial statement disclosures upon adoption.

Note 3: Investment Securities

The Company uses its investment securities portfolio to manage interest rate risk, provide liquidity (including the ability to meet regulatory requirements), generate interest and dividend income, and as collateral for public deposits and wholesale funding sources. The Company’s investment securities portfolio includes debt securities classified as held to maturity and available for sale. While the Company intends to hold its investment securities to maturity, it may sell available for sale investment securities in response to structural changes in the balance sheet and related interest rate risk and to meet liquidity requirements, among other factors.

-12-

An analysis of the amortized cost and fair value by major categories of debt securities available for sale, which are carried at fair value with net unrealized gains (losses) reported on an after-tax basis as a component of accumulated other comprehensive income, and debt securities held to maturity, which are carried at amortized cost, before allowance for credit losses of $1 thousand at March 31, 2025 and December 31, 2024, follows. In accordance with GAAP, unrealized gains and losses on held to maturity securities have not been recognized in the Company’s financial statements.

|  | At March 31, 2025 |
|  |  |  |  |  | Gross |  |  | Gross |  |  |  |  |
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
|  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
|  | (In thousands) |
Debt securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Agency residential mortgage-backed securities ("MBS") |  | $ | 218,825 |  |  | $ | 4 |  |  | $ | (14,487 | ) |  | $ | 204,342 |
Agency commercial MBS |  |  | 46,057 |  |  |  | 451 |  |  |  | (6 | ) |  |  | 46,502 |
Securities of U.S. Government sponsored entities |  |  | 311,809 |  |  |  | 19 |  |  |  | (12,106 | ) |  |  | 299,722 |
Obligations of states and political subdivisions |  |  | 62,177 |  |  |  | 7 |  |  |  | (1,603 | ) |  |  | 60,581 |
Corporate securities |  |  | 1,967,432 |  |  |  | - |  |  |  | (164,641 | ) |  |  | 1,802,791 |
Collateralized loan obligations |  |  | 823,921 |  |  |  | 514 |  |  |  | (2,324 | ) |  |  | 822,111 |
Total debt securities available for sale |  |  | 3,430,221 |  |  |  | 995 |  |  |  | (195,167 | ) |  |  | 3,236,049 |
Debt securities held to maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Agency residential MBS |  |  | 53,528 |  |  |  | 23 |  |  |  | (3,418 | ) |  |  | 50,133 |
Obligations of states and political subdivisions |  |  | 48,675 |  |  |  | 12 |  |  |  | (203 | ) |  |  | 48,484 |
Corporate securities |  |  | 737,146 |  |  |  | 277 |  |  |  | (22,915 | ) |  |  | 714,508 |
Total debt securities held to maturity |  |  | 839,349 |  |  |  | 312 |  |  |  | (26,536 | ) |  |  | 813,125 |
Total |  | $ | 4,269,570 |  |  | $ | 1,307 |  |  | $ | (221,703 | ) |  | $ | 4,049,174 |

|  | At December 31, 2024 |
|  |  |  |  |  | Gross |  |  | Gross |  |  |  |  |
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
|  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
|  | (In thousands) |
Debt securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Agency residential MBS |  | $ | 229,050 |  |  | $ | 1 |  |  | $ | (17,991 | ) |  | $ | 211,060 |
Agency commercial MBS |  |  | 7,098 |  |  |  | - |  |  |  | (132 | ) |  |  | 6,966 |
Securities of U.S. Government sponsored entities |  |  | 311,201 |  |  |  | 1 |  |  |  | (19,085 | ) |  |  | 292,117 |
U.S. Treasury Securities |  |  | 4,945 |  |  |  | 10 |  |  |  | - |  |  |  | 4,955 |
Obligations of states and political subdivisions |  |  | 63,878 |  |  |  | 9 |  |  |  | (1,701 | ) |  |  | 62,186 |
Corporate securities |  |  | 2,031,144 |  |  |  | 127 |  |  |  | (195,334 | ) |  |  | 1,835,937 |
Collateralized loan obligations |  |  | 987,155 |  |  |  | 642 |  |  |  | (5,208 | ) |  |  | 982,589 |
Total debt securities available for sale |  |  | 3,634,471 |  |  |  | 790 |  |  |  | (239,451 | ) |  |  | 3,395,810 |
Debt securities held to maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Agency residential MBS |  |  | 57,927 |  |  |  | 23 |  |  |  | (4,218 | ) |  |  | 53,732 |
Obligations of states and political subdivisions |  |  | 51,261 |  |  |  | 12 |  |  |  | (377 | ) |  |  | 50,896 |
Corporate securities |  |  | 735,447 |  |  |  | - |  |  |  | (32,237 | ) |  |  | 703,210 |
Total debt securities held to maturity |  |  | 844,635 |  |  |  | 35 |  |  |  | (36,832 | ) |  |  | 807,838 |
Total |  | $ | 4,479,106 |  |  | $ | 825 |  |  | $ | (276,283 | ) |  | $ | 4,203,648 |

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-13-

The amortized cost and fair value of debt securities by contractual maturity are shown in the following tables at the dates indicated:

|  | At March 31, 2025 |
|  | Debt Securities Available |  |  | Debt Securities Held |
|  | for Sale |  |  | to Maturity |
|  | Amortized |  |  | Fair |  |  | Amortized |  |  | Fair |
|  | Cost |  |  | Value |  |  | Cost |  |  | Value |
|  | (In thousands) |
Maturity in years: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1 year or less |  | $ | 83,272 |  |  | $ | 82,874 |  |  | $ | 18,877 |  |  | $ | 18,819 |
Over 1 to 5 years |  |  | 1,093,030 |  |  |  | 1,039,910 |  |  |  | 379,408 |  |  |  | 376,571 |
Over 5 to 10 years |  |  | 1,165,116 |  |  |  | 1,040,310 |  |  |  | 387,536 |  |  |  | 367,602 |
Subtotal |  |  | 2,341,418 |  |  |  | 2,163,094 |  |  |  | 785,821 |  |  |  | 762,992 |
Collateralized loan obligations |  |  | 823,921 |  |  |  | 822,111 |  |  |  | - |  |  |  | - |
Agency residential MBS |  |  | 218,825 |  |  |  | 204,342 |  |  |  | 53,528 |  |  |  | 50,133 |
Agency commercial MBS |  |  | 46,057 |  |  |  | 46,502 |  |  |  | - |  |  |  | - |
Total |  | $ | 3,430,221 |  |  | $ | 3,236,049 |  |  | $ | 839,349 |  |  | $ | 813,125 |

|  | At December 31, 2024 |
|  | Debt Securities Available |  |  | Debt Securities Held |
|  | for Sale |  |  | to Maturity |
|  | Amortized |  |  | Fair |  |  | Amortized |  |  | Fair |
|  | Cost |  |  | Value |  |  | Cost |  |  | Value |
|  | (In thousands) |
Maturity in years: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1 year or less |  | $ | 124,667 |  |  | $ | 124,448 |  |  | $ | 13,508 |  |  | $ | 13,468 |
Over 1 to 5 years |  |  | 993,874 |  |  |  | 940,578 |  |  |  | 347,566 |  |  |  | 342,500 |
Over 5 to 10 years |  |  | 1,292,627 |  |  |  | 1,130,169 |  |  |  | 425,634 |  |  |  | 398,138 |
Subtotal |  |  | 2,411,168 |  |  |  | 2,195,195 |  |  |  | 786,708 |  |  |  | 754,106 |
Collateralized loan obligations |  |  | 987,155 |  |  |  | 982,589 |  |  |  | - |  |  |  | - |
Agency residential MBS |  |  | 229,050 |  |  |  | 211,060 |  |  |  | 57,927 |  |  |  | 53,732 |
Agency commercial MBS |  |  | 7,098 |  |  |  | 6,966 |  |  |  | - |  |  |  | - |
Total |  | $ | 3,634,471 |  |  | $ | 3,395,810 |  |  | $ | 844,635 |  |  | $ | 807,838 |

Expected amortizing principal payments of collateralized loan obligations can differ from actual cash flows because the securities can be called and paid-off. Expected maturities of mortgage-related securities can differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties. In addition, such factors as prepayments and interest rates may affect the yield on the carrying value of mortgage-related securities.

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-14-

An analysis of the gross unrealized losses of the debt securities available for sale portfolio follows:

|  | Debt Securities Available for Sale |
|  | At March 31, 2025 |
|  | No. of |  |  | Less than 12 months |  |  | No. of |  |  | 12 months or longer |  |  | No. of |  |  | Total |
|  | Investment |  |  |  |  |  |  | Unrealized |  |  | Investment |  |  |  |  |  |  | Unrealized |  |  | Investment |  |  |  |  |  |  | Unrealized |
|  | Positions |  |  | Fair Value |  |  | Losses |  |  | Positions |  |  | Fair Value |  |  | Losses |  |  | Positions |  |  | Fair Value |  |  | Losses |
|  | ($ in thousands) |
Agency residential MBS |  |  | 10 |  |  | $ | 13,725 |  |  | $ | (420 | ) |  |  | 102 |  |  | $ | 186,156 |  |  | $ | (14,067 | ) |  |  | 112 |  |  | $ | 199,881 |  |  | $ | (14,487 | )
Agency commercial MBS |  |  | 1 |  |  |  | 3,220 |  |  |  | (6 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1 |  |  |  | 3,220 |  |  |  | (6 | )
Securities of U.S. Government sponsored entities |  |  | 1 |  |  |  | 1,937 |  |  |  | (1 | ) |  |  | 19 |  |  |  | 282,994 |  |  |  | (12,105 | ) |  |  | 20 |  |  |  | 284,931 |  |  |  | (12,106 | )
Obligations of states and political subdivisions |  |  | 4 |  |  |  | 4,668 |  |  |  | (17 | ) |  |  | 39 |  |  |  | 49,171 |  |  |  | (1,586 | ) |  |  | 43 |  |  |  | 53,839 |  |  |  | (1,603 | )
Corporate securities |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 134 |  |  |  | 1,802,791 |  |  |  | (164,641 | ) |  |  | 134 |  |  |  | 1,802,791 |  |  |  | (164,641 | )
Collateralized loan obligations |  |  | 3 |  |  |  | 38,770 |  |  |  | (66 | ) |  |  | 24 |  |  |  | 202,002 |  |  |  | (2,258 | ) |  |  | 27 |  |  |  | 240,772 |  |  |  | (2,324 | )
Total |  |  | 19 |  |  | $ | 62,320 |  |  | $ | (510 | ) |  |  | 318 |  |  | $ | 2,523,114 |  |  | $ | (194,657 | ) |  |  | 337 |  |  | $ | 2,585,434 |  |  | $ | (195,167 | )

An analysis of gross unrecognized losses of the debt securities held to maturity portfolio follows:

|  | Debt Securities Held to Maturity |
|  | At March 31, 2025 |
|  | No. of |  |  | Less than 12 months |  |  | No. of |  |  | 12 months or longer |  |  | No. of |  |  | Total |
|  | Investment |  |  |  |  |  |  | Unrecognized |  |  | Investment |  |  |  |  |  |  | Unrecognized |  |  | Investment |  |  |  |  |  |  | Unrecognized |
|  | Positions |  |  | Fair Value |  |  | Losses |  |  | Positions |  |  | Fair Value |  |  | Losses |  |  | Positions |  |  | Fair Value |  |  | Losses |
|  | ($ in thousands) |
Agency residential MBS |  |  | - |  |  | $ | - |  |  | $ | - |  |  |  | 76 |  |  | $ | 49,121 |  |  | $ | (3,418 | ) |  |  | 76 |  |  | $ | 49,121 |  |  | $ | (3,418 | )
Obligations of states and political subdivisions |  |  | 13 |  |  |  | 8,648 |  |  |  | (19 | ) |  |  | 27 |  |  |  | 24,879 |  |  |  | (184 | ) |  |  | 40 |  |  |  | 33,527 |  |  |  | (203 | )
Corporate securities |  |  | 18 |  |  |  | 167,402 |  |  |  | (1,597 | ) |  |  | 35 |  |  |  | 459,147 |  |  |  | (21,318 | ) |  |  | 53 |  |  |  | 626,549 |  |  |  | (22,915 | )
Total |  |  | 31 |  |  | $ | 176,050 |  |  | $ | (1,616 | ) |  |  | 138 |  |  | $ | 533,147 |  |  | $ | (24,920 | ) |  |  | 169 |  |  | $ | 709,197 |  |  | $ | (26,536 | )

Based upon the Company’s March 31, 2025 evaluation, the unrealized losses on debt securities were caused by market conditions for these types of securities. Market interest rates are currently higher than the book yield of the securities, causing declines in bond values generally. The Company continually monitors interest rate changes, risk premium spread changes, credit rating changes for issuers of bonds owned, collateralized loan obligations’ collateral levels, and corporate bond issuers’ common stock price changes. All collateralized loan obligations, obligations of states and political subdivisions, and corporate securities were investment grade rated at March 31, 2025.

The Company does not intend to sell any debt securities available for sale with a material unrealized loss and has concluded that it is more likely than not that it will not be required to sell the debt securities prior to recovery of the amortized cost basis.

The Company evaluates held to maturity corporate securities individually, monitoring each issuer’s financial condition, profitability, cash flows and credit rating agency conclusions. The Company has evaluated each issuer’s historical financial performance and ability to service debt payments, including throughout and following the 2008-2009 recession. The Company has an expectation that nonpayment of the amortized cost basis continues to be zero.

The fair values of debt securities could decline in the future if market interest rates rise, the general economy deteriorates, inflation increases, credit ratings decline, the issuers’ financial condition deteriorates, or the liquidity for debt securities declines. As a result, significant credit losses on debt securities may occur in the future.

As of March 31, 2025 and December 31, 2024, the Company’s debt securities pledged had a carrying value of $1,987,534 thousand and $2,049,954 thousand, respectively, primarily to secure public deposits, Federal Reserve Bank borrowings and securities sold under repurchase agreements.

-15-

An analysis of the gross unrealized losses of the debt securities available for sale portfolio follows:

|  | Debt Securities Available for Sale |
|  | At December 31, 2024 |
|  | No. of |  |  | Less than 12 months |  |  | No. of |  |  | 12 months or longer |  |  | No. of |  |  | Total |
|  | Investment |  |  |  |  |  |  | Unrealized |  |  | Investment |  |  |  |  |  |  | Unrealized |  |  | Investment |  |  |  |  |  |  | Unrealized |
|  | Positions |  |  | Fair Value |  |  | Losses |  |  | Positions |  |  | Fair Value |  |  | Losses |  |  | Positions |  |  | Fair Value |  |  | Losses |
|  | ($ in thousands) |
Agency residential MBS |  |  | 12 |  |  | $ | 18,030 |  |  | $ | (471 | ) |  |  | 103 |  |  | $ | 192,963 |  |  | $ | (17,520 | ) |  |  | 115 |  |  | $ | 210,993 |  |  | $ | (17,991 | )
Agency commercial MBS |  |  | 2 |  |  |  | 6,966 |  |  |  | (132 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2 |  |  |  | 6,966 |  |  |  | (132 | )
Securities of U.S. Government sponsored entities |  |  | 3 |  |  |  | 12,085 |  |  |  | (53 | ) |  |  | 19 |  |  |  | 275,467 |  |  |  | (19,032 | ) |  |  | 22 |  |  |  | 287,552 |  |  |  | (19,085 | )
Obligations of states and political subdivisions |  |  | 2 |  |  |  | 2,764 |  |  |  | (21 | ) |  |  | 40 |  |  |  | 51,759 |  |  |  | (1,680 | ) |  |  | 42 |  |  |  | 54,523 |  |  |  | (1,701 | )
Corporate securities |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 138 |  |  |  | 1,824,327 |  |  |  | (195,334 | ) |  |  | 138 |  |  |  | 1,824,327 |  |  |  | (195,334 | )
Collateralized loan obligations |  |  | 3 |  |  |  | 26,825 |  |  |  | (15 | ) |  |  | 32 |  |  |  | 309,249 |  |  |  | (5,193 | ) |  |  | 35 |  |  |  | 336,074 |  |  |  | (5,208 | )
Total |  |  | 22 |  |  | $ | 66,670 |  |  | $ | (692 | ) |  |  | 332 |  |  | $ | 2,653,765 |  |  | $ | (238,759 | ) |  |  | 354 |  |  | $ | 2,720,435 |  |  | $ | (239,451 | )

An analysis of gross unrecognized losses of the debt securities held to maturity portfolio follows:

|  | Debt Securities Held to Maturity |
|  | At December 31, 2024 |
|  | No. of |  |  | Less than 12 months |  |  | No. of |  |  | 12 months or longer |  |  | No. of |  |  | Total |
|  | Investment |  |  |  |  |  |  | Unrecognized |  |  | Investment |  |  |  |  |  |  | Unrecognized |  |  | Investment |  |  |  |  |  |  | Unrecognized |
|  | Positions |  |  | Fair Value |  |  | Losses |  |  | Positions |  |  | Fair Value |  |  | Losses |  |  | Positions |  |  | Fair Value |  |  | Losses |
|  | ($ in thousands) |
Agency residential MBS |  |  | - |  |  | $ | - |  |  | $ | - |  |  |  | 80 |  |  | $ | 52,771 |  |  | $ | (4,218 | ) |  |  | 80 |  |  | $ | 52,771 |  |  | $ | (4,218 | )
Obligations of states and political subdivisions |  |  | 24 |  |  |  | 15,822 |  |  |  | (78 | ) |  |  | 26 |  |  |  | 25,814 |  |  |  | (299 | ) |  |  | 50 |  |  |  | 41,636 |  |  |  | (377 | )
Corporate securities |  |  | 23 |  |  |  | 251,790 |  |  |  | (4,230 | ) |  |  | 35 |  |  |  | 451,420 |  |  |  | (28,007 | ) |  |  | 58 |  |  |  | 703,210 |  |  |  | (32,237 | )
Total |  |  | 47 |  |  | $ | 267,612 |  |  | $ | (4,308 | ) |  |  | 141 |  |  | $ | 530,005 |  |  | $ | (32,524 | ) |  |  | 188 |  |  | $ | 797,617 |  |  | $ | (36,832 | )

The Company evaluates debt securities on a quarterly basis including changes in security ratings issued by rating agencies, changes in the financial condition of the issuer, collateral levels and, for mortgage-backed and asset-backed securities, delinquency and loss information with respect to the underlying collateral, changes in the levels of subordination for the Company’s particular position within the repayment structure and remaining credit enhancement as compared to expected credit losses of the security. In addition to monitoring credit rating agency evaluations, Management performs its own evaluations regarding the credit worthiness of the issuer or the securitized assets underlying asset backed securities.

The following table presents the activity in the allowance for credit losses for debt securities held to maturity:

|  | For the Three Months Ended March 31, |
|  | 2025 |  |  | 2024 |
|  | (In thousands) |
Allowance for credit losses: |  |  |  |  |  |  |  |
Beginning balance |  | $ | 1 |  |  | $ | 1 |
Provision |  |  | - |  |  |  | - |
Chargeoffs |  |  | - |  |  |  | - |
Recoveries |  |  | - |  |  |  | - |
Total ending balance |  | $ | 1 |  |  | $ | 1 |

Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government sponsored entities. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance. Corporate securities held to maturity were individually evaluated for expected credit loss by evaluating the issuer’s financial condition, profitability, cash flows, and credit ratings. At March 31, 2025, no credit loss allowance was assigned to corporate securities held to maturity.

-16-

The following table summarizes the amortized cost of debt securities held to maturity at March 31, 2025, aggregated by credit rating:

|  | Credit Risk Profile by Credit Rating |
|  | At March 31, 2025 |
|  | AAA/AA/A |  |  | BBB+/BBB |  |  | Not Rated |  |  | Total |
|  | (In thousands) |
Agency residential MBS |  | $ | 53,064 |  |  | $ | - |  |  | $ | 464 |  |  | $ | 53,528 |
Obligations of states and political subdivisions |  |  | 48,675 |  |  |  | - |  |  |  | - |  |  |  | 48,675 |
Corporate securities |  |  | 554,871 |  |  |  | 182,275 |  |  |  | - |  |  |  | 737,146 |
Total |  | $ | 656,610 |  |  | $ | 182,275 |  |  | $ | 464 |  |  | $ | 839,349 |

There were no debt securities held to maturity on nonaccrual status or past due 30 days or more as of March 31, 2025.

The following table provides information about the amount of interest income earned on investment securities which is fully taxable and which is exempt from federal income tax:

|  | For the Three Months |
|  | Ended March 31, |
|  | 2025 |  |  | 2024 |
|  | (In thousands) |
Taxable |  | $ | 41,280 |  |  | $ | 54,145 |
Tax-exempt from regular federal income tax |  |  | 839 |  |  |  | 994 |
Total interest income from investment securities |  | $ | 42,119 |  |  | $ | 55,139 |

Note 4: Loans, Allowance for Credit Losses and Other Real Estate Owned

A summary of the major categories of loans outstanding is shown in the following tables at the dates indicated:

|  | At March 31, |  |  | At December 31, |
|  | 2025 |  |  | 2024 |
|  | (In thousands) |
Commercial |  | $ | 111,888 |  |  | $ | 127,276 |
Commercial real estate |  |  | 489,612 |  |  |  | 507,900 |
Construction |  |  | 5,064 |  |  |  | 5,064 |
Residential real estate |  |  | 8,061 |  |  |  | 8,274 |
Consumer installment & other |  |  | 156,405 |  |  |  | 171,786 |
Total |  | $ | 771,030 |  |  | $ | 820,300 |

The following summarizes activity in the allowance for credit losses:

|  | Allowance for Credit Losses |
|  | For the Three Months Ended March 31, 2025 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Consumer |  |  |  |  |
|  |  |  |  |  | Commercial |  |  |  |  |  |  | Residential |  |  | Installment |  |  |  |  |
|  | Commercial |  |  | Real Estate |  |  | Construction |  |  | Real Estate |  |  | and Other |  |  | Total |
|  | (In thousands) |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 4,197 |  |  | $ | 6,034 |  |  | $ | 247 |  |  | $ | 22 |  |  | $ | 4,280 |  |  | $ | 14,780 |
(Reversal) provision |  |  | (41 | ) |  |  | 309 |  |  |  | - |  |  |  | 4 |  |  |  | (822 | ) |  |  | (550 | )
Chargeoffs |  |  | (10 | ) |  |  | (191 | ) |  |  | - |  |  |  | - |  |  |  | (1,525 | ) |  |  | (1,726 | )
Recoveries |  |  | 265 |  |  |  | 13 |  |  |  | - |  |  |  | - |  |  |  | 1,132 |  |  |  | 1,410 |
Total allowance for credit losses |  | $ | 4,411 |  |  | $ | 6,165 |  |  | $ | 247 |  |  | $ | 26 |  |  | $ | 3,065 |  |  | $ | 13,914 |

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-17-

|  | Allowance for Credit Losses |
|  | For the Three Months Ended March 31, 2024 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Consumer |  |  |  |  |
|  |  |  |  |  | Commercial |  |  |  |  |  |  | Residential |  |  | Installment |  |  |  |  |
|  | Commercial |  |  | Real Estate |  |  | Construction |  |  | Real Estate |  |  | and Other |  |  | Total |
|  | (In thousands) |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 4,216 |  |  | $ | 5,925 |  |  | $ | 245 |  |  | $ | 26 |  |  | $ | 6,455 |  |  | $ | 16,867 |
(Reversal) provision |  |  | (463 | ) |  |  | (212 | ) |  |  | (3 | ) |  |  | (4 | ) |  |  | 982 |  |  |  | 300 |
Chargeoffs |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2,003 | ) |  |  | (2,003 | )
Recoveries |  |  | 12 |  |  |  | 45 |  |  |  | - |  |  |  | - |  |  |  | 658 |  |  |  | 715 |
Total allowance for credit losses |  | $ | 3,765 |  |  | $ | 5,758 |  |  | $ | 242 |  |  | $ | 22 |  |  | $ | 6,092 |  |  | $ | 15,879 |

The Company’s customers are primarily small businesses, professionals and consumers. Given the scale of these borrowers, corporate credit rating agencies do not evaluate the borrowers’ financial condition. The Bank maintains a Loan Review Department which reports directly to the Audit Committee of the Board of Directors. The Loan Review Department performs independent evaluations of loans and validates management assigned credit risk grades on evaluated loans using grading standards employed by bank regulatory agencies. Loans judged to carry lower-risk attributes are assigned a “pass” grade, with a minimal likelihood of loss. Loans judged to carry higher-risk attributes are referred to as “classified loans,” and are further disaggregated, with increasing expectations for loss recognition, as “substandard,” “doubtful,” and “loss.” The Loan Review Department performs continuous evaluations throughout the year. If the Bank becomes aware of deterioration in a borrower’s performance or financial condition between Loan Review Department examinations, assigned risk grades are re-evaluated promptly. Credit risk grades assigned by management and validated by the Loan Review Department are subject to review by the Bank’s regulatory authorities during regulatory examinations.

The following summarizes the credit risk profile by internally assigned grade:

|  | Credit Risk Profile by Internally Assigned Grade |
|  | At March 31, 2025 |
|  | Commercial |  |  | Commercial Real Estate |  |  | Construction |  |  | Residential Real Estate |  |  | Consumer Installment and Other |  |  | Total |
|  | (In thousands) |
Grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 107,630 |  |  | $ | 479,473 |  |  | $ | - |  |  | $ | 7,779 |  |  | $ | 154,279 |  |  | $ | 749,161 |
Substandard |  |  | 4,258 |  |  |  | 10,139 |  |  |  | 5,064 |  |  |  | 282 |  |  |  | 1,717 |  |  |  | 21,460 |
Doubtful |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 99 |  |  |  | 99 |
Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 310 |  |  |  | 310 |
Total |  | $ | 111,888 |  |  | $ | 489,612 |  |  | $ | 5,064 |  |  | $ | 8,061 |  |  | $ | 156,405 |  |  | $ | 771,030 |

|  | Credit Risk Profile by Internally Assigned Grade |
|  | At December 31, 2024 |
|  | Commercial |  |  | Commercial Real Estate |  |  | Construction |  |  | Residential Real Estate |  |  | Consumer Installment and Other |  |  | Total |
|  | (In thousands) |
Grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 122,958 |  |  | $ | 489,522 |  |  | $ | - |  |  | $ | 7,984 |  |  | $ | 169,251 |  |  | $ | 789,715 |
Substandard |  |  | 4,318 |  |  |  | 18,378 |  |  |  | 5,064 |  |  |  | 290 |  |  |  | 1,817 |  |  |  | 29,867 |
Doubtful |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 192 |  |  |  | 192 |
Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 526 |  |  |  | 526 |
Total |  | $ | 127,276 |  |  | $ | 507,900 |  |  | $ | 5,064 |  |  | $ | 8,274 |  |  | $ | 171,786 |  |  | $ | 820,300 |

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-18-

The following tables summarize loans by delinquency and nonaccrual status:

|  | Summary of Loans by Delinquency and Nonaccrual Status |
|  | At March 31, 2025 |
|  | Current and Accruing |  |  | 30-59 Days Past Due and Accruing |  |  | 60-89 Days Past Due and Accruing |  |  | Past Due 90 Days or More and Accruing |  |  | Nonaccrual |  |  | Total Loans |
|  | (In thousands) |
Commercial |  | $ | 111,583 |  |  | $ | 305 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 111,888 |
Commercial real estate |  |  | 488,508 |  |  |  | 1,104 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 489,612 |
Construction |  |  | 5,064 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,064 |
Residential real estate |  |  | 7,865 |  |  |  | 196 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 8,061 |
Consumer installment and other |  |  | 152,966 |  |  |  | 2,543 |  |  |  | 619 |  |  |  | 277 |  |  |  | - |  |  |  | 156,405 |
Total |  | $ | 765,986 |  |  | $ | 4,148 |  |  | $ | 619 |  |  | $ | 277 |  |  | $ | - |  |  | $ | 771,030 |

|  | Summary of Loans by Delinquency and Nonaccrual Status |
|  | At December 31, 2024 |
|  | Current and Accruing |  |  | 30-59 Days Past Due and Accruing |  |  | 60-89 Days Past Due and Accruing |  |  | Past Due 90 Days or More and Accruing |  |  | Nonaccrual |  |  | Total Loans |
|  | (In thousands) |
Commercial |  | $ | 126,538 |  |  | $ | 700 |  |  | $ | 28 |  |  | $ | - |  |  | $ | 10 |  |  | $ | 127,276 |
Commercial real estate |  |  | 506,588 |  |  |  | 1,121 |  |  |  | - |  |  |  | - |  |  |  | 191 |  |  |  | 507,900 |
Construction |  |  | 5,064 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,064 |
Residential real estate |  |  | 8,274 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 8,274 |
Consumer installment and other |  |  | 166,875 |  |  |  | 3,493 |  |  |  | 884 |  |  |  | 534 |  |  |  | - |  |  |  | 171,786 |
Total |  | $ | 813,339 |  |  | $ | 5,314 |  |  | $ | 912 |  |  | $ | 534 |  |  | $ | 201 |  |  | $ | 820,300 |

There was no allowance for credit losses allocated to loans on nonaccrual status as of March 31, 2025 or December 31, 2024.

There were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status at March 31, 2025 or December 31, 2024.

There were no loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2025 and March 31, 2024.

A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. Loans considered collateral dependent are reassessed quarterly. Loans that were considered collateral dependent at March 31, 2025 included the following: seven commercial real estate loans totaling $9.4 million secured by real property and $273 thousand of indirect consumer installment loans secured by personal property. There were no other collateral dependent loans at March 31, 2025. Loans that were considered collateral dependent at December 31, 2024 included the following: nine commercial real estate loans totaling $17.6 million secured by real property and $503 thousand of indirect consumer installment loans secured by personal property. There were no other collateral dependent loans at December 31, 2024.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

|  | At March 31, 2025 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Line of |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Credit |  |  |  |  |
|  | Term Loans Amortized Cost Basis by Origination Year |  |  | Total |  |  | Amortized |  |  |  |  |
|  | Prior |  |  | 2021 |  |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | 2025 |  |  | Term Loans |  |  | Cost Basis |  |  | Total |
|  | (In thousands) |
Commercial loans by grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 25,468 |  |  | $ | 6,542 |  |  | $ | 11,323 |  |  | $ | 8,509 |  |  | $ | 18,720 |  |  | $ | 15,271 |  |  | $ | 85,833 |  |  | $ | 21,797 |  |  | $ | 107,630 |
Substandard |  |  | 255 |  |  |  | 2,835 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,090 |  |  |  | 1,168 |  |  |  | 4,258 |
Doubtful |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | 25,723 |  |  | $ | 9,377 |  |  | $ | 11,323 |  |  | $ | 8,509 |  |  | $ | 18,720 |  |  | $ | 15,271 |  |  | $ | 88,923 |  |  | $ | 22,965 |  |  | $ | 111,888 |
Current gross chargeoffs on commercial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the three months ended March 31, 2025 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 10 |  |  | $ | 10 |

-19-

|  | At December 31, 2024 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Line of |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Credit |  |  |  |  |
|  | Term Loans Amortized Cost Basis by Origination Year |  |  | Total |  |  | Amortized |  |  |  |  |
|  | Prior |  |  | 2020 |  |  | 2021 |  |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | Term Loans |  |  | Cost Basis |  |  | Total |
|  | (In thousands) |
Commercial loans by grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 18,752 |  |  | $ | 8,542 |  |  | $ | 18,539 |  |  | $ | 12,388 |  |  | $ | 14,776 |  |  | $ | 19,399 |  |  | $ | 92,396 |  |  | $ | 30,562 |  |  | $ | 122,958 |
Substandard |  |  | 266 |  |  |  | - |  |  |  | 2,835 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,101 |  |  |  | 1,217 |  |  |  | 4,318 |
Doubtful |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | 19,018 |  |  | $ | 8,542 |  |  | $ | 21,374 |  |  | $ | 12,388 |  |  | $ | 14,776 |  |  | $ | 19,399 |  |  | $ | 95,497 |  |  | $ | 31,779 |  |  | $ | 127,276 |
Current gross chargeoffs on commercial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the year ended December 31, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | $ | 59 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 59 |  |  | $ | 224 |  |  | $ | 283 |

|  | At March 31, 2025 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Line of |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Credit |  |  |  |  |
|  | Term Loans Amortized Cost Basis by Origination Year |  |  | Total |  |  | Amortized |  |  |  |  |
|  | Prior |  |  | 2021 |  |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | 2025 |  |  | Term Loans |  |  | Cost Basis |  |  | Total |
|  | (In thousands) |
Commercial real estate loans by grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 254,005 |  |  | $ | 61,266 |  |  | $ | 48,702 |  |  | $ | 42,836 |  |  | $ | 70,650 |  |  | $ | 2,014 |  |  | $ | 479,473 |  |  | $ | - |  |  | $ | 479,473 |
Substandard |  |  | 10,139 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 10,139 |  |  |  | - |  |  |  | 10,139 |
Doubtful |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | 264,144 |  |  | $ | 61,266 |  |  | $ | 48,702 |  |  | $ | 42,836 |  |  | $ | 70,650 |  |  | $ | 2,014 |  |  | $ | 489,612 |  |  | $ | - |  |  | $ | 489,612 |
Current gross chargeoffs on commercial real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the three months ended March 31, 2025 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | $ | 191 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 191 |  |  | $ | - |  |  | $ | 191 |

|  | At December 31, 2024 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Line of |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Credit |  |  |  |  |
|  | Term Loans Amortized Cost Basis by Origination Year |  |  | Total |  |  | Amortized |  |  |  |  |
|  | Prior |  |  | 2020 |  |  | 2021 |  |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | Term Loans |  |  | Cost Basis |  |  | Total |
|  | (In thousands) |
Commercial real estate loans by grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 197,160 |  |  | $ | 65,384 |  |  | $ | 63,697 |  |  | $ | 49,117 |  |  | $ | 43,091 |  |  | $ | 71,073 |  |  | $ | 489,522 |  |  | $ | - |  |  | $ | 489,522 |
Substandard |  |  | 17,409 |  |  |  | 969 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 18,378 |  |  |  | - |  |  |  | 18,378 |
Doubtful |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | 214,569 |  |  | $ | 66,353 |  |  | $ | 63,697 |  |  | $ | 49,117 |  |  | $ | 43,091 |  |  | $ | 71,073 |  |  | $ | 507,900 |  |  | $ | - |  |  | $ | 507,900 |
Current gross chargeoffs on commercial real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the year ended December 31, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |

|  | At March 31, 2025 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Line of |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Credit |  |  |  |  |
|  | Term Loans Amortized Cost Basis by Origination Year |  |  | Total |  |  | Amortized |  |  |  |  |
|  | Prior |  |  | 2021 |  |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | 2025 |  |  | Term Loans |  |  | Cost Basis |  |  | Total |
|  | (In thousands) |
Residential real estate loans by grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 7,779 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 7,779 |  |  | $ | - |  |  | $ | 7,779 |
Substandard |  |  | 282 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 282 |  |  |  | - |  |  |  | 282 |
Doubtful |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | 8,061 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 8,061 |  |  | $ | - |  |  | $ | 8,061 |
Current gross chargeoffs on residential real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the three months ended March 31, 2025 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |

|  | At December 31, 2024 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Line of |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Credit |  |  |  |  |
|  | Term Loans Amortized Cost Basis by Origination Year |  |  | Total |  |  | Amortized |  |  |  |  |
|  | Prior |  |  | 2020 |  |  | 2021 |  |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | Term Loans |  |  | Cost Basis |  |  | Total |
|  | (In thousands) |
Residential real estate loans by grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 7,984 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 7,984 |  |  | $ | - |  |  | $ | 7,984 |
Substandard |  |  | 290 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 290 |  |  |  | - |  |  |  | 290 |
Doubtful |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | 8,274 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 8,274 |  |  | $ | - |  |  | $ | 8,274 |
Current gross chargeoffs on residential real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the year ended December 31, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |

-20-

|  | At March 31, 2025 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Line of |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Credit |  |  |  |  |
|  | Term Loans Amortized Cost Basis by Origination Year |  |  | Total |  |  | Amortized |  |  |  |  |
|  | Prior |  |  | 2021 |  |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | 2025 |  |  | Term Loans |  |  | Cost Basis |  |  | Total |
|  | (In thousands) |
Construction loans by grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,064 |  |  |  | 5,064 |
Doubtful |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 5,064 |  |  | $ | 5,064 |
Current gross chargeoffs on construction loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the three months ended March 31, 2025 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |

|  | At December 31, 2024 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Line of |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Credit |  |  |  |  |
|  | Term Loans Amortized Cost Basis by Origination Year |  |  | Total |  |  | Amortized |  |  |  |  |
|  | Prior |  |  | 2020 |  |  | 2021 |  |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | Term Loans |  |  | Cost Basis |  |  | Total |
|  | (In thousands) |
Construction loans by grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,064 |  |  |  | 5,064 |
Doubtful |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 5,064 |  |  | $ | 5,064 |
Current gross chargeoffs on construction loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the year ended December 31, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |

The Company considers the delinquency and nonaccrual status of the consumer loan portfolio and its impact on the allowance for credit losses. The following table presents the amortized cost in consumer installment and other loans based on delinquency and nonaccrual status:

|  | At March 31, 2025 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Line of |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Credit |  |  |  |  |
|  | Term Loans Amortized Cost Basis by Origination Year |  |  | Total |  |  | Amortized |  |  |  |  |
|  | Prior |  |  | 2021 |  |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | 2025 |  |  | Term Loans |  |  | Cost Basis |  |  | Total |
|  | (In thousands) |  |  |  |  |
Consumer installment and other loans by delinquency and nonaccrual status: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 14,575 |  |  | $ | 28,719 |  |  | $ | 43,829 |  |  | $ | 24,305 |  |  | $ | 22,626 |  |  | $ | 4,460 |  |  | $ | 138,514 |  |  | $ | 14,452 |  |  | $ | 152,966 |
30-59 days past due |  |  | 339 |  |  |  | 707 |  |  |  | 1,016 |  |  |  | 297 |  |  |  | 157 |  |  |  | - |  |  |  | 2,516 |  |  |  | 27 |  |  |  | 2,543 |
60-89 days past due |  |  | 29 |  |  |  | 72 |  |  |  | 204 |  |  |  | 100 |  |  |  | 165 |  |  |  | - |  |  |  | 570 |  |  |  | 49 |  |  |  | 619 |
Past due 90 days or more |  |  | 49 |  |  |  | 68 |  |  |  | 78 |  |  |  | 56 |  |  |  | 22 |  |  |  | - |  |  |  | 273 |  |  |  | 4 |  |  |  | 277 |
Nonaccrual |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | 14,992 |  |  | $ | 29,566 |  |  | $ | 45,127 |  |  | $ | 24,758 |  |  | $ | 22,970 |  |  | $ | 4,460 |  |  | $ | 141,873 |  |  | $ | 14,532 |  |  | $ | 156,405 |
Current gross chargeoffs on consumer installment and other loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the three months ended March 31, 2025 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | $ | 55 |  |  | $ | 400 |  |  | $ | 545 |  |  | $ | 267 |  |  | $ | 203 |  |  | $ | - |  |  | $ | 1,470 |  |  | $ | 55 |  |  | $ | 1,525 |

|  | At December 31, 2024 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Line of |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Credit |  |  |  |  |
|  | Term Loans Amortized Cost Basis by Origination Year |  |  | Total |  |  | Amortized |  |  |  |  |
|  | Prior |  |  | 2020 |  |  | 2021 |  |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | Term Loans |  |  | Cost Basis |  |  | Total |
|  | (In thousands) |  |  |  |  |
Consumer installment and other loans by delinquency and nonaccrual status: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 6,068 |  |  | $ | 12,464 |  |  | $ | 32,608 |  |  | $ | 48,694 |  |  | $ | 26,805 |  |  | $ | 24,522 |  |  | $ | 151,161 |  |  | $ | 15,714 |  |  | $ | 166,875 |
30-59 days past due |  |  | 173 |  |  |  | 201 |  |  |  | 949 |  |  |  | 1,392 |  |  |  | 385 |  |  |  | 263 |  |  |  | 3,363 |  |  |  | 130 |  |  |  | 3,493 |
60-89 days past due |  |  | 33 |  |  |  | 36 |  |  |  | 184 |  |  |  | 256 |  |  |  | 91 |  |  |  | 120 |  |  |  | 720 |  |  |  | 164 |  |  |  | 884 |
Past due 90 days or more |  |  | - |  |  |  | 38 |  |  |  | 129 |  |  |  | 200 |  |  |  | 149 |  |  |  | - |  |  |  | 516 |  |  |  | 18 |  |  |  | 534 |
Nonaccrual |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | 6,274 |  |  | $ | 12,739 |  |  | $ | 33,870 |  |  | $ | 50,542 |  |  | $ | 27,430 |  |  | $ | 24,905 |  |  | $ | 155,760 |  |  | $ | 16,026 |  |  | $ | 171,786 |
Current gross chargeoffs on consumer installment and other loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the year ended December 31, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | $ | 246 |  |  | $ | 388 |  |  | $ | 2,376 |  |  | $ | 1,843 |  |  | $ | 913 |  |  | $ | 162 |  |  | $ | 5,928 |  |  | $ | 463 |  |  | $ | 6,391 |

There were no loans held for sale at March 31, 2025 and December 31, 2024.

The Company held no other real estate owned (OREO) at March 31, 2025 and December 31, 2024. At March 31, 2025 and December 31, 2024, there were no consumer mortgage loans outstanding secured by residential real estate properties for which formal foreclosure proceedings were in process.

-21-

Note 5: Concentration of Credit Risk

Under the California Financial Code, credit extended to any one person at any one time shall not exceed the following limitations: (a) unsecured credits shall not exceed 15 percent of the sum of the Bank’s shareholders’ equity, allowance for loan losses, capital notes, and debentures, or (b) secured and unsecured credits in all shall not exceed 25 percent of the sum of the Bank’s shareholders’ equity, allowance for loan losses, capital notes, and debentures. At March 31, 2025, the Bank did not have credit extended to any one entity exceeding these limits. At March 31, 2025, the Bank had 26 lending relationships each with aggregate amounts of $5 million or more. The Company has significant credit arrangements that are secured by real estate collateral. In addition to real estate loans outstanding as disclosed in Note 4, the Company had loan commitments related to real estate loans of $25,555 thousand and $26,292 thousand at March 31, 2025 and December 31, 2024, respectively. The Company requires collateral on all real estate loans with loan-to-value ratios at origination generally no greater than 75% on commercial real estate loans and no greater than 80% on residential real estate loans. At March 31, 2025, the Bank held corporate bonds in 107 issuing entities that exceeded $5 million for each issuer.

Note 6: Other Assets and Other Liabilities

Other assets consisted of the following:

|  | At March 31, |  |  | At December 31, |
|  | 2025 |  |  | 2024 |
|  | (In thousands) |
Cost method equity investments: |  |  |  |  |  |  |  |
Federal Reserve Bank stock (1) |  | $ | 14,069 |  |  | $ | 14,069 |
Other investments |  |  | 158 |  |  |  | 158 |
Total cost method equity investments |  |  | 14,227 |  |  |  | 14,227 |
Life insurance cash surrender value |  |  | 68,969 |  |  |  | 68,578 |
Net deferred tax asset |  |  | 71,243 |  |  |  | 88,606 |
Right-of-use asset |  |  | 19,992 |  |  |  | 17,985 |
Limited partnership investments |  |  | 32,636 |  |  |  | 28,551 |
Interest receivable |  |  | 42,123 |  |  |  | 44,606 |
Prepaid assets |  |  | 4,708 |  |  |  | 5,697 |
Other assets |  |  | 5,410 |  |  |  | 12,635 |
Total other assets |  | $ | 259,308 |  |  | $ | 280,885 |

(1) | A bank applying for membership in the Federal Reserve System is required to subscribe to stock in the Federal Reserve Bank (FRB) in its district in a sum equal to six percent of the bank’s paid-up capital stock and surplus. One-half of the amount of the bank's subscription shall be paid to the FRB and the remaining half will be subject to call when deemed necessary by the Board of Governors of the Federal Reserve System.

The Company owns 211 thousand shares of Visa Inc. (“Visa”) Class B-1 common stock, which have transfer restrictions; the carrying value is $-0- thousand. Following the resolution of certain litigation involving Visa, shares of Visa’s Class B-1 stock will convert to shares of Visa Class A common stock based on a conversion factor (1.5609 as of March 31, 2025), which is periodically adjusted to reflect Visa’s ongoing litigation costs. Given the transfer restrictions and continuing uncertainty regarding the likelihood, ultimate timing and eventual conversion of Visa Class B-1 common stock for shares of Visa Class A common stock or other marketable classes of Visa common stock, these shares are not considered to have a readily determinable fair value and have no carrying value. Visa Class A common stock trades on the New York Stock Exchange and had a closing price of $350.46 per share on March 31, 2025, the last trading day for the first quarter 2025. The ultimate value of the Company’s Visa Class B-1 shares is subject to the extent of Visa’s future litigation escrow fundings, the resulting conversion rate to Visa Class A common stock, and current and future transfer restrictions on the Visa Class B-1 common stock. At March 31, 2025, the Company did not record an adjustment to the carrying value of the Visa Class B-1 shares.

The Company invests in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for low-income housing tax credits. At March 31, 2025, these investments totaled $32,636 thousand and $13,417 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2024, these investments totaled $28,551 thousand and $11,368 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At March 31, 2025, the $13,417 thousand of outstanding equity capital commitments are expected to be paid as follows: $4,905 thousand in the remainder of 2025, $4,688 thousand in 2026, $2,569 thousand in 2027, $348 thousand in 2028, $396 thousand in 2029 and or $511 thousand in 2030 and thereafter.

-22-

The amounts recognized in net income for these investments include:

|  | For the Three Months Ended |
|  | March 31, |
|  | 2025 |  |  | 2024 |
|  | (In thousands) |
Investment loss included in pre-tax income |  | $ | 915 |  |  | $ | 1,440 |
Tax credits recognized in provision for income taxes |  |  | 975 |  |  |  | 975 |

Other liabilities consisted of the following:

|  | At March 31, |  |  | At December 31, |
|  | 2025 |  |  | 2024 |
|  | (In thousands) |
Operating lease liability |  | $ | 19,992 |  |  | $ | 17,985 |
Other liabilities |  |  | 36,180 |  |  |  | 36,160 |
Total other liabilities |  | $ | 56,172 |  |  | $ | 54,145 |

The Company has entered into leases for most branch locations and certain other offices that were classified as operating leases primarily with original terms of five years. Certain lease arrangements contain extension options, which can be exercised at the Company’s option, for one or more additional five year terms. Unexercised extension options are not considered reasonably certain of exercise and have not been included in the lease term used to determine the lease liability or right-of-use asset. The Company did not have any finance leases as of March 31, 2025.

As of March 31, 2025, the Company’s lease liability and right-of-use asset were $19,992 thousand. The weighted average remaining life of operating leases and weighted average discount rate used to determine operating lease liabilities were 3.8 years and 3.57%, respectively, at March 31, 2025. The Company did not have any material lease incentives, unamortized initial direct costs, prepaid lease expense, or accrued lease expense as of March 31, 2025.

Total lease costs were $1,680 thousand and $1,678 thousand in the three months ended March 31, 2025 and March 31, 2024, respectively, and were recorded within occupancy and equipment expense. The Company did not have any material short-term or variable leases costs or sublease income during the three months ended March 31, 2025 and March 31, 2024.

The following table summarizes the remaining lease payments of operating lease liabilities:

|  | Minimum future lease payments |
|  | At March 31, |
|  | 2025 |
|  | (In thousands) |
The remainder of 2025 |  | $ | 4,872 |
2026 |  |  | 5,448 |
2027 |  |  | 4,600 |
2028 |  |  | 3,670 |
2029 |  |  | 2,040 |
Thereafter |  |  | 865 |
Total minimum lease payments |  |  | 21,495 |
Less: discount |  |  | (1,503 | )
Present value of lease liability |  | $ | 19,992 |

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-23-

Note 7: Goodwill and Identifiable Intangible Assets

The Company has recorded goodwill and other identifiable intangibles associated with purchase business combinations. Goodwill is not amortized, but is evaluated for impairment at least annually. The Company did not recognize impairment during the three months ended March 31, 2025 and the year ended December 31, 2024, as no triggering events occurred during such periods. Identifiable intangibles are amortized to their estimated residual values over their expected useful lives. Such lives and residual values are also periodically reassessed to determine if any amortization period adjustments are indicated. During the three months ended March 31, 2025 and the year ended December 31, 2024, no such adjustments were recorded.

The carrying values of goodwill were:

|  | At March 31, 2025 |  |  | At December 31, 2024 |
|  | (In thousands) |
Goodwill |  | $ | 121,673 |  |  | $ | 121,673 |

The gross carrying amount of identifiable intangible assets and accumulated amortization were:

|  | At March 31, 2025 |  |  | At December 31, 2024 |
|  | Gross |  |  |  |  |  |  | Gross |  |  |  |  |
|  | Carrying |  |  | Accumulated |  |  | Carrying |  |  | Accumulated |
|  | Amount |  |  | Amortization |  |  | Amount |  |  | Amortization |
|  | (In thousands) |
Core deposit intangibles |  | $ | 56,808 |  |  | $ | (56,736 | ) |  | $ | 56,808 |  |  | $ | (56,683 | )

As of March 31, 2025, the current period and estimated future amortization expense for identifiable intangible assets, to be fully amortized in 2025, was:

|  | Total |
|  | Core |
|  | Deposit |
|  | Intangibles |
|  | (In thousands) |
For the three months ended March 31, 2025 (actual) |  | $ | 53 |
The remainder of 2025 |  |  | 72 |

Note 8: Deposits and Borrowed Funds

The following table provides additional detail regarding deposits.

|  | Deposits |
|  | At March 31, |  |  | At December 31, |
|  | 2025 |  |  | 2024 |
|  | (In thousands) |
Noninterest-bearing |  | $ | 2,241,802 |  |  | $ | 2,333,389 |
Interest-bearing: |  |  |  |  |  |  |  |
Transaction |  |  | 920,461 |  |  |  | 953,863 |
Savings |  |  | 1,633,445 |  |  |  | 1,642,360 |
Time deposits less than $100 thousand |  |  | 45,582 |  |  |  | 47,585 |
Time deposits $100 thousand through $250 thousand |  |  | 23,789 |  |  |  | 25,368 |
Time deposits more than $250 thousand |  |  | 9,016 |  |  |  | 9,285 |
Total deposits |  | $ | 4,874,095 |  |  | $ | 5,011,850 |

Demand deposit overdrafts of $587 thousand and $591 thousand were included as loan balances at March 31, 2025 and December 31, 2024, respectively. Interest expense for aggregate time deposits with individual account balances in excess of $100 thousand was $17 thousand in the three months ended March 31, 2025 and $21 thousand in the three months ended March 31, 2024.

-24-

The following table provides additional detail regarding short-term borrowed funds.

|  | Repurchase Agreements (Sweep) Accounted for as Secured Borrowings |
|  | Remaining Contractual Maturity of the Agreements |
|  | Overnight and Continuous |
|  | At March 31, |  |  | At December 31, |
|  | 2025 |  |  | 2024 |
Repurchase agreements: |  | (In thousands) |
Collateral securing borrowings: |  |  |  |  |  |  |  |
Agency residential MBS |  | $ | 20,576 |  |  | $ | 21,284 |
Corporate securities |  |  | 418,711 |  |  |  | 412,921 |
Total collateral carrying value |  | $ | 439,287 |  |  | $ | 434,205 |
Total short-term borrowed funds |  | $ | 113,219 |  |  | $ | 120,322 |

At March 31, 2025, the Company had access to borrowing from the Federal Reserve up to $724,966 thousand based on the collateral pledged at March 31, 2025. The Company had a $60,000 thousand line of credit with a correspondent bank at March 31, 2025. There were no borrowings from the Federal Reserve Bank or correspondent banks at March 31, 2025. At March 31, 2025, the Company’s estimated unpledged collateral qualifying debt securities totaled $1,615,433 thousand.

Note 9: Fair Value Measurements

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Debt securities available for sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as other real estate owned, loans individually evaluated for credit loss, certain loans held for investment, debt securities held to maturity, and other assets. These nonrecurring fair value adjustments typically involve the lower-of-cost or fair-value accounting of individual assets.

In accordance with the Fair Value Measurement and Disclosure topic of the FASB Accounting Standards Codification, the Company bases its fair values on the price that would be received to sell an asset or paid to transfer a liability in the principal market or most advantageous market for an asset or liability in an orderly transaction between market participants on the measurement date under current market conditions. A fair value measurement reflects all of the assumptions that market participants would use in pricing the asset or liability, including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset, and the risk of nonperformance.

The Company groups its assets and liabilities measured at fair value into a three-level hierarchy, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. When the valuation assumptions used to measure the fair value of the asset or liability are categorized within different levels of the fair value hierarchy, the asset or liability is categorized in its entirety within the lowest level of the hierarchy. These levels are:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active exchange markets, such as the New York Stock Exchange. Level 1 includes U.S. Treasury and equity securities, which are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Valuation is based upon quoted prices 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 in the market. Level 2 includes mutual funds, federal agency securities, mortgage-backed securities, corporate securities, commercial paper, collateralized loan obligations, municipal bonds and securities of U.S government entities and U.S. government sponsored entities.

Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Company’s estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

The Company relies on independent vendor pricing services to measure fair value for equity securities, debt securities available for sale and debt securities held to maturity. The Company employs three pricing services. To validate the pricing of these vendors, the Company compares vendors’ pricing for each of the securities for consistency; significant pricing differences, if any, are evaluated using all available independent quotes with the quote most closely reflecting the market generally used as the fair value estimate. In addition, the Company evaluates debt securities for credit losses on a quarterly basis. As with any valuation technique used to estimate fair value, changes in underlying assumptions used could significantly affect the results of current and future values. Accordingly, these fair value estimates may not be realized in an actual sale of the securities.

-25-

The Company regularly reviews the valuation techniques and assumptions used by its vendors and determines which valuation techniques are utilized based on observable market inputs for the type of securities being measured. The Company uses the information to determine the placement in the fair value hierarchy as level 1, 2 or 3.

Assets Recorded at Fair Value on a Recurring Basis

The tables below present assets measured at fair value on a recurring basis on the dates indicated.

|  | At March 31, 2025 |
|  | Fair Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) (1) |
|  | (In thousands) |
Debt securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Agency residential MBS |  | $ | 204,342 |  |  | $ | - |  |  | $ | 204,342 |  |  | $ | - |
Agency commercial MBS |  |  | 46,502 |  |  |  | - |  |  |  | 46,502 |  |  |  | - |
Securities of U.S. Government sponsored entities |  |  | 299,722 |  |  |  | - |  |  |  | 299,722 |  |  |  | - |
Obligations of states and political subdivisions |  |  | 60,581 |  |  |  | - |  |  |  | 60,581 |  |  |  | - |
Corporate securities |  |  | 1,802,791 |  |  |  | - |  |  |  | 1,802,791 |  |  |  | - |
Collateralized loan obligations |  |  | 822,111 |  |  |  | - |  |  |  | 822,111 |  |  |  | - |
Total debt securities available for sale |  | $ | 3,236,049 |  |  | $ | - |  |  | $ | 3,236,049 |  |  | $ | - |

(1) | There were no transfers into or out of level 3 during the three months ended March 31, 2025.

|  | At December 31, 2024 |
|  | Fair Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) (1) |
|  | (In thousands) |
Debt securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Agency residential MBS |  | $ | 211,060 |  |  | $ | - |  |  | $ | 211,060 |  |  | $ | - |
Agency commercial MBS |  |  | 6,966 |  |  |  | - |  |  |  | 6,966 |  |  |  | - |
Securities of U.S. Government sponsored entities |  |  | 292,117 |  |  |  | - |  |  |  | 292,117 |  |  |  | - |
U.S. Treasury securities |  |  | 4,955 |  |  |  | 4,955 |  |  |  | - |  |  |  | - |
Obligations of states and political subdivisions |  |  | 62,186 |  |  |  | - |  |  |  | 62,186 |  |  |  | - |
Corporate securities |  |  | 1,835,937 |  |  |  | - |  |  |  | 1,835,937 |  |  |  | - |
Collateralized loan obligations |  |  | 982,589 |  |  |  | - |  |  |  | 982,589 |  |  |  | - |
Total debt securities available for sale |  | $ | 3,395,810 |  |  | $ | 4,955 |  |  | $ | 3,390,855 |  |  | $ | - |

(1) | There were no transfers into or out of level 3 during the year ended December 31, 2024.

Assets Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower-of-cost or fair-value accounting of individual assets. No assets that were recorded in the balance sheet were measured at fair value on a nonrecurring basis at March 31, 2025 or December 31, 2024.

-26-

Disclosures about Fair Value of Financial Instruments

The tables below are a summary of fair value estimates for financial instruments and the level of the fair value hierarchy within which the fair value measurements are categorized, excluding financial instruments recorded at fair value on a recurring basis. The values assigned do not necessarily represent amounts which ultimately may be realized for assets or paid to settle liabilities. In addition, these values do not give effect to adjustments to fair value which may occur when financial instruments are sold or settled in larger quantities. The carrying amounts in the following tables are recorded in the balance sheet under the indicated captions.

The Company has not included assets and liabilities that are not financial instruments such as goodwill, long-term relationships with deposit, merchant processing and trust customers, other purchased intangibles, premises and equipment, deferred taxes, and other assets and liabilities. The total estimated fair values do not represent, and should not be construed to represent, the underlying value of the Company.

|  | At March 31, 2025 |
|  | Carrying Amount |  |  | Estimated Fair Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2 ) |  |  | Significant Unobservable Inputs (Level 3 ) |
Financial Assets: |  | (In thousands) |
Cash and due from banks |  | $ | 727,336 |  |  | $ | 727,336 |  |  | $ | 727,336 |  |  | $ | - |  |  | $ | - |
Debt securities held to maturity |  |  | 839,348 |  |  |  | 813,125 |  |  |  | - |  |  |  | 813,125 |  |  |  | - |
Loans |  |  | 757,116 |  |  |  | 752,284 |  |  |  | - |  |  |  | - |  |  |  | 752,284 |
Financial Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 4,874,095 |  |  | $ | 4,871,639 |  |  | $ | - |  |  | $ | 4,795,708 |  |  | $ | 75,931 |
Securities sold under repurchase agreements |  |  | 113,219 |  |  |  | 113,219 |  |  |  | - |  |  |  | 113,219 |  |  |  | - |

|  | At December 31, 2024 |
|  | Carrying Amount |  |  | Estimated Fair Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2 ) |  |  | Significant Unobservable Inputs (Level 3 ) |
Financial Assets: |  | (In thousands) |
Cash and due from banks |  | $ | 601,494 |  |  | $ | 601,494 |  |  | $ | 601,494 |  |  | $ | - |  |  | $ | - |
Debt securities held to maturity |  |  | 844,634 |  |  |  | 807,838 |  |  |  | - |  |  |  | 807,838 |  |  |  | - |
Loans |  |  | 805,520 |  |  |  | 795,849 |  |  |  | - |  |  |  | - |  |  |  | 795,849 |
Financial Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 5,011,850 |  |  | $ | 5,007,644 |  |  | $ | - |  |  | $ | 4,929,612 |  |  | $ | 78,032 |
Securities sold under repurchase agreements |  |  | 120,322 |  |  |  | 120,322 |  |  |  | - |  |  |  | 120,322 |  |  |  | - |

The majority of the Company’s standby letters of credit and other commitments to extend credit carry current market interest rates if converted to loans. No premium or discount was ascribed to these commitments because virtually all funding would be at current market rates.

Note 10: Commitments and Contingent Liabilities

Loan commitments are agreements to lend to a customer provided there is no violation of any condition established in the agreement. Certain agreements provide the Company the right to cancel or reduce its obligations to lend to customers. The portions that are not unconditionally cancellable by the Company aggregated $25,555 thousand at March 31, 2025 and $26,292 thousand at December 31, 2024. Commitments generally have fixed expiration dates or other termination clauses. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements. Loan commitments are subject to the Company’s normal credit policies and collateral requirements. Unfunded loan commitments were $184,043 thousand at March 31, 2025 and $171,672 thousand at December 31, 2024. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. Standby letters of credit are primarily issued to support customers’ short-term financing requirements and must meet the Company’s normal credit policies and collateral requirements. Financial and performance standby letters of credit outstanding totaled $917 thousand at March 31, 2025 and $1,926 thousand at December 31, 2024. The Company had no commitments for commercial and similar letters of credit at March 31, 2025 or at December 31, 2024. The Company had $1,000 thousand in outstanding full recourse guarantees to a third party credit card company at March 31, 2025 and December 31, 2024, respectively. At March 31, 2025, the Company had a reserve for unfunded commitments of $201 thousand for the above-mentioned loan commitments of $25,555 thousand that are not unconditionally cancellable by the Company. The Company’s reserve for unfunded commitments was $201 thousand at December 31, 2024. The reserve for unfunded commitments is included in other liabilities.

-27-

Due to the nature of its business, the Company is subject to various threatened or filed legal cases. Based on the advice of legal counsel, the Company does not expect such cases will have a material, adverse effect on its financial position or results of operations. Legal liabilities are accrued when obligations become probable and the amount can be reasonably estimated.

Note 11: Earnings Per Common Share

The table below shows earnings per common share and diluted earnings per common share. Basic earnings per common share are computed by dividing net income by the average number of common shares outstanding during the period. Diluted earnings per common share are computed by dividing net income by the average number of common shares outstanding during the period plus the impact of common stock equivalents.

|  | For the Three Months Ended |
|  | March 31, |
|  | 2025 |  |  | 2024 |
|  | (In thousands, except per share data) |
Net income (numerator) |  | $ | 31,037 |  |  | $ | 36,417 |
Basic earnings per common share |  |  |  |  |  |  |  |
Weighted average number of common shares outstanding - basic (denominator) |  |  | 26,642 |  |  |  | 26,674 |
Basic earnings per common share |  | $ | 1.16 |  |  | $ | 1.37 |
Diluted earnings per common share |  |  |  |  |  |  |  |
Weighted average number of common shares outstanding - basic |  |  | 26,642 |  |  |  | 26,674 |
Add common stock equivalents for options |  |  | - |  |  |  | 1 |
Weighted average number of common shares outstanding - diluted (denominator) |  |  | 26,642 |  |  |  | 26,675 |
Diluted earnings per common share |  | $ | 1.16 |  |  | $ | 1.37 |

For the three months ended March 31, 2025 and March 31, 2024, options to purchase 1,269 thousand and 1,109 thousand shares of common stock, respectively, were outstanding but not included in the computation of diluted earnings per share because the option exercise price exceeded the fair value of the stock such that their inclusion would have had an anti-dilutive effect.

Note 12: Operating Segments

The Company’s reportable segment is determined by the Chief Financial Officer, who is the designated chief decision maker, based upon information provided about the Company’s products and services offered, primarily banking operations. Loans, investments, and deposits provide revenues in the banking operation. Interest expense, provisions for credit losses, and payroll provide the significant expenses in the banking operations. While the chief decision-maker monitors the revenue streams of the various products and services, operations are managed, and financial performance is evaluated on a Company-wide basis as reflected in the consolidated financial statements contained in the this report. The consolidated net income is used 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.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

WESTAMERICA BANCORPORATION |
FINANCIAL SUMMARY |
|  | For the Three Months Ended |
|  | March 31, |  |  | December 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
|  | (In thousands, except per share data) |
Net Interest and Fee Income (FTE)(1) |  | $ | 56,390 |  |  | $ | 66,094 |  |  | $ | 59,247 |
(Reversal of) Provision for Credit Losses |  |  | (550 | ) |  |  | 300 |  |  |  | - |
Noninterest Income |  |  | 10,321 |  |  |  | 10,097 |  |  |  | 10,633 |
Noninterest Expense |  |  | 25,127 |  |  |  | 26,099 |  |  |  | 25,853 |
Income Before Income Taxes (FTE)(1) |  |  | 42,134 |  |  |  | 49,792 |  |  |  | 44,027 |
Provision for Income Taxes (FTE)(1) |  |  | 11,097 |  |  |  | 13,375 |  |  |  | 12,327 |
Net Income |  | $ | 31,037 |  |  | $ | 36,417 |  |  | $ | 31,700 |
Average Common Shares Outstanding |  |  | 26,642 |  |  |  | 26,674 |  |  |  | 26,699 |
Average Diluted Common Shares Outstanding |  |  | 26,642 |  |  |  | 26,675 |  |  |  | 26,701 |
Common Shares Outstanding at Period End |  |  | 26,360 |  |  |  | 26,678 |  |  |  | 26,708 |
Per Common Share: |  |  |  |  |  |  |  |  |  |  |  |
Basic Earnings |  | $ | 1.16 |  |  | $ | 1.37 |  |  | $ | 1.19 |
Diluted Earnings |  |  | 1.16 |  |  |  | 1.37 |  |  |  | 1.19 |
Book Value Per Common Share |  |  | 35.02 |  |  |  | 29.68 |  |  |  | 33.32 |
Financial Ratios: |  |  |  |  |  |  |  |  |  |  |  |
Return On Assets |  |  | 2.03 | % |  |  | 2.24 | % |  |  | 2.02 | %
Return On Common Equity |  |  | 11.92 | % |  |  | 15.17 | % |  |  | 12.14 | %
Net Interest Margin (FTE)(1) |  |  | 3.90 | % |  |  | 4.30 | % |  |  | 4.01 | %
Net Loan (Chargeoffs) to Average Loans |  |  | (0.16 | )% |  |  | (0.61 | )% |  |  | (0.26 | )%
Efficiency Ratio(2) |  |  | 37.7 | % |  |  | 34.3 | % |  |  | 37.0 | %
Average Balances: |  |  |  |  |  |  |  |  |  |  |  |
Assets |  | $ | 6,187,321 |  |  | $ | 6,525,921 |  |  | $ | 6,243,799 |
Loans |  |  | 789,935 |  |  |  | 853,553 |  |  |  | 821,767 |
Investment securities |  |  | 4,395,565 |  |  |  | 5,098,539 |  |  |  | 4,557,436 |
Deposits |  |  | 4,958,554 |  |  |  | 5,379,060 |  |  |  | 5,028,363 |
Shareholders' Equity |  |  | 1,055,925 |  |  |  | 965,840 |  |  |  | 1,039,017 |
Period End Balances: |  |  |  |  |  |  |  |  |  |  |  |
Assets |  | $ | 5,966,624 |  |  | $ | 6,464,685 |  |  | $ | 6,076,274 |
Loans |  |  | 771,030 |  |  |  | 844,677 |  |  |  | 820,300 |
Investment securities |  |  | 4,075,398 |  |  |  | 4,757,903 |  |  |  | 4,240,445 |
Deposits |  |  | 4,874,095 |  |  |  | 5,354,925 |  |  |  | 5,011,850 |
Shareholders' Equity |  |  | 923,138 |  |  |  | 791,691 |  |  |  | 889,957 |
Capital Ratios at Period End: |  |  |  |  |  |  |  |  |  |  |  |
Total Risk Based Capital |  |  | 23.68 | % |  |  | 20.21 | % |  |  | 22.82 | %
Tangible Equity to Tangible Assets |  |  | 13.71 | % |  |  | 10.56 | % |  |  | 12.90 | %
Dividends Paid Per Common Share |  | $ | 0.44 |  |  | $ | 0.44 |  |  | $ | 0.44 |
Common Dividend Payout Ratio |  |  | 38 | % |  |  | 32 | % |  |  | 37 | %

The above financial summary has been derived from the Company's unaudited consolidated financial statements. This information should be read in conjunction with those statements, notes and the other information included elsewhere herein. Percentages under the heading "Financial Ratios" are annualized with the exception of the efficiency ratio.

(1) Yields on securities and certain loans have been adjusted upward to an FTE basis in order to reflect the effect of income which is exempt from federal income taxation at the current statutory tax rate.

(2) The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income on an FTE basis and noninterest income).

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Financial Overview

Westamerica Bancorporation and subsidiaries (collectively, the “Company”) reported net income of $31.0 million or $1.16 diluted earnings per common share (“EPS”) in the three months ended March 31, 2025. First quarter 2025 results compare with net income of $36.4 million or $1.37 EPS for the three months ended March 31, 2024 and $31.7 million or $1.19 EPS for the three months ended December 31, 2024. The results in the three months ended March 31, 2025 included a $550 thousand reversal of provision for credit losses, which increased EPS $0.01.

The Federal Open Market Committee of the Federal Reserve Board (“FOMC”) reduced the federal funds rate by 0.25 percent to the range of 4.25 to 4.50 percent in December 2024 and maintained the same target range for the federal funds rate in March 2025. The FOMC press release in March stated, “Recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the long run. Uncertainty around the economic outlook has increased.” The interest rate paid on reserve balances at the Federal Reserve Bank was 4.40% as of March 31, 2025. The Bank maintains reserve balances at the Federal Reserve Bank; the amount that earns interest is identified as “interest-bearing cash”.

Management continues to evaluate the impacts of inflation, the Federal Reserve’s monetary policy, the impacts of tariffs, international trade tensions, and climate changes on the Company’s business. The banking industry could experience significant volatility as it did with several regional bank failures in 2023. Industrywide concerns could develop related to liquidity, deposit outflows and unrealized losses on investment debt securities. These recent events and concerns could adversely affect the Company’s ability to effectively fund its operations. Any one or a combination of such risk factors, or other factors, could materially adversely affect the Company's business, financial condition, results of operations and prospects. The extent of the impact on the Company’s results of operations, cash flow, liquidity, and financial performance, as well as the Company’s ability to execute near- and long-term business strategies and initiatives, will depend on numerous evolving factors and future developments, which are highly uncertain and cannot be reasonably predicted.

The Company presents its net interest margin and net interest income on a fully taxable equivalent (“FTE”) basis using the current statutory federal tax rate. Management believes the FTE basis is valuable to the reader because the Company’s loan and investment securities portfolios contain municipal loans and securities that are federally tax exempt. The Company’s tax exempt loans and securities composition may not be similar to that of other banks, therefore in order to reflect the impact of the federally tax exempt loans and securities on the net interest margin and net interest income for comparability with other banks, the Company presents its net interest margin and net interest income on an FTE basis.

The Company’s significant accounting policies (see Note 1, “Summary of Significant Accounting Policies,” to Financial Statements in the Company’s 2024 Form 10-K and Note 2 “Summary of Significant Accounting Policies” in this Form 10-Q) are fundamental to understanding the Company’s results of operations and financial condition. The Company adopted the following new accounting guidance:

FASB ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, was issued November 27, 2023. The ASU requires disclosure of certain significant segment expenses and other items, the title and position of the chief operating decision maker and information about how the reported measures of segment profit or loss are used in assessing segment performance. The ASU became effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

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Net Income

Following is a summary of the components of net income for the periods indicated:

|  | For the Three Months Ended |
|  | March 31, |  |  | December 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
|  | (In thousands, except per share data) |
Net interest and loan fee income (FTE) |  | $ | 56,390 |  |  | $ | 66,094 |  |  | $ | 59,247 |
(Reversal of) provision for credit losses |  |  | (550 | ) |  |  | 300 |  |  |  | - |
Noninterest income |  |  | 10,321 |  |  |  | 10,097 |  |  |  | 10,633 |
Noninterest expense |  |  | 25,127 |  |  |  | 26,099 |  |  |  | 25,853 |
Income before taxes (FTE) |  |  | 42,134 |  |  |  | 49,792 |  |  |  | 44,027 |
Income tax provision (FTE) |  |  | 11,097 |  |  |  | 13,375 |  |  |  | 12,327 |
Net income |  | $ | 31,037 |  |  | $ | 36,417 |  |  | $ | 31,700 |
Average diluted common shares |  |  | 26,642 |  |  |  | 26,675 |  |  |  | 26,701 |
Diluted earnings per common share |  | $ | 1.16 |  |  | $ | 1.37 |  |  | $ | 1.19 |
Average total assets |  | $ | 6,187,321 |  |  | $ | 6,525,921 |  |  | $ | 6,243,799 |
Net income to average total assets (annualized) |  |  | 2.03 | % |  |  | 2.24 | % |  |  | 2.02 | %
Net income to average common shareholders' equity (annualized) |  |  | 11.92 | % |  |  | 15.17 | % |  |  | 12.14 | %

Net income for the three months ended March 31, 2025 decreased $5.4 million compared with the three months ended March 31, 2024 primarily due to decreased net interest and loan fee income (FTE), partially offset by lower tax provision (FTE). Net interest and loan fee income (FTE) decreased $9.7 million in the three months ended March 31, 2025 compared with the three months ended March 31, 2024 due to lower average balances of investment debt securities and loans, lower yield on investment debt securities and interest-bearing cash, and higher rate on interest-bearing deposits, partially offset by higher average balances of interest-bearing cash and lower average balances of bank term funding program borrowings. The Company recorded a $550 thousand reversal of provision for credit losses in the three months ended March 31, 2025, based on the results of its current expected credit losses (“CECL”) model and Management’s estimate of credit losses over the remaining life of its loans. The Company provided a $300 thousand provision for credit losses in the three months ended March 31, 2024, based on the results of its CECL model and Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. Noninterest income in the three months ended March 31, 2025 increased $224 thousand compared with the three months ended March 31, 2024 primarily due to higher income from merchant processing services, trust fees and a $102 thousand life insurance gain, partially offset by lower ATM processing fees. Noninterest expense in the three months ended March 31, 2025 decreased $972 thousand compared with the three months ended March 31, 2024 primarily due to lower salaries and benefits and lower estimated operating losses from limited partnership investments. The tax rate (FTE) was 26.3% for the three months ended March 31, 2025 and 26.9% for the three months ended March 31, 2024.

Net income for the three months ended March 31, 2025 decreased $663 thousand compared with the three months ended December 31, 2024 primarily due to decreased net interest and loan fee income (FTE), partially offset by lower tax provision (FTE). Net interest and loan fee income (FTE) decreased $2.9 million in the three months ended March 31, 2025 compared with the three months ended December 31, 2024 due to lower average balances of investment debt securities and loans, lower yield on investment debt securities and interest-bearing cash, partially offset by higher average balances of interest-bearing cash. The Company recorded a $550 thousand reversal of provision for credit losses in the three months ended March 31, 2025, based on the results of its CECL model and Management’s estimate of credit losses over the remaining life of its loans. The Company provided no provision for credit losses in the three months ended December 31, 2024, based on the results of its CECL model and Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. Noninterest income in the three months ended March 31, 2025 decreased $312 thousand compared with the three months ended December 31, 2024 primarily due to lower income from debit card fees and service charges on deposit accounts, partially offset by a $102 thousand life insurance gain in the three months ended March 31, 2025. Debit card fees in the three months ended December 31, 2024 included annual incentives. Noninterest expense in the three months ended March 31, 2025 decreased $726 thousand compared with the three months ended December 31, 2024 primarily due to lower salaries and benefits due to fewer business days in the current period compared with the prior period, lower occupancy and equipment expense and lower estimated operating losses from limited partnership investments. The tax rate (FTE) was 26.3% for the three months ended March 31, 2025 and 28.0% for the three months ended December 31, 2024. The effective tax rates (FTE) in the three months ended December 31, 2024 was higher than the three months ended March 31, 2025 primarily due to a $305 thousand increase in book tax provision to reconcile the 2023 income tax provision to the filed 2023 tax returns.

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Net Interest and Loan Fee Income (FTE)

Following is a summary of the components of net interest and loan fee income (FTE) for the periods indicated:

|  | For the Three Months Ended |
|  | March 31, |  |  | December 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
|  | (In thousands) |
Interest and loan fee income |  | $ | 59,491 |  |  | $ | 68,746 |  |  | $ | 62,402 |
Interest expense |  |  | 3,396 |  |  |  | 3,001 |  |  |  | 3,466 |
FTE adjustment |  |  | 295 |  |  |  | 349 |  |  |  | 311 |
Net interest and loan fee income (FTE) |  | $ | 56,390 |  |  | $ | 66,094 |  |  | $ | 59,247 |
Average earning assets |  | $ | 5,794,836 |  |  | $ | 6,119,368 |  |  | $ | 5,850,620 |
Net interest margin (FTE) (annualized) |  |  | 3.90 | % |  |  | 4.30 | % |  |  | 4.01 | %

Net interest and loan fee income (FTE) decreased $9.7 million in the three months ended March 31, 2025 compared with the three months ended March 31, 2024 due to lower average balances of investment debt securities (down $703 million) and loans (down $64 million), lower yield on investment debt securities (down 0.47%) and interest-bearing cash (down 1.00%), and higher rate on interest-bearing deposits (up 0.19%), partially offset by higher average balances of interest-bearing cash (up $442 million) and lower average balances of bank term funding program borrowings (down $63 million).

Net interest and loan fee income (FTE) decreased $2.9 million in the three months ended March 31, 2025 compared with the three months ended December 31, 2024 due to lower average balances of investment debt securities (down $162 million) and loans (down $32 million), lower yield on investment debt securities (down 0.14%) and interest-bearing cash (down 0.30%), partially offset by higher average balances of interest-bearing cash (up $138 million).

The annualized net interest margin (FTE) was 3.90% in the three months ended March 31, 2025, 4.30% in the three months ended March 31, 2024 and 4.01% in the three months ended December 31, 2024.

The Company’s annualized funding costs were 0.24% in the three months ended March 31, 2025, 0.20% in the three months ended March 31, 2024 and 0.24% in the three months ended December 31, 2024. Noninterest bearing deposits represented 46% of average deposits in the three months ended March 31, 2025, and 47% in both the three months ended March 31, 2024 and December 31, 2024. Average balances of checking and saving deposits accounted for 98% of average total deposits in each of the three months ended March 31, 2025, March 31, 2024 and December 31, 2024.

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Net Interest Margin (FTE)

The following summarizes the components of the Company's net interest margin (FTE) for the periods indicated (percentages are annualized.)

|  | For the Three Months Ended |
|  | March 31, |  |  | December 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
Yield on earning assets (FTE) |  |  | 4.14 | % |  |  | 4.50 | % |  |  | 4.25 | %
Rate paid on interest-bearing liabilities |  |  | 0.50 | % |  |  | 0.41 | % |  |  | 0.49 | %
Net interest spread (FTE) |  |  | 3.64 | % |  |  | 4.09 | % |  |  | 3.76 | %
Impact of noninterest-bearing funds |  |  | 0.26 | % |  |  | 0.21 | % |  |  | 0.25 | %
Net interest margin (FTE) |  |  | 3.90 | % |  |  | 4.30 | % |  |  | 4.01 | %

The Company’s yield on earning assets during the three months ended March 31, 2025 decreased compared with the three months ended March 31, 2024 and December 31, 2024. The Company’s yield on earning assets has been primarily affected by collateralized loan obligations (CLOs), held in debt securities available for sale portfolio, and interest-bearing cash. The CLOs have interest coupons that change once every three months by the amount of change in the three-month SOFR base rate. The average balances and yields of CLOs for the three months ended March 31, 2025 was $916 million yielding 6.30%. The average balances and yields of CLOs was $1,461 million yielding 7.23% for the three months ended March 31, 2024 and $1,037 million yielding 6.67% for the three months ended December 31, 2024. The interest-bearing cash yield changes by the amount of change in the overnight federal funds rate on the effective date declared by the FOMC. The average balance and yields of interest-bearing cash for the three months ended March 31, 2025 were $609 million yielding 4.40%. The average balance and yields of interest-bearing cash were $167 million yielding 5.40% for the three months ended March 31, 2024 and $471 million yielding 4.70% for the three months ended December 31, 2024, respectively. The Company has other earning assets with variable yields such as commercial loans and lines of credit, consumer lines of credit and adjustable rate residential real estate loans, which are included in “other taxable loans” in the following “Summary of Average Balances, Yields/Rates and Interest Differential.”

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Summary of Average Balances, Yields/Rates and Interest Differential

The following tables present information regarding the consolidated average assets, liabilities and shareholders’ equity, the amounts of interest income earned from average interest earning assets and the resulting yields, and the amounts of interest expense incurred on average interest-bearing liabilities and the resulting rates. Average loan balances include nonperforming loans. Interest income includes the reversal of previously accrued interest on loans placed on nonaccrual status during the period, proceeds from loans on nonaccrual status only to the extent cash payments have been received and applied as interest income, and accretion of purchased loan discounts. Yields, rates and interest margins are annualized. Yields on tax-exempt securities and loans have been adjusted upward to reflect the effect of income exempt from federal income taxation at the federal statutory tax rate of 21 percent.

Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin

|  | For the Three Months Ended March 31, 2025 |
|  |  |  |  |  | Interest |  |  |  |  |
|  | Average |  |  | Income/ |  |  | Yields/ |
|  | Balance |  |  | Expense |  |  | Rates |
|  | ($ in thousands) |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Investment securities: |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  | $ | 4,284,044 |  |  | $ | 41,280 |  |  |  | 3.85 | %
Tax-exempt (1) |  |  | 111,521 |  |  |  | 1,059 |  |  |  | 3.80 | %
Total investments (1) |  |  | 4,395,565 |  |  |  | 42,339 |  |  |  | 3.85 | %
Loans: |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  |  | 754,864 |  |  |  | 10,381 |  |  |  | 5.58 | %
Tax-exempt (1) |  |  | 35,071 |  |  |  | 363 |  |  |  | 4.20 | %
Total loans (1) |  |  | 789,935 |  |  |  | 10,744 |  |  |  | 5.51 | %
Total interest-bearing cash |  |  | 609,336 |  |  |  | 6,703 |  |  |  | 4.40 | %
Total interest-earning assets (1) |  |  | 5,794,836 |  |  |  | 59,786 |  |  |  | 4.14 | %
Other assets |  |  | 392,485 |  |  |  |  |  |  |  |  |
Total assets |  | $ | 6,187,321 |  |  |  |  |  |  |  |  |
Liabilities and shareholders' equity |  |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing demand |  | $ | 2,293,059 |  |  | $ | - |  |  |  | - | %
Savings and interest-bearing transaction |  |  | 2,584,685 |  |  |  | 3,174 |  |  |  | 0.50 | %
Time less than $100,000 |  |  | 51,350 |  |  |  | 38 |  |  |  | 0.30 | %
Time $100,000 or more |  |  | 29,460 |  |  |  | 17 |  |  |  | 0.24 | %
Total interest-bearing deposits |  |  | 2,665,495 |  |  |  | 3,229 |  |  |  | 0.49 | %
Securities sold under repurchase agreements |  |  | 104,604 |  |  |  | 167 |  |  |  | 0.65 | %
Total interest-bearing liabilities |  |  | 2,770,099 |  |  |  | 3,396 |  |  |  | 0.50 | %
Other liabilities |  |  | 68,238 |  |  |  |  |  |  |  |  |
Shareholders' equity |  |  | 1,055,925 |  |  |  |  |  |  |  |  |
Total liabilities and shareholders' equity |  | $ | 6,187,321 |  |  |  |  |  |  |  |  |
Net interest spread (1) (2) |  |  |  |  |  |  |  |  |  |  | 3.64 | %
Net interest and fee income and interest margin (1) (3) |  |  |  |  |  | $ | 56,390 |  |  |  | 3.90 | %

(1) | Amounts calculated on an FTE basis using the current statutory federal tax rate.

(2) | Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing liabilities.

(3) | Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

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Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin

|  | For the Three Months Ended March 31, 2024 |
|  |  |  |  |  | Interest |  |  |  |  |
|  | Average |  |  | Income/ |  |  | Yields/ |
|  | Balance |  |  | Expense |  |  | Rates |
|  | ($ in thousands) |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Investment securities: |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  | $ | 4,959,352 |  |  | $ | 54,145 |  |  |  | 4.37 | %
Tax-exempt (1) |  |  | 139,187 |  |  |  | 1,254 |  |  |  | 3.60 | %
Total investments (1) |  |  | 5,098,539 |  |  |  | 55,399 |  |  |  | 4.32 | %
Loans: |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  |  | 811,418 |  |  |  | 10,984 |  |  |  | 5.44 | %
Tax-exempt (1) |  |  | 42,135 |  |  |  | 429 |  |  |  | 4.10 | %
Total loans (1) |  |  | 853,553 |  |  |  | 11,413 |  |  |  | 5.38 | %
Total interest-bearing cash |  |  | 167,276 |  |  |  | 2,283 |  |  |  | 5.40 | %
Total interest-earning assets (1) |  |  | 6,119,368 |  |  |  | 69,095 |  |  |  | 4.50 | %
Other assets |  |  | 406,553 |  |  |  |  |  |  |  |  |
Total assets |  | $ | 6,525,921 |  |  |  |  |  |  |  |  |
Liabilities and shareholders' equity |  |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing demand |  | $ | 2,532,381 |  |  | $ | - |  |  |  | - | %
Savings and interest-bearing transaction |  |  | 2,750,008 |  |  |  | 2,036 |  |  |  | 0.30 | %
Time less than $100,000 |  |  | 60,536 |  |  |  | 49 |  |  |  | 0.33 | %
Time $100,000 or more |  |  | 36,135 |  |  |  | 21 |  |  |  | 0.23 | %
Total interest-bearing deposits |  |  | 2,846,679 |  |  |  | 2,106 |  |  |  | 0.30 | %
Bank term funding program borrowings |  |  | 62,582 |  |  |  | 843 |  |  |  | 5.40 | %
Securities sold under repurchase agreements |  |  | 46,304 |  |  |  | 52 |  |  |  | 0.45 | %
Total interest-bearing liabilities |  |  | 2,955,565 |  |  |  | 3,001 |  |  |  | 0.41 | %
Other liabilities |  |  | 72,135 |  |  |  |  |  |  |  |  |
Shareholders' equity |  |  | 965,840 |  |  |  |  |  |  |  |  |
Total liabilities and shareholders' equity |  | $ | 6,525,921 |  |  |  |  |  |  |  |  |
Net interest spread (1) (2) |  |  |  |  |  |  |  |  |  |  | 4.09 | %
Net interest and fee income and interest margin (1) (3) |  |  |  |  |  | $ | 66,094 |  |  |  | 4.30 | %

(1) | Amounts calculated on an FTE basis using the current statutory federal tax rate.

(2) | Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing liabilities.

(3) | Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

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Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin

|  | For the Three Months Ended December 31, 2024 |
|  |  |  |  |  | Interest |  |  |  |  |
|  | Average |  |  | Income/ |  |  | Yields/ |
|  | Balance |  |  | Expense |  |  | Rates |
|  | ($ in thousands) |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Investment securities: |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  | $ | 4,441,615 |  |  | $ | 44,707 |  |  |  | 4.03 | %
Tax-exempt (1) |  |  | 115,821 |  |  |  | 1,098 |  |  |  | 3.79 | %
Total investments (1) |  |  | 4,557,436 |  |  |  | 45,805 |  |  |  | 3.99 | %
Loans: |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  |  | 783,922 |  |  |  | 10,855 |  |  |  | 5.51 | %
Tax-exempt (1) |  |  | 37,845 |  |  |  | 394 |  |  |  | 4.14 | %
Total loans (1) |  |  | 821,767 |  |  |  | 11,249 |  |  |  | 5.45 | %
Total interest-bearing cash |  |  | 471,417 |  |  |  | 5,659 |  |  |  | 4.70 | %
Total interest-earning assets (1) |  |  | 5,850,620 |  |  |  | 62,713 |  |  |  | 4.25 | %
Other assets |  |  | 393,179 |  |  |  |  |  |  |  |  |
Total assets |  | $ | 6,243,799 |  |  |  |  |  |  |  |  |
Liabilities and shareholders' equity |  |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing demand |  | $ | 2,342,092 |  |  | $ | - |  |  |  | - | %
Savings and interest-bearing transaction |  |  | 2,601,418 |  |  |  | 3,194 |  |  |  | 0.49 | %
Time less than $100,000 |  |  | 53,312 |  |  |  | 43 |  |  |  | 0.32 | %
Time $100,000 or more |  |  | 31,541 |  |  |  | 25 |  |  |  | 0.31 | %
Total interest-bearing deposits |  |  | 2,686,271 |  |  |  | 3,262 |  |  |  | 0.48 | %
Securities sold under repurchase agreements |  |  | 110,404 |  |  |  | 204 |  |  |  | 0.73 | %
Total interest-bearing liabilities |  |  | 2,796,675 |  |  |  | 3,466 |  |  |  | 0.49 | %
Other liabilities |  |  | 66,015 |  |  |  |  |  |  |  |  |
Shareholders' equity |  |  | 1,039,017 |  |  |  |  |  |  |  |  |
Total liabilities and shareholders' equity |  | $ | 6,243,799 |  |  |  |  |  |  |  |  |
Net interest spread (1) (2) |  |  |  |  |  |  |  |  |  |  | 3.76 | %
Net interest and fee income and interest margin (1) (3) |  |  |  |  |  | $ | 59,247 |  |  |  | 4.01 | %

(1) | Amounts calculated on an FTE basis using the current statutory federal tax rate.

(2) | Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing liabilities.

(3) | Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

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Summary of Changes in Interest Income and Expense due to Changes in Average Asset & Liability Balances and Yields Earned & Rates Paid

The following tables set forth a summary of the changes in interest income and interest expense due to changes in average assets and liability balances (volume) and changes in average interest yields/rates for the periods indicated. Changes not solely attributable to volume or yields/rates have been allocated in proportion to the respective volume and yield/rate components.

Summary of Changes in Interest Income and Expense

|  | For the Three Months Ended March 31, 2025 |
|  | Compared with |
|  | For the Three Months Ended March 31, 2024 |
|  | Volume |  |  | Yield/Rate |  |  | Total |
|  | (In thousands) |
(Decrease) increase in interest and loan fee income: |  |  |  |  |  |  |  |  |  |  |  |
Investment securities: |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  | $ | (7,373 | ) |  | $ | (5,492 | ) |  | $ | (12,865 | )
Tax-exempt (1) |  |  | (249 | ) |  |  | 54 |  |  |  | (195 | )
Total investments (1) |  |  | (7,622 | ) |  |  | (5,438 | ) |  |  | (13,060 | )
Loans: |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  |  | (855 | ) |  |  | 252 |  |  |  | (603 | )
Tax-exempt (1) |  |  | (74 | ) |  |  | 8 |  |  |  | (66 | )
Total loans (1) |  |  | (929 | ) |  |  | 260 |  |  |  | (669 | )
Total interest-bearing cash |  |  | 5,948 |  |  |  | (1,528 | ) |  |  | 4,420 |
Total decrease in interest and loan fee income (1) |  |  | (2,603 | ) |  |  | (6,706 | ) |  |  | (9,309 | )
(Decrease) increase in interest expense: |  |  |  |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |  |
Savings and interest-bearing transaction |  |  | (122 | ) |  |  | 1,260 |  |  |  | 1,138 |
Time less than $100,000 |  |  | (7 | ) |  |  | (4 | ) |  |  | (11 | )
Time $100,000 or more |  |  | (5 | ) |  |  | 1 |  |  |  | (4 | )
Total interest-bearing deposits |  |  | (134 | ) |  |  | 1,257 |  |  |  | 1,123 |
Bank term funding program borrowings |  |  | (843 | ) |  |  | - |  |  |  | (843 | )
Securities sold under repurchase agreements |  |  | 64 |  |  |  | 51 |  |  |  | 115 |
Total (decrease) increase in interest expense |  |  | (913 | ) |  |  | 1,308 |  |  |  | 395 |
Decrease in net interest and loan fee income (1) |  | $ | (1,690 | ) |  | $ | (8,014 | ) |  | $ | (9,704 | )

(1) | Amounts calculated on an FTE basis using the current statutory federal tax rate.

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Summary of Changes in Interest Income and Expense

|  | For the Three Months Ended March 31, 2025 |
|  | Compared with |
|  | For the Three Months Ended December 31, 2024 |
|  | Volume |  |  | Yield/Rate |  |  | Total |
|  | (In thousands) |
(Decrease) increase in interest and loan fee income: |  |  |  |  |  |  |  |  |  |  |  |
Investment securities: |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  | $ | (1,586 | ) |  | $ | (1,841 | ) |  | $ | (3,427 | )
Tax-exempt (1) |  |  | (41 | ) |  |  | 2 |  |  |  | (39 | )
Total investments (1) |  |  | (1,627 | ) |  |  | (1,839 | ) |  |  | (3,466 | )
Loans: |  |  |  |  |  |  |  |  |  |  |  |
Taxable |  |  | (554 | ) |  |  | 80 |  |  |  | (474 | )
Tax-exempt (1) |  |  | (35 | ) |  |  | 4 |  |  |  | (31 | )
Total loans (1) |  |  | (589 | ) |  |  | 84 |  |  |  | (505 | )
Total interest-bearing cash |  |  | 1,527 |  |  |  | (483 | ) |  |  | 1,044 |
Total decrease in interest and loan fee income (1) |  |  | (689 | ) |  |  | (2,238 | ) |  |  | (2,927 | )
(Decrease) increase in interest expense: |  |  |  |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |  |
Savings and interest-bearing transaction |  |  | (35 | ) |  |  | 15 |  |  |  | (20 | )
Time less than $100,000 |  |  | (2 | ) |  |  | (3 | ) |  |  | (5 | )
Time $100,000 or more |  |  | (2 | ) |  |  | (6 | ) |  |  | (8 | )
Total interest-bearing deposits |  |  | (39 | ) |  |  | 6 |  |  |  | (33 | )
Securities sold under repurchase agreements |  |  | (13 | ) |  |  | (24 | ) |  |  | (37 | )
Total decrease in interest expense |  |  | (52 | ) |  |  | (18 | ) |  |  | (70 | )
Decrease in net interest and loan fee income (1) |  | $ | (637 | ) |  | $ | (2,220 | ) |  | $ | (2,857 | )

(1) | Amounts calculated on an FTE basis using the current statutory federal tax rate.

Provision for Credit Losses

The Company manages credit risk by enforcing conservative underwriting and administration procedures and aggressively pursuing collection efforts with debtors experiencing financial difficulties. The provision for credit losses reflects Management's assessment of credit risk in the loan portfolio and debt securities held to maturity portfolio during each of the periods presented.

The Company recorded a $550 thousand reversal of provision for credit losses in the first quarter of 2025 based on the results of the CECL model and Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. The Company recorded a $300 thousand provision for credit losses in the first quarter of 2024, based on the results of the CECL model and Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity. For further information regarding credit risk, net credit losses, and the allowance for credit losses, see the “Loan Portfolio Credit Risk” and “Allowance for Credit Losses” sections of this Report.

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Noninterest Income

The following table summarizes the components of noninterest income for the periods indicated.

|  | For the Three Months Ended |
|  | March 31, |  |  | December 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
|  | (In thousands) |
Service charges on deposit accounts |  | $ | 3,381 |  |  | $ | 3,470 |  |  | $ | 3,501 |
Merchant processing services |  |  | 2,733 |  |  |  | 2,507 |  |  |  | 2,735 |
Debit card fees |  |  | 1,581 |  |  |  | 1,543 |  |  |  | 1,902 |
Trust fees |  |  | 899 |  |  |  | 794 |  |  |  | 867 |
ATM processing fees |  |  | 463 |  |  |  | 591 |  |  |  | 506 |
Other service fees |  |  | 429 |  |  |  | 438 |  |  |  | 428 |
Life insurance gains |  |  | 102 |  |  |  | - |  |  |  | - |
Other noninterest income |  |  | 733 |  |  |  | 754 |  |  |  | 694 |
Total |  | $ | 10,321 |  |  | $ | 10,097 |  |  | $ | 10,633 |

Noninterest income in the three months ended March 31, 2025 increased $224 thousand compared with the three months ended March 31, 2024 primarily due to higher income from merchant processing services, trust fees and a $102 thousand life insurance gain, partially offset by lower ATM processing fees.

Noninterest income in the three months ended March 31, 2025 decreased $312 thousand compared with the three months ended December 31, 2024 primarily due to lower income from debit card fees and service charges on deposit accounts, partially offset by a $102 thousand life insurance gain. Debit card fees in the three months ended December 31, 2024 included annual incentives.

Noninterest Expense

The following table summarizes the components of noninterest expense for the periods indicated.

|  | For the Three Months Ended |
|  | March 31, |  |  | December 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
|  | (In thousands) |
Salaries and related benefits |  | $ | 12,126 |  |  | $ | 12,586 |  |  | $ | 12,461 |
Occupancy and equipment |  |  | 5,038 |  |  |  | 5,040 |  |  |  | 5,219 |
Outsourced data processing services |  |  | 2,697 |  |  |  | 2,536 |  |  |  | 2,610 |
Limited partnership operating losses |  |  | 915 |  |  |  | 1,440 |  |  |  | 1,095 |
Professional fees |  |  | 395 |  |  |  | 402 |  |  |  | 369 |
Courier service |  |  | 688 |  |  |  | 649 |  |  |  | 692 |
Other noninterest expense |  |  | 3,268 |  |  |  | 3,446 |  |  |  | 3,407 |
Total |  | $ | 25,127 |  |  | $ | 26,099 |  |  | $ | 25,853 |

Noninterest expense in the three months ended March 31, 2025 decreased $972 thousand compared with the three months ended March 31, 2024 primarily due to lower salaries and benefits and lower estimated operating losses from limited partnership investments.

Noninterest expense in the three months ended March 31, 2025 decreased $726 thousand compared with the three months ended December 31, 2024 primarily due to lower salaries and benefits due to fewer business days in the current period compared with the prior period, lower occupancy and equipment expense and lower estimated operating losses from limited partnership investments.

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Provision for Income Tax

The Company’s income tax provision (FTE) was $11.1 million for the first quarter 2025 compared with $13.4 million for the first quarter 2024 and $12.3 million for the fourth quarter 2024, representing effective tax rates (FTE) of 26.3%, 26.9% and 28.0%, respectively. The fourth quarter 2024 effective tax rates (FTE) was higher than the first quarter 2025 and the first quarter 2024 primarily due to a $305 thousand increase in book tax provision to reconcile the 2023 income tax provision to the filed 2023 tax returns.

Investment Securities Portfolio

The Company maintains an investment securities portfolio consisting of securities issued by U.S. Treasury, U.S. Government sponsored entities, state and political subdivisions, corporations and banks. The Company had no marketable equity securities at March 31, 2025 and December 31, 2024.

Management manages the investment securities portfolio in response to anticipated changes in interest rates, and changes in deposit and loan volumes. The carrying value of the Company’s investment securities portfolio was $4.1 billion at March 31, 2025 and $4.2 billion at December 31, 2024. The following table lists debt securities in the Company’s portfolio by type as of the dates indicated. Debt securities held to maturity are listed at amortized cost before related reserve for expected credit losses of $1 thousand at March 31, 2025 and December 31, 2024. Debt securities available for sale are listed at fair value.

|  | At March 31, 2025 |  |  | At December 31, 2024 |
|  | Carrying Value |  |  | As a percent of total investment securities |  |  | Carrying Value |  |  | As a percent of total investment securities |
|  | ($ in thousands) |
Securities of U.S. Government sponsored entities |  | $ | 299,722 |  |  |  | 7 | % |  | $ | 292,117 |  |  |  | 7 | %
Agency residential mortgage-backed securities ("MBS") |  |  | 257,870 |  |  |  | 6 | % |  |  | 268,987 |  |  |  | 6 | %
Agency commercial MBS |  |  | 46,502 |  |  |  | 1 | % |  |  | 6,966 |  |  |  | - | %
U.S. Treasury securities |  |  | - |  |  |  | - | % |  |  | 4,955 |  |  |  | - | %
Obligations of states and political subdivisions |  |  | 109,256 |  |  |  | 3 | % |  |  | 113,447 |  |  |  | 3 | %
Corporate securities |  |  | 2,539,937 |  |  |  | 63 | % |  |  | 2,571,384 |  |  |  | 61 | %
Collateralized loan obligations |  |  | 822,111 |  |  |  | 20 | % |  |  | 982,589 |  |  |  | 23 | %
Total |  | $ | 4,075,398 |  |  |  | 100 | % |  | $ | 4,240,445 |  |  |  | 100 | %
Debt securities available for sale |  | $ | 3,236,049 |  |  |  |  |  |  | $ | 3,395,810 |  |  |  |  |
Debt securities held to maturity |  |  | 839,349 |  |  |  |  |  |  |  | 844,635 |  |  |  |  |
Total |  | $ | 4,075,398 |  |  |  |  |  |  | $ | 4,240,445 |  |  |  |  |

Management continually evaluates the Company’s investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, liquidity, and the level of interest rate risk to which the Company is exposed. These evaluations may cause Management to change the level of funds the Company deploys into investment securities and change the composition of the Company’s investment securities portfolio.

At March 31, 2025, substantially all of the Company’s investment securities were investment grade as rated by one or more major rating agencies. In addition to monitoring credit rating agency evaluations, Management performs its own evaluations regarding the credit worthiness of the issuer or the securitized assets underlying asset-backed securities. The Company’s procedures for evaluating investments in securities are in accordance with guidance issued by the Board of Governors of the Federal Reserve System, “Investing in Securities without Reliance on Nationally Recognized Statistical Rating Agencies” (SR 12-15) and other regulatory guidance.

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The Company had corporate securities as shown below at the dates indicated:

|  | Corporate securities |
|  | At March 31, 2025 |  |  | At December 31, 2024 |
|  | Amortized |  |  | Fair |  |  | Amortized |  |  | Fair |
|  | Cost |  |  | Value |  |  | Cost |  |  | Value |
|  | (In thousands) |
Debt securities available for sale |  | $ | 1,967,432 |  |  | $ | 1,802,791 |  |  | $ | 2,031,144 |  |  | $ | 1,835,937 |
Debt securities held to maturity |  |  | 737,146 |  |  |  | 714,508 |  |  |  | 735,447 |  |  |  | 703,210 |
Total corporate securities |  | $ | 2,704,578 |  |  | $ | 2,517,299 |  |  | $ | 2,766,591 |  |  | $ | 2,539,147 |

The following table summarizes total corporate securities by credit rating:

|  | At March 31, 2025 |  |  | At December 31, 2024 |
|  | Fair value |  |  | As a percent of total corporate securities |  |  | Fair value |  |  | As a percent of total corporate securities |
|  | ($ in thousands) |
AA- |  | $ | 74,193 |  |  |  | 3 | % |  | $ | 72,569 |  |  |  | 3 | %
A+ |  |  | 261,316 |  |  |  | 10 | % |  |  | 256,906 |  |  |  | 10 | %
A |  |  | 360,312 |  |  |  | 14 | % |  |  | 353,434 |  |  |  | 14 | %
A- |  |  | 803,605 |  |  |  | 32 | % |  |  | 807,698 |  |  |  | 32 | %
BBB+ |  |  | 597,711 |  |  |  | 24 | % |  |  | 634,118 |  |  |  | 25 | %
BBB |  |  | 420,162 |  |  |  | 17 | % |  |  | 414,422 |  |  |  | 16 | %
Total corporate securities |  | $ | 2,517,299 |  |  |  | 100 | % |  | $ | 2,539,147 |  |  |  | 100 | %

The following table summarizes total corporate securities by the industry sector in which the issuing companies operate:

|  | At March 31, 2025 |  |  | At December 31, 2024 |
|  | Fair value |  |  | As a percent of total corporate securities |  |  | Fair value |  |  | As a percent of total corporate securities |
|  | ($ in thousands) |
Financial |  | $ | 1,439,371 |  |  |  | 57 | % |  | $ | 1,450,675 |  |  |  | 57 | %
Utilities |  |  | 280,189 |  |  |  | 11 | % |  |  | 275,551 |  |  |  | 11 | %
Industrial |  |  | 215,855 |  |  |  | 9 | % |  |  | 212,587 |  |  |  | 8 | %
Consumer, Non-cyclical |  |  | 172,733 |  |  |  | 7 | % |  |  | 169,311 |  |  |  | 7 | %
Communications |  |  | 129,265 |  |  |  | 5 | % |  |  | 154,358 |  |  |  | 6 | %
Basic Materials |  |  | 101,476 |  |  |  | 4 | % |  |  | 100,617 |  |  |  | 4 | %
Energy |  |  | 70,279 |  |  |  | 3 | % |  |  | 69,320 |  |  |  | 3 | %
Technology |  |  | 61,776 |  |  |  | 2 | % |  |  | 61,008 |  |  |  | 2 | %
Consumer, Cyclical |  |  | 46,355 |  |  |  | 2 | % |  |  | 45,720 |  |  |  | 2 | %
Total corporate securities |  | $ | 2,517,299 |  |  |  | 100 | % |  | $ | 2,539,147 |  |  |  | 100 | %

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The following table summarizes total corporate securities by the location of the issuers’ headquarters; all the corporate securities are denominated in United States dollars:

|  | At March 31, 2025 |  |  | At December 31, 2024 |
|  | Fair value |  |  | As a percent of total corporate securities |  |  | Fair value |  |  | As a percent of total corporate securities |
|  | ($ in thousands) |
United States of America |  | $ | 1,767,547 |  |  |  | 70 | % |  | $ | 1,767,669 |  |  |  | 70 | %
Canada |  |  | 195,635 |  |  |  | 8 | % |  |  | 192,122 |  |  |  | 8 | %
Japan |  |  | 152,714 |  |  |  | 6 | % |  |  | 167,624 |  |  |  | 7 | %
United Kingdom |  |  | 140,920 |  |  |  | 6 | % |  |  | 139,648 |  |  |  | 5 | %
France |  |  | 78,671 |  |  |  | 3 | % |  |  | 92,970 |  |  |  | 4 | %
Switzerland |  |  | 74,548 |  |  |  | 3 | % |  |  | 73,424 |  |  |  | 3 | %
Netherlands |  |  | 36,189 |  |  |  | 2 | % |  |  | 35,425 |  |  |  | 1 | %
Australia |  |  | 24,862 |  |  |  | 1 | % |  |  | 24,700 |  |  |  | 1 | %
Belgium |  |  | 19,983 |  |  |  | 1 | % |  |  | 19,726 |  |  |  | 1 | %
Germany |  |  | 13,157 |  |  |  | - | % |  |  | 12,891 |  |  |  | - | %
Jersey |  |  | 13,073 |  |  |  | - | % |  |  | 12,948 |  |  |  | - | %
Total corporate securities |  | $ | 2,517,299 |  |  |  | 100 | % |  | $ | 2,539,147 |  |  |  | 100 | %

The following table summarizes the above corporate securities with issuer’s headquarters located outside of the United States of America by the industry sector in which the issuing companies operate; all the corporate securities are denominated in United States dollars:

|  | At March 31, 2025 |  |  | At December 31, 2024 |
|  | Fair value |  |  | As a percent of total foreign corporate securities |  |  | Fair value |  |  | As a percent of total foreign corporate securities |
|  | ($ in thousands) |
Financial |  | $ | 636,232 |  |  |  | 85 | % |  | $ | 659,403 |  |  |  | 86 | %
Energy |  |  | 32,535 |  |  |  | 4 | % |  |  | 32,041 |  |  |  | 4 | %
Consumer, Cyclical |  |  | 26,231 |  |  |  | 4 | % |  |  | 25,839 |  |  |  | 3 | %
Basic Materials |  |  | 24,862 |  |  |  | 3 | % |  |  | 24,700 |  |  |  | 3 | %
Consumer, Non-cyclical |  |  | 19,983 |  |  |  | 3 | % |  |  | 19,726 |  |  |  | 3 | %
Utilities |  |  | 9,909 |  |  |  | 1 | % |  |  | 9,769 |  |  |  | 1 | %
Total foreign corporate securities |  | $ | 749,752 |  |  |  | 100 | % |  | $ | 771,478 |  |  |  | 100 | %

The Company’s $822 million (fair value) in collateralized loan obligations at March 31, 2025, consist of investments in 82 issues that are within the senior tranches of their respective fund securitization structures. The following table summarizes total collateralized loan obligations by credit rating:

|  | At March 31, 2025 |
|  | Amortized |  |  | Fair |
|  | Cost |  |  | Value |
|  | (In thousands) |
AAA |  | $ | 270,592 |  |  | $ | 269,817 |
AA |  |  | 553,329 |  |  |  | 552,294 |
Total |  | $ | 823,921 |  |  | $ | 822,111 |

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The Company’s $983 million (fair value) in collateralized loan obligations at December 31, 2024, consist of investments in 96 issues that are within the senior tranches of their respective fund securitization structures. The following table summarizes total collateralized loan obligations by credit rating:

|  | At December 31, 2024 |
|  | Amortized |  |  | Fair |
|  | Cost |  |  | Value |
|  | (In thousands) |
AAA |  | $ | 312,710 |  |  | $ | 311,650 |
AA |  |  | 674,445 |  |  |  | 670,939 |
Total |  | $ | 987,155 |  |  | $ | 982,589 |

See Note 3 to the unaudited consolidated financial statements for additional information related to the investment securities.

Loan Portfolio Credit Risk

The Company extends loans to commercial and consumer customers which expose the Company to the risk that the borrowers will default, causing loss. The Company’s lending activities are exposed to various qualitative risks. All loan segments are exposed to risks inherent in the economy and market conditions. Significant risk characteristics related to the commercial loan segment include the borrowers’ business performance and financial condition, and the value of collateral for secured loans. Significant risk characteristics related to the commercial real estate segment include the borrowers’ business performance and the value of properties collateralizing the loans. Significant risk characteristics related to the construction loan segment include the borrowers’ performance in successfully developing the real estate into the intended purpose and the value of the property collateralizing the loans. Significant risk characteristics related to the residential real estate segment include the borrowers’ financial wherewithal to service the mortgages and the value of the property collateralizing the loans. Significant risk characteristics related to the consumer loan segment include the financial condition of the borrowers and the value of collateral securing the loans.

The Company closely monitors the markets in which it conducts its lending operations and follows a strategy to control exposure to loans with high credit risk. The Bank’s organizational structure separates the functions of business development and loan underwriting; Management believes this segregation of duties avoids inherent conflicts of combining business development and loan approval functions. In measuring and managing credit risk, the Company adheres to the following practices:

| ● | The Bank maintains a Loan Review Department which reports directly to the audit committee of the Board of Directors. The Loan Review Department performs independent evaluations of loans to challenge the credit risk grades assigned by Management, using grading standards employed by bank regulatory agencies. Those loans judged to carry higher risk attributes are referred to as “classified loans.” Classified loans receive elevated Management attention in order to maximize collection.

| ● | The Bank maintains two loan administration offices whose sole responsibility is to manage and collect classified loans.

Classified loans with higher levels of credit risk are further designated as “nonaccrual loans.” Management places classified loans on nonaccrual status when full collection of contractual interest and principal payments is in doubt. Uncollected interest previously accrued on loans placed on nonaccrual status is reversed as a charge against interest income. The Company does not accrue interest income on loans following placement on nonaccrual status. Interest payments received on nonaccrual loans are applied to reduce the carrying amount of the loan unless the carrying amount is well secured by loan collateral. “Nonperforming assets” include nonaccrual loans, loans 90 or more days past due and still accruing, and repossessed loan collateral (commonly referred to as “Other Real Estate Owned”).

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Nonperforming Loans

|  | At March 31, |  |  | At December 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
|  | (In thousands) |
Nonperforming nonaccrual loans |  | $ | - |  |  | $ | 957 |  |  | $ | 201 |
Performing nonaccrual loans |  |  | - |  |  |  | 1 |  |  |  | - |
Total nonaccrual loans |  |  | - |  |  |  | 958 |  |  |  | 201 |
Accruing loans 90 or more days past due |  |  | 277 |  |  |  | 525 |  |  |  | 534 |
Total nonperforming loans |  | $ | 277 |  |  | $ | 1,483 |  |  | $ | 735 |

Management believes the overall credit quality of the loan portfolio is reasonably stable; however, classified and nonperforming assets could fluctuate from period to period. The performance of any individual loan can be affected by external factors such as the interest rate environment, economic conditions, pandemics, and collateral values or factors particular to the borrower. No assurance can be given that additional increases in nonaccrual and delinquent loans will not occur in the future.

Allowance for Credit Losses

The following table summarizes allowance for credit losses at the dates indicated:

|  | At March 31, |  |  | At December 31, |
|  | 2025 |  |  | 2024 |
|  | (In thousands) |
Allowance for credit losses on loans |  | $ | 13,914 |  |  | $ | 14,780 |
Allowance for credit losses on held to maturity debt securities |  |  | 1 |  |  |  | 1 |
Total allowance for credit losses |  | $ | 13,915 |  |  | $ | 14,781 |
Allowance for unfunded credit commitments |  | $ | 201 |  |  | $ | 201 |

Allowance for Credit Losses on Debt Securities Held to Maturity

Management segmented debt securities held to maturity, selected methods to estimate losses for each segment, and measured a loss estimate. Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government sponsored entities. Corporate securities held to maturity were individually evaluated for expected credit loss by evaluating the issuer’s financial condition, profitability, cash flows, and credit ratings. The Company has evaluated each issuer’s historical financial performance and ability to service debt payments throughout and following the 2008-2009 recession. The Company has an expectation that nonpayment of the amortized cost basis continues to be zero. At March 31, 2025, no credit loss allowance was assigned to corporate securities held to maturity based on evaluation of each individual issuer’s historical financial performance throughout full business cycles. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance. Allowance for credit losses related to debt securities held to maturity was $1 thousand related to municipal securities at March 31, 2025 and December 31, 2024, reflecting the expected credit losses on debt securities held to maturity.

Allowance for Credit Losses on Loans

The Company’s allowance for credit losses on loans represents Management’s estimate of forecasted credit losses in the loan portfolio based on the current expected credit loss model. In evaluating credit risk for loans, Management measures the loss potential of the carrying value of loans. As described above, payments received on nonaccrual loans may be applied against the principal balance of the loans until such time as full collection of the remaining recorded balance is expected.

The preparation of the financial statements requires Management to estimate the amount of expected losses over the expected contractual life of the Bank’s existing loan portfolio and establish an allowance for credit losses. Loan agreements generally include a maturity date, and the Company considers the contractual life of a loan agreement to extend from the date of origination to the contractual maturity date. In estimating credit losses, Management must exercise significant judgment in evaluating information deemed relevant. The amount of ultimate losses on the loan portfolio can vary from the estimated amounts. Management follows a systematic methodology to estimate loss potential in an effort to reduce the differences between estimated and actual losses.

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The allowance for credit losses is established through provisions for credit losses charged to income. Losses on loans are charged to the allowance for credit losses when all or a portion of the recorded amount of a loan is deemed to be uncollectible. Recoveries of loans previously charged off are credited to the allowance when realized. The Company’s allowance for credit losses is maintained at a level considered adequate to provide for expected losses based on historical loss rates adjusted for current and expected conditions over a forecast period. These include conditions unique to individual borrowers, as well as overall credit loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing economic conditions, or credit protection agreements and other factors.

Loans that share common risk characteristics are segregated into pools based on common characteristics, which is primarily determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. For consumer installment loans, primarily secured by automobiles, historical loss rates are determined using a vintage methodology, which tracks losses based on period of origination. For commercial, construction, and commercial real estate, historical loss rates are determined using an open pool methodology where losses are tracked over time for all loans included in the pool at the historical measurement date. Historical loss rates are adjusted for factors that are not reflected in the historical loss rates that are attributable to national or local economic or industry trends which have occurred but have not yet been recognized in past loan charge-off history, estimated losses based on management’s reasonable and supportable expectation of economic trends over a forecast horizon of up to two years, and other factors that impact credit loss expectations that are not reflected in the historical loss rates. Other factors include, but are not limited to, the effectiveness of the Company’s loan review system, adequacy of lending Management and staff, loan policies and procedures, problem loan trends, and concentrations of credit. At the end of the two-year forecast period loss rates revert immediately to the historical loss rates. The results of this analysis are applied to the amortized cost of the loans included within each pool.

Loans that do not share risk characteristics with other loans in the pools are evaluated individually. A loan is considered ‘collateral-dependent’ when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. A credit loss reserve for collateral-dependent loans is established at the difference between the amortized cost basis in the loan and the fair value of the underlying collateral adjusted for costs to sell. For other individually evaluated loans that are not collateral dependent, a credit loss reserve is established at the difference between the amortized cost basis in the loan and the present value of expected future cash flows discounted at the loan’s effective interest rate. The impact of an expected modification to be made to loans to borrowers experiencing financial difficulty is included in the allowance for credit losses when management determines such modification is likely.

Accrued interest is recorded in other assets and is excluded from the estimation of expected credit loss. Accrued interest is reversed through interest income when amounts are determined to be uncollectible, which generally occurs when the underlying receivable is placed on nonaccrual status or charged off.

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The following table summarizes the allowance for credit losses, chargeoffs and recoveries for the periods indicated.

|  | For the Three Months Ended |
|  | March 31, |  |  | December 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
|  | (In thousands) |
Analysis of the Allowance for Credit Losses on Loans |  |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  | $ | 14,780 |  |  | $ | 16,867 |  |  | $ | 15,318 |
(Reversal of) provision for credit losses |  |  | (550 | ) |  |  | 300 |  |  |  | - |
Loans charged off: |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | (10 | ) |  |  | - |  |  |  | (146 | )
Commercial real estate |  |  | (191 | ) |  |  | - |  |  |  | - |
Consumer installment and other |  |  | (1,525 | ) |  |  | (2,003 | ) |  |  | (1,326 | )
Total chargeoffs |  |  | (1,726 | ) |  |  | (2,003 | ) |  |  | (1,472 | )
Recoveries of loans previously charged off: |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 265 |  |  |  | 12 |  |  |  | 60 |
Commercial real estate |  |  | 13 |  |  |  | 45 |  |  |  | 13 |
Consumer installment and other |  |  | 1,132 |  |  |  | 658 |  |  |  | 861 |
Total recoveries |  |  | 1,410 |  |  |  | 715 |  |  |  | 934 |
Net chargeoffs |  |  | (316 | ) |  |  | (1,288 | ) |  |  | (538 | )
Balance, end of period |  | $ | 13,914 |  |  | $ | 15,879 |  |  | $ | 14,780 |
Net chargeoffs as a percentage of average total loans (annualized) |  |  | (0.16 | )% |  |  | (0.61 | )% |  |  | (0.26 | )%

Selected financial data: (At the dates indicated)

|  | At March 31, |  |  | At December 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
Loans |  | $ | 771,030 |  |  | $ | 844,677 |  |  | $ | 820,300 |
Nonaccrual loans |  |  | - |  |  |  | 958 |  |  |  | 201 |
Allowance for credit losses as a percentage of loans |  |  | 1.80 | % |  |  | 1.88 | % |  |  | 1.80 | %
Nonaccrual loans as a percentage of loans |  |  | - | % |  |  | 0.11 | % |  |  | 0.02 | %
Allowance for credit losses to nonaccrual loans |  | n/m |  |  |  | 1657.52 | % |  |  | 7353.23 | %

The following table summarizes net (chargeoffs) recoveries and the ratio of net (chargeoffs) recoveries to average loans for the periods indicated:

|  | For the Three Months Ended March 31, |  |  | For the Three Months Ended December 31, |
|  | 2025 |  |  | 2024 |  |  | 2024 |
|  |  |  |  |  |  |  |  |  | As a Percentage |  |  |  |  |  |  |  |  |  |  | As a Percentage |  |  |  |  |  |  |  |  |  |  | As a percentage |
|  |  |  |  |  | Average |  |  | of Net Recoveries |  |  |  |  |  |  | Average |  |  | of Net Recoveries |  |  |  |  |  |  | Average |  |  | of Net (Chargeoffs) |
|  | Net Recoveries |  |  | Loan |  |  | (Chargeoffs) |  |  | Net Recoveries |  |  | Loan |  |  | (Chargeoffs) |  |  | Net (Chargeoffs) |  |  | Loan |  |  | Recoveries |
|  | (Chargeoffs) |  |  | Balances |  |  | to Average loans |  |  | (Chargeoffs) |  |  | Balances |  |  | to Average loans |  |  | Recoveries |  |  | Balances |  |  | to Average loans |
|  | ($ in thousands) |
Commercial |  | $ | 255 |  |  | $ | 115,125 |  |  |  | 0.22 | % |  | $ | 12 |  |  | $ | 128,358 |  |  |  | 0.01 | % |  | $ | (86 | ) |  | $ | 126,024 |  |  |  | (0.07 | )%
Commercial real estate |  |  | (178 | ) |  |  | 497,379 |  |  |  | (0.04 | )% |  |  | 45 |  |  |  | 488,989 |  |  |  | 0.01 | % |  |  | 13 |  |  |  | 503,546 |  |  |  | - | %
Construction |  |  | - |  |  |  | 5,064 |  |  |  | - | % |  |  | - |  |  |  | 5,064 |  |  |  | - | % |  |  | - |  |  |  | 5,064 |  |  |  | - | %
Residential real estate |  |  | - |  |  |  | 8,180 |  |  |  | - | % |  |  | - |  |  |  | 9,831 |  |  |  | - | % |  |  | - |  |  |  | 8,559 |  |  |  | - | %
Consumer and other installment |  |  | (393 | ) |  |  | 164,187 |  |  |  | (0.24 | )% |  |  | (1,345 | ) |  |  | 221,311 |  |  |  | (0.61 | )% |  |  | (465 | ) |  |  | 178,574 |  |  |  | (0.26 | )%
Total |  | $ | (316 | ) |  | $ | 789,935 |  |  |  | (0.04 | )% |  | $ | (1,288 | ) |  | $ | 853,553 |  |  |  | (0.15 | )% |  | $ | (538 | ) |  | $ | 821,767 |  |  |  | (0.07 | )%

The Company's allowance for credit losses on loans is maintained at a level considered adequate to provide for expected losses based on historical loss rates adjusted for current and expected conditions over a forecast period. These include conditions unique to individual borrowers, as well as overall loan loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing and forecasted economic conditions, or credit protection agreements and other factors. Loans that share common risk characteristics are segregated into pools based on common characteristics, which are primarily determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. Loans that do not share risk characteristics with other loans in the pools are evaluated individually. See Note 2 to the unaudited consolidated financial statements for additional information.

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The following summarizes activity in the allowance for credit losses:

|  | Allowance for Credit Losses |
|  | For the Three Months Ended March 31, 2025 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Consumer |  |  |  |  |
|  |  |  |  |  | Commercial |  |  |  |  |  |  | Residential |  |  | Installment |  |  |  |  |
|  | Commercial |  |  | Real Estate |  |  | Construction |  |  | Real Estate |  |  | and Other |  |  | Total |
|  | (In thousands) |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 4,197 |  |  | $ | 6,034 |  |  | $ | 247 |  |  | $ | 22 |  |  | $ | 4,280 |  |  | $ | 14,780 |
(Reversal) provision |  |  | (41 | ) |  |  | 309 |  |  |  | - |  |  |  | 4 |  |  |  | (822 | ) |  |  | (550 | )
Chargeoffs |  |  | (10 | ) |  |  | (191 | ) |  |  | - |  |  |  | - |  |  |  | (1,525 | ) |  |  | (1,726 | )
Recoveries |  |  | 265 |  |  |  | 13 |  |  |  | - |  |  |  | - |  |  |  | 1,132 |  |  |  | 1,410 |
Total allowance for credit losses |  | $ | 4,411 |  |  | $ | 6,165 |  |  | $ | 247 |  |  | $ | 26 |  |  | $ | 3,065 |  |  | $ | 13,914 |

Management considers the $13.9 million allowance for credit losses on loans to be adequate as a reserve against current expected credit losses in the loan portfolio as of March 31, 2025.

See Note 4 to the unaudited consolidated financial statements for additional information related to the loan portfolio, loan portfolio credit risk, allowance for credit losses on loans, and other real estate owned.

Climate-Related Financial Risk

Climate change presents risk to the Company, our critical vendors and our customers. Our risk management practices incorporate the challenges brought about by climate change. The operations conducted in our centralized facilities and branch locations can be disrupted by acute physical risks such as flooding and windstorms, and by chronic physical risks such as rising sea levels, sustained higher temperatures, drought, and increased wildfires. Over the intermediate and longer-term, the Company can be subject to transition risks such as market demand, and policy and law changes.

None of the Company’s physical locations are located near sea level, and only a limited number of branches are located in flood zones. The Company and its critical vendors maintain property and casualty insurance, and maintain and regularly test disaster recovery plans, which include redundant operational locations and power sources. The Company’s operations do not use a significant amount of water in producing its products and services.

The Company monitors the climate risks of its loan customers. Borrowers with real estate loan collateral located in flood zones must carry flood insurance under the loans’ terms. At March 31, 2025, the Company had $2 million in loans to agricultural borrowers; Management continuously monitors these customers’ access to adequate water sources as well as their ability to sustain low crop yields and volatile commodity prices without encountering financial hardship. The Company makes automobile loans; changes in consumer demand, or governmental laws or policies, regarding gasoline, electric and hybrid vehicles are not considered to be material risks to the Company’s automobile lending practices. The Company considers climate risk in its underwriting of corporate bonds, and avoids purchasing bonds of issuers, which, in Management’s judgement, have elevated climate risk.

While the Company follows risk management practices related to climate risk, the Company may experience financial losses due to climate risk despite these precautions.

Asset/Liability and Market Risk Management

Asset/liability management involves the evaluation, monitoring and management of interest rate risk, market risk, liquidity and funding. The fundamental objective of the Company's management of assets and liabilities is to maximize its economic value while maintaining adequate liquidity and a conservative level of interest rate risk.

Interest Rate Risk

Interest rate risk is a significant market risk affecting the Company. Many factors affect the Company’s exposure to interest rates, such as general economic and financial conditions, customer preferences, historical pricing relationships, and re-pricing characteristics of financial instruments. Financial instruments may mature or re-price at different times. Financial instruments may re-price at the same time but by different amounts. Short-term and long-term market interest rates may change by different amounts. The timing and amount of cash flows of various financial instruments may change as interest rates change. In addition, the changing levels of interest rates may have an impact on bond portfolio volumes, accumulated other comprehensive (loss) income, loan demand and demand for various deposit products.

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The Company’s earnings are affected not only by general economic conditions, but also by the monetary and fiscal policies of the United States government and its agencies, particularly the FOMC. The monetary policies of the FOMC can influence the overall demand for loans and growth of deposits and the level of interest rates earned on loans and investment securities and paid for deposits and other borrowings. The nature and impact of future changes in monetary policies are generally not predictable.

Management attempts to manage interest rate risk while enhancing the net interest margin and net interest income. At times, depending on expected increases or decreases in market interest rates, the relationship between long and short-term interest rates, market conditions and competitive factors, Management may adjust the Company's interest rate risk position. The Company's results of operations and net portfolio values remain subject to changes in interest rates and to fluctuations in the difference between long, intermediate, and short-term interest rates.

Management monitors the Company’s interest rate risk using a licensed third party simulation model, which is periodically assessed using supervisory guidance issued by the Board of Governors of the Federal Reserve System, SR 11-7 “Guidance on Model Risk Management.” Management measures its exposure to interest rate risk using a dynamic composition simulation and static simulation. Within the dynamic composition simulation, Management makes assumptions regarding the expected change in the volume of financial instruments given the assumed change in market interest rates. Within the static simulation, cash flows are assumed redeployed into like financial instruments at prevailing rates and yields. Both simulations are used to measure expected changes in net interest income assuming various levels of change in market interest rates.

The Company’s asset and liability position was generally “asset sensitive” at March 31, 2025, based on the interest rate assumptions applied to the simulation model. An “asset sensitive” position results in a larger change in interest income than in interest expense resulting from application of assumed interest rate changes. However, in the dynamic simulation, an assumed decline in interest rates is expected to result in improved deposit balances funding higher earning asset levels. Further, in the dynamic simulation, no change in interest rates is expected to result in a decline in net interest income as asset yields remain stable and deposit costs rise as the Bank negotiates deposit rates with customers in the current environment.

At March 31, 2025, Management’s most recent measurements of estimated changes in net interest income were:

| Dynamic Simulation (1) | Static Simulation (2)
Change in Interest Rates | First Year Change in Net Interest Income
+ 2.0% | + 4.6% | + 13.0%
+ 1.0% | + 2.4% | + 6.5%
0.0% | - 0.4% | 0.0%
- 1.0% | - 1.6% | - 7.2%
- 2.0% | - 7.0% | - 14.3%

(1) | Balance sheet composition changes; Assumed change in interest rates over 1 year

(2) | Balance sheet composition unchanged; Assumed immediate change in interest rates

Simulation estimates depend on, and will change with, the size and mix of the actual and projected composition of financial instruments at the time of each simulation. Assumptions made in the simulation may not materialize and unanticipated events and circumstances may occur. In addition, the simulation does not take into account any future actions Management may undertake to mitigate the impact of interest rate changes, loan prepayment estimates and spread relationships, which may change regularly.

The Company does not currently engage in trading activities or use derivative instruments to manage interest rate risk, even though such activities may be permitted with the approval of the Company's Board of Directors.

Market Risk - Equity Markets

Equity price risk can affect the Company. Preferred or common stock holdings, as permitted by banking regulations, can fluctuate in value. Changes in value of preferred or common stock holdings are recognized in the Company's income statement.

Fluctuations in the Company's common stock price can impact the Company's financial results in several ways. First, the Company has at times repurchased and retired its common stock; the market price paid to retire the Company's common stock affects the level of the Company's shareholders' equity, cash flows and shares outstanding. Second, the Company's common stock price impacts the number of dilutive equivalent shares used to compute diluted earnings per share. Third, fluctuations in the Company's common stock price can motivate holders of options to purchase Company common stock through the exercise of such options thereby increasing the number of shares outstanding and potentially adding volatility to the book tax provision. Finally, the amount of compensation expense and tax deductions associated with share based compensation fluctuates with changes in and the volatility of the Company's common stock price.

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Market Risk - Other

Market values of loan collateral can directly impact the level of loan chargeoffs and the provision for credit losses. The financial condition and liquidity of debtors issuing bonds and debtors whose mortgages or other obligations are securitized can directly impact the credit quality of the Company’s investment securities portfolio requiring the Company to establish or increase reserves for expected credit losses. Other types of market risk, such as foreign currency exchange risk, are not significant in the normal course of the Company's business activities.

Liquidity and Funding

The objective of liquidity management is to manage cash flow and liquidity reserves so that they are adequate to fund the Bank's operations and meet obligations and other commitments on a timely basis and at a reasonable cost. The Bank achieves this objective through the selection of asset and liability maturity mixes that it believes best meet its needs. The Bank's liquidity position is enhanced by its ability to raise additional funds as needed by borrowing from correspondent banks or in the wholesale markets, or by selling debt securities available for sale.

In recent years, the Bank's deposit base has provided the majority of the Bank's funding requirements. This low-cost source of funds, along with shareholders' equity, provided 97% of funding for average total assets for the three months ended March 31, 2025 and 96% for the year ended December 31, 2024. The Bank’s funding from customer deposits is in part reliant on the confidence clients have in the Bank. The Bank places a very high priority in maintaining this confidence through conservative credit risk and capital management practices and by maintaining an appropriate level of liquidity.

Total deposits were $4,874 million at March 31, 2025 and $5,012 million at December 31, 2024. Total time deposits were $78 million at March 31, 2025 and $82 million at December 31, 2024. The Company has no foreign time deposits. FDIC deposit insurance is $250,000 per depositor, for each account ownership category. At March 31, 2025, estimated federally uninsured total deposits and time deposits were $2,359 million and $4 million, respectively.

The following table shows the time remaining to maturity of the Company’s estimated amounts of uninsured time deposits with a balance greater than $250,000 per depositor per category:

|  | At March 31, 2025 |
|  | (In thousands) |
Three months or less |  | $ | 2,270 |
Over three through six months |  |  | 114 |
Over six through twelve months |  |  | 1,824 |
Over twelve months |  |  | 58 |
Total |  | $ | 4,266 |

Liquidity is further provided by assets such as balances held at the Federal Reserve Bank, and principal and interest payments from debt securities and loans. At March 31, 2025, the Company had $727,336 thousand in cash balances. During the twelve months ending March 31, 2026, the Company expects to receive $265,000 thousand in principal payments from its debt securities. If additional operational liquidity is required, the Company can pledge debt securities as collateral for borrowing purposes; at March 31, 2025, the Company’s debt securities which qualify as collateral for borrowing totaled $3,498,151 thousand. In the ordinary course of business, the Company pledges debt securities as collateral for certain depository customers; at March 31, 2025, the Company had pledged $713,752 thousand in debt securities for depository customers. In the ordinary course of business, the Company pledges debt securities as collateral for borrowing from the Federal Reserve Bank; at March 31, 2025, the Company had pledged $724,966 thousand in debt securities at the Federal Reserve Bank. During the three months ended March 31, 2025, the Company’s average borrowings from the Federal Reserve Bank and other correspondent banks were $-0- thousand, respectively, and at March 31, 2025, the Company had no borrowings from the Federal Reserve Bank or other correspondent banks. At March 31, 2025, the Company had access to borrowing from the Federal Reserve up to $724,966 thousand based on collateral pledged at March 31, 2025. At March 31, 2025, the Company’s estimated unpledged collateral qualifying debt securities totaled $1,615,433 thousand. Debt securities eligible as collateral are shown at market value unless noted otherwise:

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|  | At March 31, 2025 |
|  | (in thousands) |
Debt Securities Eligible as Collateral: |  |  |  |
Corporate Securities |  | $ | 2,517,299 |
Collateralized Loan Obligations rated AAA |  |  | 269,817 |
Obligations of States and Political Subdivisions |  |  | 109,065 |
Agency Mortgage Backed Securities |  |  | 302,248 |
Securities of U.S. Government Sponsored Entities |  |  | 299,722 |
Total Debt Securities Eligible as Collateral |  | $ | 3,498,151 |
Debt Securities Pledged as Collateral: |  |  |  |
Debt Securities Pledged at the Federal Reserve Bank |  | $ | (724,966 | )
Deposits by Public Entities |  |  | (713,752 | )
Securities Sold under Repurchase Agreements |  |  | (439,287 | )
Other |  |  | (4,713 | )
Total Debt Securities Pledged as Collateral |  | $ | (1,882,718 | )
Estimated Debt Securities Available to Pledge |  | $ | 1,615,433 |

Liquidity risk can result from the mismatching of asset and liability cash flows, or from disruptions in the financial markets. The Bank performs liquidity stress tests on a periodic basis to evaluate the sustainability of its liquidity. Under the stress testing, the Bank assumes outflows of funds increase beyond expected levels. Measurement of such heightened outflows considers the composition of the Bank’s deposit base, including any concentration of deposits, non-deposit funding such as short-term borrowings, and unfunded lending commitments. The composition of the Bank’s deposits is considered including the broad industry and geographic diversification in the Bank’s market area. The Bank evaluates its stock of highly liquid assets to meet the assumed higher levels of outflows. Highly liquid assets include cash and amounts due from other banks from daily transaction settlements, reduced by branch cash needs and any Federal Reserve Bank reserve requirements, and investment securities based on regulatory guidelines. Based on the results of the most recent liquidity stress test, Management is satisfied with the liquidity condition of the Bank. However, no assurance can be given the Bank will not experience a period of reduced liquidity.

Management continually monitors the Bank’s cash levels. Loan demand from credit worthy borrowers will be dictated by economic and competitive conditions. The Bank aggressively solicits non-interest bearing demand deposits and money market checking deposits, which are the least sensitive to changes in interest rates. The growth of these deposit balances is subject to heightened competition, the success of the Bank's sales efforts, delivery of superior customer service, new regulations and market conditions. The Bank does not aggressively solicit higher-costing time deposits. Changes in interest rates, most notably rising or elevated interest rates, or increased consumer spending, could impact deposit volumes. Depending on economic conditions, interest rate levels, liquidity management and a variety of other conditions, any deposit growth may be used to fund loans or purchase investment securities. However, due to possible volatility in economic conditions, competition and political uncertainty, loan demand and levels of customer deposits are not certain. Shareholder dividends are expected to continue subject to the Board's discretion and continuing evaluation of capital levels, earnings, asset quality and other factors.

Westamerica Bancorporation ("Parent Company") is a separate entity apart from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Parent Company is responsible for the payment of dividends declared for its shareholders, and interest and principal on any outstanding debt. The Parent Company had no debt at March 31, 2025. Substantially all of the Parent Company's revenues are obtained from subsidiary dividends and service fees.

The Bank’s dividends paid to the Parent Company and Parent Company cash balances provided adequate cash for the Parent Company to pay shareholder dividends of $12 million in the three months ended March 31, 2025 and $47 million in the year ended December 31, 2024 and retire common stock in the amounts of $18 million in the three months ended March 31, 2025 and $210 thousand in the year ended December 31, 2024. Payment of dividends to the Parent Company by the Bank is limited under California and Federal laws. The Company believes these regulatory dividend restrictions will not impact Parent Company's ability to meet its ongoing cash obligations. The Parent Company’s cash balance was $275 million at March 31, 2025 and $263 million at December 31, 2024.

Capital Resources

The Company has historically generated high levels of earnings, which provide a means of accumulating capital. The Company's net income as a percentage of average shareholders' equity (“return on equity” or “ROE”) was 11.9% (annualized) for the three months ended March 31, 2025 and 13.8% for the year ended December 31, 2024. The Company also raises capital as employees exercise stock options. Capital was not raised through the exercise of stock options in the three months ended March 31, 2025 while $1.5 million was raised through the exercise of stock options in the year ended December 31, 2024.

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The Company paid common dividends totaling $12 million in the three months ended March 31, 2025 and $47 million in the year ended December 31, 2024, which represent dividends per common share of $0.44 and $1.76, respectively. The Company's earnings have historically exceeded dividends paid to shareholders. The amount of earnings in excess of dividends provides the Company resources to finance growth and maintain appropriate levels of shareholders' equity. In the absence of profitable growth opportunities, the Company has at times repurchased and retired its common stock as another means to return capital to shareholders. The Company retired 361 thousand shares valued at $18 million in the three months ended March 31, 2025 and 4 thousand shares valued at $210 thousand in the year ended December 31, 2024.

The Company's primary capital resource is shareholders' equity, which was $923 million at March 31, 2025 compared with $890 million at December 31, 2024. The Company's ratio of equity to total assets was 15.47% at March 31, 2025 and 14.65% at December 31, 2024.

The Company performs capital stress tests on a periodic basis to evaluate the sustainability of its capital. Under the stress testing, the Company assumes various scenarios such as deteriorating economic and operating conditions, and unanticipated asset devaluations. The Company measures the impact of these scenarios on its earnings and capital. Based on the results of the most recent stress tests, Management is satisfied with the capital condition of the Bank and the Company. However, no assurance can be given the Bank or Company will not experience a period of reduced earnings or a reduction in capital from unanticipated events and circumstances.

Capital to Risk-Adjusted Assets

The capital ratios for the Company and the Bank under current regulatory capital standards are presented in the tables below, on the dates indicated. For Common Equity Tier I Capital, Tier 1 Capital and Total Capital, the minimum percentage required for regulatory capital adequacy purposes include a 2.5% “capital conservation buffer.”

|  |  |  |  |  |  |  |  |  |  |  |  |  | To Be |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Well-capitalized |
|  |  |  |  |  |  |  |  |  | Required for |  |  | Under Prompt |
|  | At March 31, 2025 |  |  | Capital Adequacy |  |  | Corrective Action |
|  | Company |  |  | Bank |  |  | Purposes |  |  | Regulations (Bank) |
Common Equity Tier I Capital |  |  | 23.33 | % |  |  | 15.66 | % |  |  | 7.00 | % |  |  | 6.50 | %
Tier I Capital |  |  | 23.33 | % |  |  | 15.66 | % |  |  | 8.50 | % |  |  | 8.00 | %
Total Capital |  |  | 23.68 | % |  |  | 16.16 | % |  |  | 10.50 | % |  |  | 10.00 | %
Leverage Ratio |  |  | 15.47 | % |  |  | 10.34 | % |  |  | 4.00 | % |  |  | 5.00 | %

|  |  |  |  |  |  |  |  |  |  |  |  |  | To Be |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Well-capitalized |
|  |  |  |  |  |  |  |  |  | Required for |  |  | Under Prompt |
|  | At December 31, 2024 |  |  | Capital Adequacy |  |  | Corrective Action |
|  | Company |  |  | Bank |  |  | Purposes |  |  | Regulations (Bank) |
Common Equity Tier I Capital |  |  | 22.46 | % |  |  | 15.33 | % |  |  | 7.00 | % |  |  | 6.50 | %
Tier I Capital |  |  | 22.46 | % |  |  | 15.33 | % |  |  | 8.50 | % |  |  | 8.00 | %
Total Capital |  |  | 22.82 | % |  |  | 15.84 | % |  |  | 10.50 | % |  |  | 10.00 | %
Leverage Ratio |  |  | 15.30 | % |  |  | 10.41 | % |  |  | 4.00 | % |  |  | 5.00 | %

The Cmpany and the Bank routinely project capital levels by analyzing forecasted earnings, credit quality, shareholder dividends, asset volumes, share repurchase activity, stock option exercise proceeds, and other factors. Based on current capital projections, the Bank expects to maintain regulatory capital levels in excess of the minimum required to be considered well-capitalized under the prompt corrective action framework. The Company expects to continue paying quarterly dividends to shareholders. No assurance can be given that changes in capital management plans will not occur.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company does not currently engage in trading activities or use derivative instruments to control interest rate risk, even though such activities may be permitted with the approval of the Company’s Board of Directors.

Credit risk and interest rate risk are the most significant market risks affecting the Company, and equity price risk can also affect the Company’s financial results. These risks are described in the preceding sections regarding “Loan Portfolio Credit Risk,” and “Asset/Liability and Market Risk Management.” Other types of market risk, such as foreign currency exchange risk and commodity price risk, are not significant in the normal course of the Company’s business activities.

Operational risk is the risk to current or projected financial condition and resilience arising from inadequate or failed internal processes or systems, people (including human errors or misconduct), or adverse external events, including the risk of loss resulting from breaches in data security. Operational risk can also include the risk of loss due to failures by third parties with which the Company does business.

Item 4. Controls and Procedures

The Company’s principal executive officer and principal financial officer have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of March 31, 2025.

Based upon their evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that material 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 as and when required and that such information is communicated to the Company’s management, including the principal executive officer and the principal financial officer, to allow for timely decisions regarding required disclosures. The evaluation did not identify any change in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Due to the nature of its business, the Company is subject to various threatened or filed legal cases. Neither the Company nor any of its subsidiaries is a party to any material pending legal proceeding, nor is their property the subject of any material pending legal proceeding, other than ordinary routine legal proceedings arising in the ordinary course of the Company’s business. Based on the advice of legal counsel, the Company does not expect such cases will have a material, adverse effect on its business, financial position or results of operations. Legal liabilities are accrued when obligations become probable and the amount can be reasonably estimated.

Item 1A. Risk Factors

The Company’s Annual Report on Form 10-K for the year ended December 31, 2024 includes detailed disclosure about the risks faced by the Company’s business.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) None

(b) None

(c) Issuer Purchases of Equity Securities

The table below sets forth the information with respect to purchases made by or on behalf of Westamerica Bancorporation or any “affiliated purchaser”, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of common stock during the quarter ended March 31, 2025.

|  | 2025 |
Period |  | (a) Total Number of Shares Purchased |  |  | (b) Average Price Paid per Share |  |  | (c) Number of Shares Purchased as Part of Publicly Announced Plans or Programs |  |  | (d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |
|  | (In thousands, except price paid) |
January 1 through January 31 |  |  | N/A |  |  |  | N/A |  |  |  | N/A |  |  |  | N/A |
February 1 through February 28 |  |  | - |  |  | $ | - |  |  |  | - |  |  |  | 2,000 |
March 1 through March 31 |  |  | 356 |  |  |  | 50.44 |  |  |  | 356 |  |  |  | 1,644 |
Total |  |  | 356 |  |  | $ | 50.44 |  |  |  | 356 |  |  |  | 1,644 |

The Company may repurchase shares of its common stock in the open market from time to time to optimize the Company’s use of equity capital and enhance shareholder value and with the intention of lessening the dilutive impact of issuing new shares under stock option plans, and other ongoing requirements.

No shares were repurchased during January and February 2025. There had been no stock repurchase plan in place after the Company’s previous repurchase plan expired on September 1, 2023. Shares were repurchased during March 2025 pursuant to a replacement program approved by the Board of Directors on February 27, 2025 authorizing the purchase of up to 2,000 thousand shares of the Company’s common stock from time to time prior to March 31, 2026.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Rule 10b5-1 Trading Plans

During the quarter ended March 31, 2025, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408 of Regulation S‑K.

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Item 6. Exhibits

Exhibit No. | Description of Exhibit
Exhibit 31.1 | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)

Exhibit 31.2 | Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)

Exhibit 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101.INS | 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.

Exhibit 101.SCH | Inline XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF | Inline XBRL Taxonomy Extension Definitions Linkbase Document

Exhibit 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 104. | The Cover page of Westamerica Bancorporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, formatted in Inline XBRL (contained in Exhibit 101)

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SIGNATURESs

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.

WESTAMERICA BANCORPORATION

(Registrant)

/s/ Anela Jonas |
Anela Jonas |
Senior Vice President and Chief Financial Officer |
(Principal Financial and Chief Accounting Officer) |

Date: May 9, 2025

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