# Plumas Bancorp (PLBC) 10-Q SEC filing - Q2 FY2026
- Filed: Aug 5, 2026, 10:40 AM EDT
- Fiscal quarter: Q2 FY2026
- Calendar quarter: Q2 2026
- Accession: 0001437749-26-025819
- OpenCapital page: https://www.opencapital.sh/filings/0001437749-26-025819
- Markdown URL: https://www.opencapital.sh/filings/0001437749-26-025819.md
- Official SEC filing index: https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/0001437749-26-025819-index.htm
## Filing documents
- [10-Q (plbc20260630_10q.htm)](https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/plbc20260630_10q.htm)
- [EXHIBIT 10.3 (ex_985901.htm)](https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/ex_985901.htm)
- [EXHIBIT 10.4 (ex_985902.htm)](https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/ex_985902.htm)
- [EXHIBIT 31.1 (ex_966512.htm)](https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/ex_966512.htm)
- [EXHIBIT 31.2 (ex_966513.htm)](https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/ex_966513.htm)
- [EXHIBIT 32.1 (ex_966514.htm)](https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/ex_966514.htm)
- [EXHIBIT 32.2 (ex_966515.htm)](https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/ex_966515.htm)
---
## 10-Q
SEC source: [plbc20260630_10q.htm](https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/plbc20260630_10q.htm)
**UNITED STATES**
**SECURITIES AND EXCHANGE COMMISSION**
**Washington, D.C. 20549**
**FORM 10-Q**
**(Mark One)**
**☒**
**QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2026**
**☐**
**TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM \_\_\_\_\_\_\_\_\_\_ TO \_\_\_\_\_\_\_\_\_\_\_**
**COMMISSION FILE NUMBER: 000-49883**
**PLUMAS BANCORP**
(Exact Name of Registrant as Specified in Its Charter)
| California | 75-2987096 |
| --- | --- |
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
| 5525 Kietzke Lane, Suite 100, Reno, Nevada | 89511 |
| (Address of Principal Executive Offices) | (Zip Code) |
| Registrant’s Telephone Number, Including Area Code (775) 786-0907 | |
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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act:
Large Accelerated Filer ☐ Accelerated Filer ☐ 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 ☒
Securities registered pursuant to Section 12(b) of the Act:
**Title of Each Class:**
**Trading Symbol**
**Name of Each Exchange on which Registered:**
Common Stock, no par value
PLBC
The NASDAQ Stock Market LLC
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of August 1, 2026: 6,959,016 shares.
**PART I – FINANCIAL INFORMATION**
## ITEM 1. FINANCIAL STATEMENTS
**PLUMAS BANCORP AND SUBSIDIARY**
### CONDENSED CONSOLIDATED BALANCE SHEETS
_(Unaudited) · ($ in thousands, except share data)_
| Line item | June 30, 2026 | December 31, 2025 |
| --- | --- | --- |
| Assets | | |
| Cash and cash equivalents | $135,546 | $80,616 |
| Investment securities available-for-sale, net of allowance for credit losses of $0 at June 30, 2026 and December 31, 2025 | 465,991 | 476,595 |
| Loans, less allowance for credit losses of $19,740 at June 30, 2026 and $19,959 at December 31, 2025 | 1,496,190 | 1,495,834 |
| Premises and equipment, net | 23,763 | 24,398 |
| Right-of-use assets | 27,985 | 28,860 |
| Bank owned life insurance | 34,203 | 33,659 |
| Core deposit intangible | 9,954 | 11,101 |
| Goodwill | 24,215 | 24,215 |
| Accrued interest receivable and other assets | 59,897 | 63,245 |
| Total assets | $2,277,744 | $2,238,523 |
| Liabilities and Shareholders’ Equity | | |
| Deposits: | | |
| Non-interest bearing | $864,075 | $848,986 |
| Interest bearing | 1,020,990 | 960,618 |
| Total deposits | 1,885,065 | 1,809,604 |
| Repurchase agreements | 59,217 | 97,855 |
| Lease liabilities | 28,388 | 29,029 |
| Accrued interest payable and other liabilities | 16,908 | 19,946 |
| Borrowings | 16,033 | 21,013 |
| Total liabilities | 2,005,611 | 1,977,447 |
| Commitments and contingencies (Note 5) | | |
| Shareholders’ equity: | | |
| Common stock, no par value; 22,500,000 shares authorized; issued and outstanding – 6,963,616 shares at June 30, 2026 and 6,958,814 at December 31, 2025 | 74,702 | 75,668 |
| Retained earnings | 211,013 | 195,899 |
| Accumulated other comprehensive loss, net | (13,582) | (10,491) |
| Total shareholders’ equity | 272,133 | 261,076 |
| Total liabilities and shareholders’ equity | $2,277,744 | $2,238,523 |
See notes to unaudited condensed consolidated financial statements.
1
**PLUMAS BANCORP AND SUBSIDIARY**
### CONDENSED CONSOLIDATED STATEMENTS OF INCOME
_(Unaudited) · ($ in thousands, except per share data)_
| Line item | For the Three Months Ended / June 30, 2026 | For the Three Months Ended / June 30, 2025 | For the Six Months Ended / June 30, 2026 | For the Six Months Ended / June 30, 2025 |
| --- | --- | --- | --- | --- |
| Interest Income: | | | | |
| Interest and fees on loans | $24,777 | $15,612 | $48,734 | $31,008 |
| Interest on investment securities | 4,988 | 4,504 | 9,987 | 9,014 |
| Other | 595 | 517 | 1,006 | 1,201 |
| Total interest income | 30,360 | 20,633 | 59,727 | 41,223 |
| Interest Expense: | | | | |
| Interest on deposits | 3,904 | 2,284 | 7,491 | 4,180 |
| Interest on borrowings | 176 | 146 | 375 | 290 |
| Other | 273 | 20 | 715 | 31 |
| Total interest expense | 4,353 | 2,450 | 8,581 | 4,501 |
| Net interest income before provision for credit losses | 26,007 | 18,183 | 51,146 | 36,722 |
| Provision for Credit Losses | 600 | 860 | 270 | 1,110 |
| Net interest income after provision for credit losses | 25,407 | 17,323 | 50,876 | 35,612 |
| Non-Interest Income: | | | | |
| Interchange revenue | 881 | 784 | 1,712 | 1,474 |
| Service charges | 813 | 781 | 1,598 | 1,486 |
| Other | 1,057 | 796 | 2,438 | 2,614 |
| Total non-interest income | 2,751 | 2,361 | 5,748 | 5,574 |
| Non-Interest Expenses: | | | | |
| Salaries and employee benefits | 7,520 | 5,553 | 15,250 | 11,433 |
| Occupancy and equipment | 2,648 | 2,050 | 5,322 | 4,064 |
| Other | 4,336 | 3,409 | 9,219 | 6,980 |
| Total non-interest expenses | 14,504 | 11,012 | 29,791 | 22,477 |
| Income before provision for income taxes | 13,654 | 8,672 | 26,833 | 18,709 |
| Provision for Income Taxes | 3,695 | 2,351 | 7,111 | 5,208 |
| Net income | $9,959 | $6,321 | $19,722 | $13,501 |
| Basic earnings per share | $1.43 | $1.07 | $2.83 | $2.28 |
| Diluted earnings per share | $1.41 | $1.05 | $2.79 | $2.25 |
See notes to unaudited condensed consolidated financial statements.
2
**PLUMAS BANCORP AND SUBSIDIARY**
### CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
_(Unaudited) · ($ in thousands)_
| Line item | For the Three Months Ended / June 30, 2026 | For the Three Months Ended / June 30, 2025 | For the Six Months Ended / June 30, 2026 | For the Six Months Ended / June 30, 2025 |
| --- | --- | --- | --- | --- |
| Net income | $9,959 | $6,321 | $19,722 | $13,501 |
| Other comprehensive income: | | | | |
| Change in net unrealized loss on securities | (665) | 832 | (4,388) | 6,346 |
| Less: reclassification adjustments for net (gain) loss included in net income | - | (3) | - | (3) |
| Net unrealized holding gain | (665) | 829 | (4,388) | 6,343 |
| Related tax effect: | | | | |
| Change in net unrealized loss on securities | 197 | (246) | 1,297 | (1,877) |
| Reclassification of net gain (loss) is included in net income | - | 1 | - | 1 |
| Income tax effect | 197 | (245) | 1,297 | (1,876) |
| Other comprehensive (loss) income | (468) | 584 | (3,091) | 4,467 |
| Total comprehensive income | $9,491 | $6,905 | $16,631 | $17,968 |
See notes to unaudited condensed consolidated financial statements.
3
**PLUMAS BANCORP AND SUBSIDIARY**
### CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
_($ in thousands, except shares)_
| Line item | Common Stock / Shares | Common Stock / Amount | Accumulated Other Comprehensive Loss / (Net of Taxes) | Total Shareholders’ / Equity |
| --- | --- | --- | --- | --- |
| Balance, December 31, 2024 | 5,903,368 | $29,043 | $$(25,145) | $177,900 |
| Net Income | - | - | - | 13,501 |
| Other comprehensive income | - | - | 4,467 | 4,467 |
| Cash dividends on common stock ($0.60 per share) | - | - | - | (3,549) |
| Vesting of restricted stock units | 3,033 | - | - | - |
| Exercise of stock options | 27,305 | 583 | - | 583 |
| Stock-based compensation expense | - | 177 | - | 177 |
| Balance, June 30, 2025 | 5,933,706 | $29,803 | $$(20,678) | $193,079 |
| Balance, December 31, 2025 | 6,958,814 | $75,668 | $$(10,491) | $261,076 |
| Net Income | - | - | - | 19,722 |
| Other comprehensive loss | - | - | (3,091) | (3,091) |
| Cash dividends on common stock ($0.66 per share) | - | - | - | (4,608) |
| Repurchase of Common Stock | (56,000) | (2,783) | - | (2,783) |
| Exercise of stock options | 60,802 | 1,489 | - | 1,489 |
| Stock-based compensation expense | - | 328 | - | 328 |
| Balance, June 30, 2026 | 6,963,616 | $74,702 | $$(13,582) | $272,133 |
| Line item | Common Stock / Shares | Common Stock / Amount | Accumulated Other Comprehensive Loss / (Net of Taxes) | Total Shareholders’ / Equity |
| --- | --- | --- | --- | --- |
| Balance, March 31, 2025 | 5,922,116 | $29,454 | $$(21,262) | $187,603 |
| Net Income | - | - | - | 6,321 |
| Other comprehensive income | - | - | 584 | 584 |
| Cash dividends on common stock ($0.30 per share) | - | - | - | (1,778) |
| Exercise of stock options | 11,590 | 254 | - | 254 |
| Stock-based compensation expense | - | 95 | - | 95 |
| Balance, June 30, 2025 | 5,933,706 | $29,803 | $$(20,678) | $193,079 |
| Balance, March 31, 2026 | 6,974,673 | $75,149 | $$(13,114) | $265,392 |
| Net Income | - | - | - | 9,959 |
| Other comprehensive loss | - | - | (468) | (468) |
| Cash dividends on common stock ($0.33 per share) | - | - | - | (2,303) |
| Repurchase of Common Stock | (15,000) | (756) | - | (756) |
| Exercise of stock options | 3,943 | 101 | - | 101 |
| Stock-based compensation expense | - | 208 | - | 208 |
| Balance, June 30, 2026 | 6,963,616 | $74,702 | $$(13,582) | $272,133 |
- See notes to unaudited condensed consolidated financial statements.
4
**PLUMAS BANCORP AND SUBSIDIARY**
### CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
_(Unaudited) · ($ in thousands)_
| Line item | For the Six Months Ended / June 30, 2026 | For the Six Months Ended / June 30, 2025 |
| --- | --- | --- |
| Cash Flows from Operating Activities: | | |
| Net income | $19,722 | $13,501 |
| Adjustments to reconcile net income to net cash provided by operating activities: | | |
| Provision for credit losses | 270 | 1,110 |
| Change in deferred loan origination costs/fees, net | (21) | (89) |
| Depreciation of premises and equipment and amortization of intangibles | 904 | 722 |
| Stock-based compensation expense | 328 | 177 |
| Amortization of discount on subordinated debentures | 20 | - |
| Amortization of core deposit intangible | 1,147 | - |
| Accretion of premium on time deposits | 63 | - |
| Amortization of investment security premiums | 297 | 357 |
| Accretion of investment security discounts | (636) | (608) |
| Net gain on sale of investment securities | - | (3) |
| Loans originated for sale | - | (75) |
| Accretion of discount on loans | (2,055) | - |
| Gain on sale of other real estate | (104) | - |
| Loss on sale of other vehicles | 3 | 18 |
| Earnings on bank-owned life insurance | (544) | (217) |
| Decrease (increase) in accrued interest receivable and other assets | 5,447 | (7,027) |
| (Decrease) increase in accrued interest payable and other liabilities | (3,749) | 1,702 |
| Net cash provided by operating activities | 21,092 | 9,568 |
| Cash Flows from Investing Activities: | | |
| Proceeds from principal repayments from available-for-sale securities | 22,559 | 19,439 |
| Proceeds from matured and called available-for-sale securities | 865 | 655 |
| Proceeds from sale of available-for-sale securities | - | 1,122 |
| Purchases of available-for-sale securities | (16,869) | (16,560) |
| Purchase of Federal Reserve Bank stock | - | (4) |
| Net decrease (increase) in loans | 1,458 | (2,629) |
| Proceeds from sale of other real estate | 196 | - |
| Proceeds from sale of other vehicles | 40 | 234 |
| Purchase of premises and equipment | (269) | (204) |
| Net cash provided by investing activities | 7,980 | 2,053 |
Continued on next page.
5
**PLUMAS BANCORP AND SUBSIDIARY**
### CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
_(Unaudited)
- ($ in thousands)
- (Continued)_
| Line item | For the Six Months Ended / June 30, 2026 | For the Six Months Ended / June 30, 2025 |
| --- | --- | --- |
| Cash Flows from Financing Activities: | | |
| Net increase (decrease) in demand, interest bearing and savings deposits | $43,885 | $(36,870) |
| Net increase in time deposits | 31,513 | 32,596 |
| Net decrease in securities sold under agreements to repurchase | (38,638) | (7,133) |
| Cash dividends paid on common stock | (4,608) | (3,549) |
| Decrease in other borrowings | (5,000) | - |
| Repurchase of common stock | (2,783) | - |
| Proceeds from exercise of stock options | 1,489 | 583 |
| Net cash provided by (used in) financing activities | 25,858 | (14,373) |
| Increase (decrease) in cash and cash equivalents | 54,930 | (2,752) |
| Cash and Cash Equivalents at Beginning of Period | 80,616 | 82,018 |
| Cash and Cash Equivalents at End of Period | $135,546 | $79,266 |
| Supplemental Disclosure of Cash Flow Information: | | |
| Cash paid during the period for: | | |
| Interest expense | $8,527 | $4,776 |
| Income taxes | $4,145 | $6,985 |
| Supplemental noncash disclosures | | |
| Real estate and vehicles acquired through foreclosure/repossession | $62 | $145 |
| Common stock retired in connection with the exercise of stock options | $91 | $86 |
| Lease liabilities arising from obtaining right-of-use assets | - | $244 |
See notes to unaudited condensed consolidated financial statements.
6
**PLUMAS BANCORP AND SUBSIDIARY**
### **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
**(Unaudited)**
***1.*** **THE BUSINESS OF PLUMAS BANCORP**
During *2002,* Plumas Bancorp (the "Company") was incorporated as a bank holding company for the purpose of acquiring Plumas Bank (the "Bank") in a *one* bank holding company reorganization. This corporate structure gives the Company and the Bank greater flexibility in terms of operation, expansion and diversification. Plumas Bancorp's Principal Executive Office is located in Reno, Nevada.
As of *June 30, 2026,* the Bank operates a total of nineteen branches, including seventeen branches in California and two branches in Nevada. The Bank's California branches are located in Alturas, Anderson, Chester, Chico, Fall River Mills, Greenville, Kings Beach, Portola, Quincy, Redding (3 branches), Red Bluff, Susanville, Tahoe City, Truckee and Yuba City. The Bank’s Nevada branches are located in Reno and Carson City. In addition, the Bank operates a lending office specializing in government-guaranteed lending in Auburn, California, and a commercial/agricultural lending office in Klamath Falls, Oregon. The Bank's primary source of revenue is generated from providing loans to customers who are predominately small and middle market businesses and individuals residing in the surrounding areas. The Bank’s administrative headquarters are in Quincy, California.
On *July 1, 2025,* the Company completed its acquisition of Cornerstone Community Bancorp ("Cornerstone"), which increased its branch network in California by four branches: one in Anderson, one in Red Bluff and two in Redding.
***2.*** **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the Company and the consolidated accounts of its wholly-owned subsidiary, Plumas Bank. All significant intercompany balances and transactions have been eliminated.
The accounting and reporting policies of Plumas Bancorp and subsidiary conform with accounting principles generally accepted in the United States of America (“GAAP”) and prevailing practices within the banking industry. In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position at *June 30, 2026* and the results of its operations and its cash flows for the *three* and *six*-month periods. Our condensed consolidated balance sheet at *December 31, 2025* is derived from audited financial statements.
The unaudited condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting on Form *10*-Q. Accordingly, certain disclosures normally presented in the notes to the annual consolidated financial statements prepared in accordance with GAAP have been omitted. The Company believes that the disclosures are adequate to make the information *not* misleading. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's *2025* Annual Report to Shareholders on Form *10*-K. The results of operations for the *three* and *six*-month periods ended *June 30, 2026*, *may* *not* necessarily be indicative of future operating results. In preparing such financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the periods reported. Actual results could differ significantly from those estimates.
Allowance for Credit Losses
During the *three* and *six* months ended *June 30, 2026,* the Company completed its annual review of the allowance for credit losses methodology and refined certain assumptions and model inputs used in estimating expected credit losses within its existing CECL framework. The refinements included updates to the reasonable and supportable forecast period, which was extended from *four* quarters to *eight* quarters, and certain model inputs. The Company continues to use a discounted cash flow methodology for collectively evaluated loans and continues to evaluate loans that do *not* share similar risk characteristics on an individual basis.
Reclassifications
Certain reclassifications have been made to prior years’ balances to conform to the classifications used in *2025.* These reclassifications had *no* impact on the Company’s consolidated financial position, results of operations or net change in cash and cash equivalents.
Segment Information
An operating segment is generally defined as a component of business for which discrete financial information is available and whose operating results are regularly reviewed by the chief operating decision maker. As a community-oriented financial institution, substantially all of the Company’s operations involve the delivery of loan and deposit products to customers.
The chief operating decision maker makes operating decisions and assesses performance based on an ongoing review of the Company’s community banking activities, which constitutes the Company’s only operating segment for financial reporting purposes. The Company’s single reportable segment is determined by the Chief Financial Officer, who is the designated chief operating decision maker, based upon information provided about the Company’s products and services offered, primarily banking operations. The segment is also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business such as branches and departments, which are then aggregated if operating performance, products/services, and customers are similar. The chief operating decision maker will evaluate the financial performance of the Company’s business components such as by evaluating revenue streams, significant expenses, and budget to actual results in assessing the Company’s segment and in the determination of allocating resources. The chief operating decision maker uses revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets. The chief operating decision maker uses consolidated net income to benchmark the Company against its competitors. The benchmarking analysis coupled with monitoring of budget to actual results are used in assessment performance and in establishing compensation. Loans, investments, and deposits provide the revenues in the banking operation. Interest expense, provisions for credit losses, and payroll provide the significant expenses in the banking operation. The consolidated expense information is the same as is reported on the income statement as consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets. All operations are domestic.
*7*
***3.* INVESTMENT SECURITIES AVAILABLE-FOR-SALE**
The amortized cost and estimated fair value of investment securities at *June 30, 2026* and *December 31, 2025* consisted of the following, in thousands:
| ($ in thousands) / Available-for-Sale | June 30, 2026 / Amortized / Cost | June 30, 2026 / Gross / Unrealized / Gains | June 30, 2026 / Gross / Unrealized / Losses | June 30, 2026 / Fair / Value |
| --- | --- | --- | --- | --- |
| Debt securities: | | | | |
| U.S. Government-sponsored agencies collateralized by mortgage obligations - residential | $$242,548 | $832 | $(8,415) | 234,965 |
| U.S. Government- sponsored agencies collateralized by mortgage obligations - commercial | 150,585 | 624 | (9,103) | 142,106 |
| Obligations of states and political subdivisions | 92,140 | 1,200 | (4,420) | 88,920 |
| | $$485,273 | $2,656 | $(21,938) | 465,991 |
Unrealized losses on available-for-sale investment securities totaling $19,282,000 were recorded, net of $5,700,000 in tax benefit, as accumulated other comprehensive loss within shareholders' equity at *June 30, 2026*. No investment securities were sold during the *six* months ended *June 30, 2026.* During the *six* months ended *June 30, 2025**,* the Company sold four available-for-sale investment securities for proceeds of $1,122,000, recognizing a $3,000 gain on sale. The Company realized a gain on sale from one of these securities totaling $5,000 and a loss on sale of 3 securities totaling $2,000.
| ($ in thousands) / Available-for-Sale | December 31, 2025 / Amortized / Cost | December 31, 2025 / Gross / Unrealized / Gains | December 31, 2025 / Gross / Unrealized / Losses | December 31, 2025 / Fair / Value |
| --- | --- | --- | --- | --- |
| Debt securities: | | | | |
| U.S. Government-sponsored agencies collateralized by mortgage obligations - residential | $257,520 | $2,709 | $(7,064) | $253,165 |
| U.S. Government- sponsored agencies collateralized by mortgage obligations - commercial | 141,861 | 1,245 | (8,342) | 134,764 |
| Obligations of states and political subdivisions | 92,109 | 1,038 | (4,481) | 88,666 |
| | $491,490 | $4,992 | $(19,887) | $476,595 |
Unrealized losses on available-for-sale investment securities totaling $14,895,000 were recorded, net of $4,404,000 in tax benefits, as accumulated other comprehensive loss within shareholders' equity at *December 31,* *2025.* During the *twelve* months ended *December 31, 2025,* the Company sold 135 available-for-sale investment securities for proceeds of $130,635,000 recognizing a $6,065,000 net loss on sale. The loss was partially offset by a gain of $254,000 on the termination of a fair value hedge. The Company realized a gain on sale from 15 of these securities totaling $36,000 and a loss on sale of 120 securities totaling $6,101,000.
There were *no* transfers of available-for-sale investment securities during the *six* months ended *June 30, 2026* and *December 31, 2025*. There were no securities classified as held-to-maturity at *June 30, 2026* or *December 31, 2025*.
Investment securities with unrealized losses at *June 30, 2026* and *December 31, 2025* are summarized and classified according to the duration of the loss period as follows:
| ($ in thousands) | Less than 12 Months | 12 Months or More | Total |
| --- | --- | --- | --- |
| | Unrealized | Unrealized | Unrealized |
| June 30, 2026 | Losses | Losses | Losses |
| Debt securities: | | | |
| U.S. Government-sponsored agencies collateralized by mortgage obligations - residential | $$1,055 | $$7,360 | $$8,415 |
| U.S. Government- sponsored agencies collateralized by mortgage obligations - commercial | 345 | 8,758 | 9,103 |
| Obligations of states and political subdivisions | 56 | 4,364 | 4,420 |
| | $$1,456 | $$20,482 | $$21,938 |
| ($ in thousands) | Less than 12 Months | 12 Months or More | Total |
| --- | --- | --- | --- |
| | Unrealized | Unrealized | Unrealized |
| December 31, 2025 | Losses | Losses | Losses |
| Debt securities: | | | |
| U.S. Government-sponsored agencies collateralized by mortgage obligations - residential | $$109 | $$6,955 | $$7,064 |
| U.S. Government- sponsored agencies collateralized by mortgage obligations - commercial | 35 | 8,307 | 8,342 |
| Obligations of states and political subdivisions | 7 | 4,474 | 4,481 |
| | $$151 | $$19,736 | $$19,887 |
At *June 30, 2026*, the Company held 298 securities of which 56 were in a loss position for less than *twelve* months and 105 were in a loss position for *twelve* months or more. Of the 298 securities, 92 are U.S. Government-sponsored agencies collateralized by residential mortgage obligations, 51 were U.S. Government agencies collateralized by commercial mortgage obligations and 155 were obligations of states and political subdivisions. As of *June 30, 2026* and *December 31, 2025*, the Company did *not* intend to sell, nor was it more‑likely‑than‑not required to sell, any available‑for‑sale debt securities in an unrealized loss position before recovery of their amortized cost basis. In addition, the Company expects to recover the entire amortized cost basis of these securities, as the unrealized losses are attributable primarily to changes in interest rates, and the issuers of these securities have *not,* to the Company’s knowledge, established any cause for default. Accordingly, there was *no* allowance for credit losses provided against these securities as of both *June 30, 2026* and *December 31, 2025*. In addition, there was *no* provision for credit losses recognized for the *six* months ended *June 30, 2026* and *2025.*
*8*
The amortized cost and estimated fair value of investment in debt securities at *June 30, 2026* by contractual maturity are shown below.
| ($ in thousands) | Amortized Cost | Estimated Fair Value |
| --- | --- | --- |
| Within one year | $$935 | 934 |
| After one year through five years | 8,086 | 8,145 |
| After five years through ten years | 15,287 | 15,370 |
| After ten years | 67,832 | 64,471 |
| Investment securities not due at a single maturity date: | | |
| U.S. Government-sponsored agencies collateralized by mortgage obligations - residential | 242,548 | 234,965 |
| U.S. Government- sponsored agencies collateralized by mortgage obligations - commercial | 150,585 | 142,106 |
| | $$485,273 | 465,991 |
Expected maturities will differ from contractual maturities as the issuers of the securities *may* have the right to call or prepay obligations with or without call or prepayment penalties.
Investment securities with amortized costs totaling $423,691,000 and $400,458,000 and estimated fair values totaling $407,083,000 and $388,357,000 at *June 30, 2026* and *December 31, 2025*, respectively, were pledged to secure deposits, repurchase agreements and Federal Reserve Bank Discount Window borrowings. No borrowings were outstanding on *June 30, 2026* and *December 31, 2025*, at the Discount Window.
***4.* LOANS AND THE ALLOWANCE FOR CREDIT LOSSES**
The following table presents the composition of the Company's loans outstanding:
| ($ in thousands) | June 30, 2026 | December 31, 2025 |
| --- | --- | --- |
| Commercial | $$162,128 | 167,851 |
| Agricultural | 142,940 | 157,526 |
| Real estate – residential | 32,223 | 33,116 |
| Real estate – commercial | 1,026,049 | 1,002,627 |
| Real estate – construction and land development | 48,672 | 40,168 |
| Equity lines of credit (Equity LOC) | 54,993 | 53,647 |
| Auto | 29,616 | 39,595 |
| Other | 15,552 | 17,526 |
| Total loans | 1,512,173 | 1,512,056 |
| Deferred loan costs, net | 3,757 | 3,737 |
| Loans, amortized cost basis | 1,515,930 | 1,515,793 |
| Allowance for credit losses | (19,740) | (19,959) |
| Total net loans | $$1,496,190 | 1,495,834 |
Salaries and employee benefits totaling $732,000 and $619,000 have been deferred as loan origination costs during the *three* months ended *June 30, 2026* and *2025,* respectively. Salaries and employee benefits totaling $1,600,000 and $1,222,000 have been deferred as loan origination costs during the *six* months ended *June 30, 2026* and *2025,* respectively.
The Company assigns a risk rating to all loans and periodically, but *not* less than annually, performs detailed reviews of all criticized and classified loans over *$100,000* to identify credit risks and to assess the overall collectability of the portfolio. These risk ratings are also subject to examination by independent specialists engaged by the Company and the Company’s regulators. During these internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the fair values of collateral securing these loans. These credit quality indicators are used to assign a risk rating to each individual loan.
The risk ratings can be grouped into *three* major categories, defined as follows:
***Special Mention*** – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses *may* result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
***Substandard*** – A substandard loan is *not* adequately protected by the current sound worth and paying capacity of the borrower or the value of the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Well defined weaknesses include a project's lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time or the project's failure to fulfill economic expectations. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are *not* corrected.
***Doubtful*** – Loans classified doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.
Loans *not* meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass-rated loans. Pass-rated loans have sufficient sources of repayment to repay the loan in full, in accordance with all terms and conditions.
For other loans, which are primarily consumer loans and automobile loans the Company evaluates credit quality based on the aging status of the loan and by payment activity. Non-performing loans consist of nonaccrual loans and loans past due *90* days or more and still accruing.
*9*
The following table presents the amortized cost basis of the loan portfolio allocated by management's internal risk ratings or payment activity at the dates indicated, in thousands:
| ($ in thousands) | Amortized Cost Basis by Origination Year and Risk Grades As of June 30, 2026 / 2026 | Amortized Cost Basis by Origination Year and Risk Grades As of June 30, 2026 / 2025 | Amortized Cost Basis by Origination Year and Risk Grades As of June 30, 2026 / 2024 | Amortized Cost Basis by Origination Year and Risk Grades As of June 30, 2026 / 2023 | Amortized Cost Basis by Origination Year and Risk Grades As of June 30, 2026 / 2022 | Amortized Cost Basis by Origination Year and Risk Grades As of June 30, 2026 / Prior | Revolving Loans Book Amortized Cost Basis | Revolving Loans Converted to Term Amortized Cost Basis | Total - Amortized Cost Basis |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Commercial | | | | | | | | | |
| Pass | $13,896 | $22,444 | $26,815 | $17,718 | $22,903 | $18,298 | $31,135 | - | $153,209 |
| Special Mention | 281 | 2,468 | - | 919 | - | 55 | 2,061 | - | 5,784 |
| Substandard | 676 | 534 | - | 215 | 53 | 1,544 | 947 | - | 3,969 |
| Total Commercial loans | $14,853 | $25,446 | $26,815 | $18,852 | $22,956 | $19,897 | $34,143 | - | $162,962 |
| Current period gross charge-offs | - | $1 | - | - | $100 | $2 | $99 | - | $202 |
| Agricultural | | | | | | | | | |
| Pass | $2,873 | $10,825 | $4,211 | $15,026 | $11,722 | $42,340 | $24,091 | - | $111,088 |
| Special Mention | - | 37 | - | 327 | 162 | 5,750 | 2,033 | - | 8,309 |
| Substandard | 235 | 737 | 225 | 4,246 | 10,531 | 6,643 | 1,183 | - | 23,800 |
| Total Agricultural | $3,108 | $11,599 | $4,436 | $19,599 | $22,415 | $54,733 | $27,307 | - | $143,197 |
| Current period gross charge-offs | - | - | $6 | - | - | - | - | - | $6 |
| Real Estate - Residential | | | | | | | | | |
| Pass | - | $2,250 | $3,723 | $1,999 | $9,177 | $14,136 | $1 | - | $31,286 |
| Special Mention | - | 592 | - | - | - | - | - | - | 592 |
| Substandard | - | - | - | - | - | 371 | - | - | 371 |
| Total Real Estate - Residential | - | $2,842 | $3,723 | $1,999 | $9,177 | $14,507 | $1 | - | $32,249 |
| Current period gross charge-offs | - | - | - | - | - | - | - | - | - |
| Real Estate -Commercial | | | | | | | | | |
| Pass | $62,586 | $131,284 | $111,099 | $115,070 | $155,461 | $410,232 | $9,681 | - | $995,413 |
| Special Mention | - | - | 367 | 4,053 | 2,142 | 12,308 | - | - | 18,870 |
| Substandard | - | 1,173 | - | 4,396 | 428 | 7,612 | - | - | 13,609 |
| Total Real Estate -Commercial | $62,586 | $132,457 | $111,466 | $123,519 | $158,031 | $430,152 | $9,681 | - | $1,027,892 |
| Current period gross charge-offs | - | - | - | - | - | - | - | - | - |
| Real Estate -Construction | | | | | | | | | |
| Pass | $13,186 | $12,226 | $10,947 | $5,863 | $3,461 | $2,383 | - | - | $48,066 |
| Substandard | - | - | - | - | - | 46 | - | - | 46 |
| Total Real Estate -Construction | $13,186 | $12,226 | $10,947 | $5,863 | $3,461 | $2,429 | - | - | $48,112 |
| Current period gross charge-offs | - | - | - | - | - | - | - | - | - |
| Equity LOC | | | | | | | | | |
| Pass | - | - | - | - | - | - | $53,198 | $1,672 | $54,870 |
| Special Mention | - | - | - | - | - | - | 85 | - | 85 |
| Substandard | - | - | - | - | - | - | 925 | 95 | 1,020 |
| Total Equity LOC | - | - | - | - | - | - | $54,208 | $1,767 | $55,975 |
| Current period gross charge-offs | - | - | - | - | - | - | $75 | - | $75 |
| Total | | | | | | | | | |
| Pass | $92,541 | $179,029 | $156,795 | $155,676 | $202,724 | $487,389 | $118,106 | $1,672 | $1,393,932 |
| Special Mention | 281 | 3,097 | 367 | 5,299 | 2,304 | 18,113 | 4,179 | - | 33,640 |
| Substandard | 911 | 2,444 | 225 | 8,857 | 11,012 | 16,216 | 3,055 | 95 | 42,815 |
| Total | $93,733 | $184,570 | $157,387 | $169,832 | $216,040 | $521,718 | $125,340 | $1,767 | $1,470,387 |
| Current period gross charge-offs | - | $1 | $6 | - | $100 | $2 | $174 | - | $283 |
| Auto | | | | | | | | | |
| Performing | - | - | - | $12,628 | $11,190 | $5,491 | - | - | $29,309 |
| Non-performing | - | - | - | 105 | 208 | 276 | - | - | 589 |
| Total Auto | - | - | - | $12,733 | $11,398 | $5,767 | - | - | $29,898.00 |
| Current period gross charge-offs | - | - | - | $105 | $112 | $136 | - | - | $353 |
| Other | | | | | | | | | |
| Performing | $2,312 | $4,450 | $4,950 | $1,532 | $1,800 | $80 | $466 | - | $15,590 |
| Non-performing | - | 2 | 24 | 20 | 5 | 4 | - | - | 55 |
| Total Other | $2,312 | $4,452 | $4,974 | $1,552 | $1,805 | $84 | $466 | - | $15,645.00 |
| Current period gross charge-offs | - | $12 | $5 | $6 | $4 | - | - | - | $27 |
| Total | | | | | | | | | |
| Performing | $2,312 | $4,450 | $4,950 | $14,160 | $12,990 | $5,571 | $466 | - | $44,899 |
| Non-performing | - | 2 | 24 | 125 | 213 | 280 | - | - | $644 |
| Total | $2,312 | $4,452 | $4,974 | $14,285 | $13,203 | $5,851 | $466 | - | $45,543 |
| Total Loans | $96,045 | $189,022 | $162,361 | $184,117 | $229,243 | $527,569 | $125,806 | $1,767 | $1,515,930 |
| Total gross charge-offs | - | $13 | $11 | $111 | $216 | $138 | $174 | - | $663 |
*10*
| ($ in thousands) | Term Loans / Amortized Cost Basis by Origination Year and Risk Grades As of December 31, 2025 / 2025 | Term Loans / Amortized Cost Basis by Origination Year and Risk Grades As of December 31, 2025 / 2024 | Term Loans / Amortized Cost Basis by Origination Year and Risk Grades As of December 31, 2025 / 2023 | Term Loans / Amortized Cost Basis by Origination Year and Risk Grades As of December 31, 2025 / 2022 | Term Loans / Amortized Cost Basis by Origination Year and Risk Grades As of December 31, 2025 / 2021 | Term Loans / Amortized Cost Basis by Origination Year and Risk Grades As of December 31, 2025 / Prior | Revolving Loans Book Amortized Cost Basis | Revolving Loans Converted to Term Amortized Cost Basis | Total - Amortized Cost Basis |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Commercial | | | | | | | | | |
| Pass | $23,877 | $30,424 | $22,262 | $25,867 | $11,871 | $13,150 | $39,108 | $- | $166,559 |
| Special Mention | - | - | - | - | 65 | - | 473 | - | 538 |
| Substandard | 2 | - | 225 | 85 | 754 | 339 | 194 | - | 1,599 |
| Total Commercial loans | $23,879 | $30,424 | $22,487 | $25,952 | $12,690 | $13,489 | $39,775 | $- | $168,696 |
| Current period gross charge-offs | - | $114 | - | $51 | - | $- | $190 | $- | $355 |
| Agricultural | | | | | | | | | |
| Pass | $9,045 | $6,893 | $15,988 | $11,829 | $13,875 | $35,349 | $32,117 | $- | $125,096 |
| Special Mention | 285 | - | 419 | 1,036 | 806 | 4,867 | 3,365 | - | 10,778 |
| Substandard | 1,165 | 231 | 4,246 | 11,236 | 2,978 | 1,323 | 715 | - | 21,894 |
| Total Agricultural | $10,495 | $7,124 | $20,653 | $24,101 | $17,659 | $41,539 | $36,197 | $- | $157,768 |
| Current period gross charge-offs | - | - | $11 | - | - | $- | $- | $- | $11 |
| Real Estate - Residential | | | | | | | | | |
| Pass | $2,634 | $4,189 | $1,810 | $9,315 | $5,825 | $8,980 | $11 | $- | $32,764 |
| Special Mention | - | - | - | - | - | $149 | | | 149 |
| Substandard | - | - | - | - | - | 229 | - | - | 229 |
| Total Real Estate - Residential | $2,634 | $4,189 | $1,810 | $9,315 | $5,825 | $9,358 | $11 | - | $33,142 |
| Current period gross charge-offs | - | - | - | - | - | $- | $- | $- | - |
| Real Estate -Commercial | | | | | | | | | |
| Pass | $126,156 | $116,542 | $128,720 | $166,246 | $136,927 | $309,406 | $6,368 | $- | $990,365 |
| Special Mention | 1,183 | - | - | 238 | 941 | 1,756 | - | - | 4,118 |
| Substandard | - | - | - | 368 | 409 | 8,684 | - | - | 9,461 |
| Total Real Estate -Commercial | $127,339 | $116,542 | $128,720 | $166,852 | $138,277 | $319,846 | $6,368 | $- | $1,003,944 |
| Current period gross charge-offs | - | - | - | - | - | $- | $- | $- | - |
| Real Estate -Construction | | | | | | | | | |
| Pass | $9,175 | $12,674 | $6,240 | $3,516 | $1,627 | $1,069 | $1,325 | $- | $35,626 |
| Special Mention | - | - | 4,396 | - | - | - | - | - | 4,396 |
| Total Real Estate -Construction | $9,175 | $12,674 | $10,636 | $3,516 | $1,627 | $1,069 | $1,325 | $- | $40,022 |
| Current period gross charge-offs | - | - | - | - | - | $- | $- | $- | - |
| Equity LOC | | | | | | | | | |
| Pass | - | - | - | - | - | | $51,149 | $2,365 | $53,514 |
| Special Mention | - | - | - | - | - | $- | $- | $93 | 93 |
| Substandard | - | - | - | - | - | | 887 | 100 | 987 |
| Total Equity LOC | - | - | - | - | - | $- | $52,036 | $2,558 | $54,594 |
| Current period gross charge-offs | - | - | - | - | - | $- | $66 | $- | $66 |
| Total | | | | | | | | | |
| Pass | $170,887 | $170,722 | $175,020 | $216,773 | $170,125 | $367,954 | $130,078 | $2,365 | $1,403,924 |
| Special Mention | 1,468 | - | 4,815 | 1,274 | 1,812 | 6,772 | 3,838 | 93 | 20,072 |
| Substandard | 1,167 | 231 | 4,471 | 11,689 | 4,141 | 10,575 | 1,796 | 100 | 34,170 |
| Total | $173,522 | $170,953 | $184,306 | $229,736 | $176,078 | $385,301 | $135,712 | $2,558 | $1,458,166 |
| Current period gross charge-offs | - | $114 | $11 | $51 | - | $- | $256 | $- | $432 |
| Auto | | | | | | | | | |
| Performing | - | - | $15,923 | $14,577 | $5,613 | $3,161 | $- | $- | $39,274 |
| Non-performing | - | - | 191 | 159 | 233 | 163 | - | - | 746 |
| Total Auto | - | - | $16,114 | $14,736 | $5,846 | $3,324 | $- | $- | $40,020 |
| Current period gross charge-offs | - | - | $107 | $219 | $41 | $161 | $- | $- | $528 |
| Other | | | | | | | | | |
| Performing | $5,854 | $6,203 | $1,981 | $2,962 | $122 | $24 | $440 | $- | $17,586 |
| Non-performing | - | 21 | - | - | - | - | - | - | 21 |
| Total Other | $5,854 | $6,224 | $1,981 | $2,962 | $122 | $24 | $440 | $- | $17,607 |
| Current period gross charge-offs | - | $39 | $46 | $41 | $2 | $7 | $- | $- | $135 |
| Total | | | | | | | | | |
| Performing | $5,854 | $6,203 | $17,904 | $17,539 | $5,735 | $3,185 | $440 | $- | $56,860 |
| Non-performing | - | 21 | 191 | 159 | 233 | 163 | - | - | 767 |
| Total | $5,854 | $6,224 | $18,095 | $17,698 | $5,968 | $3,348 | $440 | $- | $57,627 |
| Total Loans | $179,376 | $177,177 | $202,401 | $247,434 | $182,046 | $388,649 | $136,152 | $2,558 | $1,515,793 |
| Total gross charge-offs | - | $153 | $164 | $311 | $43 | $168 | $256 | $- | $1,095 |
*11*
The following table shows the ending balance of nonperforming loans by loan category as of the date indicated:
| ($ in thousands) | Non-Performing Loans / June 30, 2026 / Nonaccrual with no allowance for credit losses | Non-Performing Loans / June 30, 2026 / Total nonaccrual | Non-Performing Loans / June 30, 2026 / Past due 90 days or more and still accruing | Non-Performing Loans / December 31, 2025 / Nonaccrual with no allowance for credit losses | Non-Performing Loans / December 31, 2025 / Total nonaccrual | Non-Performing Loans / December 31, 2025 / Past due 90 days or more and still accruing |
| --- | --- | --- | --- | --- | --- | --- |
| Commercial | $965 | $1,255 | - | $458 | $611 | - |
| Agricultural | 9,194 | 12,001 | - | 7,157 | 10,509 | - |
| Real estate – residential | 210 | 210 | - | 215 | 215 | - |
| Real estate – commercial | 6,694 | 6,694 | - | 2,000 | 2,000 | - |
| Real estate – construction & land development | 46 | 46 | 1,623 | - | - | - |
| Equity lines of credit | 1,020 | 1,020 | - | 988 | 988 | - |
| Auto | 588 | 588 | - | 745 | 745 | - |
| Other | 36 | 36 | - | 21 | 21 | - |
| Total Gross Loans | $18,753 | $21,850 | $1,623 | $11,584 | $15,089 | - |
The Company places loans *90* days or more past due on nonaccrual status unless the loan is well-collateralized and in the process of collection. A loan is considered to be in the process of collection if, based on a probable specific event, it is expected that the loan will be repaid or brought current. Generally, this collection period would *not* exceed *90* days. When a loan is placed on nonaccrual status the Company's general policy is to reverse and charge against current income previously accrued but unpaid interest. Interest income on such loans is subsequently recognized only to the extent that cash is received, and future collection of principal is deemed by management to be probable. Where the collectability of the principal or interest on a loan is considered to be doubtful by management, it is placed on nonaccrual status prior to becoming *90* days delinquent.
No income was recognized on nonaccrual loans accounted on a cash basis during the *three* and *six* months ended *June 30, 2026* and *2025*. The following tables show interest reversed against interest income for loans placed on nonaccrual status during the *three* and *six* months ended *June 30, 2026* and *2025*.
| Three months ended: / (in thousands) | June 30, 2026 | June 30, 2025 |
| --- | --- | --- |
| Commercial | $47 | $6 |
| Agricultural | 156 | 339 |
| Real estate – residential | - | 1 |
| Real estate – commercial | 162 | 4 |
| Equity lines of credit | 7 | 10 |
| Auto | 2 | 4 |
| Other | 1 | - |
| Total | $375 | $364 |
| Six months ended: / (in thousands) | June 30, 2026 | June 30, 2025 |
| --- | --- | --- |
| Commercial | $49 | $10 |
| Agricultural | 156 | 340 |
| Real estate – residential | - | 1 |
| Real estate – commercial | 162 | 4 |
| Equity lines of credit | 13 | 15 |
| Auto | 5 | 7 |
| Other | 2 | 1 |
| Total | $387 | $378 |
The following table presents the amortized cost basis of loans at *June 30, 2026*, that were both experiencing financial difficulty and modified during the *three* and *six* months ended *June 30, 2026*, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.
| ($ in thousands) | Term Extension / Amortized Cost Basis | Term Extension / Total Class of Financing Receivable |
| --- | --- | --- |
| Commercial | $1,682 | 1.03% |
| Agricultural | 350 | 0.21% |
| Real estate – commercial | 538 | 0.33% |
| Total | $2,570 | 0.17% |
*12*
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty as of *June 30, 2026*:
| Line item | Weighted-Average Term Extension (in months) |
| --- | --- |
| Commercial | 5.1 |
| Agricultural | 3.0 |
| Real estate – commercial | 84.0 |
| Total | 21.3 |
The following table presents the amortized cost basis of loans at *June 30, 2025,* that were both experiencing financial difficulty and modified during the *three* and *six* months ended *June 30, 2025,* by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below. There were *no* loans modified during the *three* months ended *June 30, 2025,* to borrowers experiencing financial difficulty.
| ($ in thousands) | Term Extension / Amortized Cost Basis | Term Extension / Total Class of Financing Receivable |
| --- | --- | --- |
| Agricultural | 7,186 | 6.30% |
| Real estate – commercial | 772 | 0.11% |
| Total | $7,958 | 0.78% |
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty as of *June 30, 2025*:
| Line item | Weighted-Average Term Extension (in months) |
| --- | --- |
| Agricultural | 5.3 |
| Real estate – commercial | 3.0 |
| Total | 5.1 |
A modified loan *may* become delinquent and *may* result in a payment default (generally *90* days past due) subsequent to modification. The Company also monitors the performance of loans modified for borrowers experiencing financial difficulty to assess the effectiveness of its modification efforts. Loans with payment defaults by borrowers experiencing financial difficulty during the *six* months ended *June 30, 2026*, which had material modifications in rate, term or principal forgiveness during the *twelve* months prior to default consisted of one commercial real estate loan totaling $71 thousand. All other loans modified for borrowers experiencing financial difficulty within the previous *twelve* months were performing in accordance with their modified terms. Loans with payment defaults by borrowers experiencing financial difficulty during the *six* months ended *June 30, 2025,* which had material modifications in rate, term or principal forgiveness during the *twelve* months prior to default consisted of $7.0 million in agricultural loans.
*13*
The following tables show the allocation of the allowance for credit losses at the dates indicated, in thousands:
| Six Months Ended June 30, 2026: | Commercial | Agricultural | Real Estate-Residential | Real Estate-Commercial | Real Estate-Construction | Equity LOC | Auto | Other | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Allowance for credit losses | | | | | | | | | |
| Beginning balance | $3,246 | $3,973 | $258 | $10,605 | $514 | $502 | $591 | $270 | $19,959 |
| Charge-offs | (202) | (6) | - | - | - | (75) | (353) | (27) | (663) |
| Recoveries | 52 | - | - | - | - | - | 177 | 15 | 244 |
| Provision for (recovery of) credit losses | 21 | 558 | (42) | (204) | (154) | 48 | 19 | (46) | 200 |
| Ending balance | $3,117 | $4,525 | $216 | $10,401 | $360 | $475 | $434 | $212 | $19,740 |
| Three Months Ended June 30, 2026: | | | | | | | | | |
| Allowance for credit losses | | | | | | | | | |
| Beginning balance | $3,154 | $4,068 | $237 | $10,298 | $358 | $489 | $491 | $226 | $19,321 |
| Charge-offs | (102) | - | - | - | - | (75) | (124) | (20) | (321) |
| Recoveries | 39 | - | - | - | - | - | 97 | 4 | 140 |
| Provision for (recovery of) credit losses | 26 | 457 | (21) | 103 | 2 | 61 | (30) | 2 | 600 |
| Ending balance | $3,117 | $4,525 | $216 | $10,401 | $360 | $475 | $434 | $212 | $19,740 |
| Six Months Ended June 30, 2025: | | | | | | | | | |
| Allowance for credit losses | | | | | | | | | |
| Beginning balance | $1,265 | $1,802 | $102 | $7,459 | $815 | $460 | $1,215 | $78 | $13,196 |
| Charge-offs | (165) | (11) | - | - | - | - | (251) | (79) | (506) |
| Recoveries | 10 | - | 2 | - | - | - | 349 | 8 | 369 |
| Provision for (recovery of) credit losses | 287 | 866 | 6 | 283 | (121) | 102 | (358) | 85 | 1,150 |
| Ending balance | $1,397 | $2,657 | $110 | $7,742 | $694 | $562 | $955 | $92 | $14,209 |
| Three Months Ended June 30, 2025: | | | | | | | | | |
| Allowance for credit losses | | | | | | | | | |
| Beginning balance | $1,286 | $1,765 | $111 | $7,635 | $792 | $553 | $1,083 | $94 | $13,319 |
| Charge-offs | - | (11) | - | - | - | - | (131) | (52) | (194) |
| Recoveries | 6 | - | 1 | - | - | - | 172 | 5 | 184 |
| Provision for (recovery of) credit losses | 105 | 903 | (2) | 107 | (98) | 9 | (169) | 45 | 900 |
| Ending balance | $1,397 | $2,657 | $110 | $7,742 | $694 | $562 | $955 | $92 | $14,209 |
The following tables summarize the activity in the reserve for unfunded commitments, which is recorded on the balance sheet within other liabilities, for the *three* and *six* months ended *June 30, 2026* and *2025*.
| Three months ended: / (in thousands) | June 30, 2026 | June 30, 2025 |
| --- | --- | --- |
| Beginning balance | $651 | $620 |
| Provision for credit losses | (1) | (40) |
| Ending balance | $650 | $580 |
| Six months ended: / (in thousands) | June 30, 2026 | June 30, 2025 |
| --- | --- | --- |
| Beginning balance | $580 | $620 |
| Provision for credit losses | 70 | (40) |
| Ending balance | $650 | $580 |
*14*
The following tables show an aging analysis of the loan portfolio by the time past due:
| Line item | | | | | | | | Total | Total | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ($ in thousands) | | | | | 90 Days | | | Past Due | | | |
| | 30-59 Days | | 60-89 Days | | and Still | | | and | | | |
| June 30, 2026 | Past Due | | Past Due | | Accruing | | Nonaccrual | Nonaccrual | | Current | Total |
| Commercial | $ | $363 | $ | - | $ | - | 1,255 | $ | $$1,618 | $161,344 | 162,962 |
| Agricultural | | 100 | | - | | - | 12,001 | | 12,101 | 131,096 | 143,197 |
| Real estate – residential | | - | | 14 | | - | 210 | | 224 | 32,025 | 32,249 |
| Real estate – commercial | | 373 | | - | | - | 6,694 | | 7,067 | 1,020,825 | 1,027,892 |
| Real estate - construction & land | | - | | - | | 1,623 | 46 | | 1,669 | 46,443 | 48,112 |
| Equity Lines of Credit | | 413 | | 295 | | - | 1,020 | | 1,728 | 54,247 | 55,975 |
| Auto | | 708 | | 190 | | - | 588 | | 1,486 | 28,412 | 29,898 |
| Other | | 164 | | 5 | | - | 36 | | 205 | 15,440 | 15,645 |
| Total | $ | $2,121 | $ | $504 | $ | $$1,623 | 21,850 | $ | $$26,098 | $1,489,832 | 1,515,930 |
| Line item | | | | | | | | Total | Total | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ($ in thousands) | | | | | 90 Days | | | Past Due | | | |
| | 30-59 Days | | 60-89 Days | | and Still | | | and | | | |
| December 31, 2025 | Past Due | | Past Due | | Accruing | | Nonaccrual | Nonaccrual | | Current | Total |
| Commercial | $ | $2,809 | $ | $572 | $ | - | 611 | $ | $$3,992 | $164,704 | 168,696 |
| Agricultural | | 395 | | - | | - | 10,509 | | 10,904 | 146,864 | 157,768 |
| Real estate – residential | | 15 | | - | | - | 215 | | 230 | 32,912 | 33,142 |
| Real estate - commercial | | 1,160 | | - | | - | 2,000 | | 3,160 | 1,000,784 | 1,003,944 |
| Real estate - construction & land | | 1,466 | | - | | - | - | | 1,466 | 38,556 | 40,022 |
| Equity Lines of Credit | | 835 | | 191 | | - | 988 | | 2,014 | 52,580 | 54,594 |
| Auto | | 943 | | 159 | | - | 745 | | 1,847 | 38,173 | 40,020 |
| Other | | 45 | | 1 | | - | 21 | | 67 | 17,540 | 17,607 |
| Total | $ | $7,668 | $ | $923 | $ | - | 15,089 | $ | $$23,680 | $1,492,113 | 1,515,793 |
*15*
The following tables present the amortized cost basis of collateral dependent loans by class of loans at *June 30, 2026*:
| ($ in thousands) | Equipment | Crops | Livestock | Farmland | Commercial -1st / Deed | SFR-1st / Deed | SFR-2nd / Deed | Other | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Commercial | $90 | - | - | - | - | $151 | $146 | $593 | $980 |
| Agricultural | 109 | 4,471 | 225 | 2,583 | 2,241 | 2,268 | - | - | 11,897 |
| Real estate – residential | - | - | - | - | - | 145 | - | - | 145 |
| Real estate – commercial | - | - | - | - | 5,347 | 935 | 76 | 30 | 6,388 |
| Equity Lines of Credit | - | - | - | - | - | 263 | 288 | - | 551 |
| Total | $199 | $4,471 | $225 | $2,583 | $7,588 | $3,762 | $510 | $623 | $19,961 |
The following tables present the amortized cost basis of collateral dependent loans by class of loans at *December 31, 2025*:
| ($ in thousands) | Equipment | Crops | Livestock | Farmland | Commercial -1st / Deed | SFR-1st / Deed | SFR-2nd / Deed | SFR-3rd / Deed | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Commercial | $111 | - | - | - | - | $161 | - | - | $272 |
| Agricultural | - | 4,873 | 225 | 2,749 | 2,241 | 311 | - | - | 10,399 |
| Real estate – residential | - | - | - | - | - | 145 | - | - | 145 |
| Real estate – commercial | - | - | - | - | 1,399 | 245 | 112 | 37 | 1,793 |
| Equity Lines of Credit | - | - | - | - | - | | 398 | - | 398 |
| Total | $111 | $4,873 | $225 | $2,749 | $3,640 | $862 | $510 | $37 | $13,007 |
Other Real Estate Owned
Other real estate owned relates to real estate acquired in full or partial settlement of loan obligations. Other real estate owned totaled $135,000 at *June 30, 2026* and consisted of one single family residential real estate (SFR) property, compared to $226,000 at *December 31, 2025*, which consisted of two SFR properties. During the *three* and *six* months ended *June 30, 2026,* the Company sold *one* property, recognizing a gain of $104,000.
There was one agricultural loan with a balance of $2,000,000 secured by equipment, farmland and a small residential real estate property for which formal foreclosure proceedings were in process at *June 30, 2026*. There was one agricultural loan with a balance of $2,000,000 secured by equipment, farmland and a small residential real estate property for which formal foreclosure proceedings were in process at *December 31, 2025.*
***5.* COMMITMENTS AND CONTINGENCIES**
The Company is party to claims and legal proceedings arising in the ordinary course of business. In the opinion of the Company’s management, the amount of ultimate liability with respect to such proceedings will *not* have a material adverse effect on the financial condition or result of operations of the Company taken as a whole. In the normal course of business, there are various outstanding commitments to extend credit, which are *not* reflected in the financial statements, including loan commitments of $254 million and $247 million at *June 30, 2026* and *December 31, 2025*, respectively
Of the loan commitments outstanding at *June 30, 2026*, $38 million are real estate construction loan commitments that are expected to fund within the next *twelve* months. The remaining commitments primarily relate to revolving lines of credit or other commercial loans, and many of these are expected to expire without being drawn upon. Therefore, the total commitments do *not* necessarily represent future cash requirements. Each loan commitment and the amount and type of collateral obtained, if any, are evaluated on an individual basis. Collateral held varies, but *may* include real property, bank deposits, debt or equity securities or business assets. The reserve for unfunded commitments at *June 30, 2026* and *December 31, 2025* totaled $650 thousand and $580 thousand, respectively.
Stand-by letters of credit are conditional commitments written to guarantee the performance of a customer to a *third* party. These guarantees are primarily related to the purchases of inventory by commercial customers and are typically short-term in nature. Credit risk is similar to that involved in extending loan commitments to customers and accordingly, evaluation and collateral requirements similar to those for loan commitments are used. Stand-by letters of credit totaled $7.5 million and $1.6 million on *June 30, 2026* and *December 31, 2025*, respectively.
*16*
***6.* EARNINGS PER SHARE**
Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, result in the issuance of common stock which shares in the earnings of the Company. The treasury stock method has been applied to determine the dilutive effect of stock options in computing diluted earnings per share.
| ($ in thousands, except per share data) | For the Three Months Ended / June 30, 2026 | For the Three Months Ended / June 30, 2025 | For the Six Months Ended / June 30, 2026 | For the Six Months Ended / June 30, 2025 |
| --- | --- | --- | --- | --- |
| Net Income: | | | | |
| Net income | $9,959 | $6,321 | $19,722 | $13,501 |
| Earnings Per Share: | | | | |
| Basic earnings per share | $1.43 | $1.07 | $2.83 | $2.28 |
| Diluted earnings per share | $1.41 | $1.05 | $2.79 | $2.25 |
| Weighted Average Number of Shares Outstanding: | | | | |
| Basic shares | 6,966 | 5,929 | 6,975 | 5,920 |
| Effect of dilutive stock options and restricted stock | 92 | 77 | 94 | 86 |
| Diluted shares | 7,058 | 6,006 | 7,069 | 6,006 |
Stock options and RSUs having an antidilutive effect during the *three* and *six* months ended *June 30, 2026* totaled 4,120 and 15,083, respectively. There were no stock options or RSUs having an antidilutive effect during the *three* and *six* months ended *June 30, 2025*.
***7.* STOCK-BASED COMPENSATION**
In *May 2022,* the Company’s shareholders approved the *2022* Equity Incentive Plan (the *“2022* Plan”), which provides for the grant of up to 576,550 shares of common stock, including 126,550 shares that remained available for grant under the *2013* Stock Option Plan when the *2022* Plan was adopted. The *2022* Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. The frequency, amount and terms of stock-based awards *may* be determined by the Board of Directors or its compensation committee, consistent with the terms and purposes of the *2022* plan.
In *May 2013,* the Company established the *2013* Stock Option Plan (the *"2013* Plan") for which 35,292 shares of common stock are reserved. With the establishment of the Company’s *2022* Equity Incentive Plan *no* further options *may* be issued under the *2013* Plan, though options previously granted continue to be outstanding and governed by the *2013* Stock Option Plan.
Options granted during the *six* months ended *June 30, 2026* consisted of 80,500 options granted under the *2022* Plan. No stock options were granted during the *six* months ended *June 30, 2025*. The fair value of each option granted in *2026* was estimated on the date of grant using the following assumptions.
| Line item | 2026 |
| --- | --- |
| Weighted-average expected life of stock options (in years) | 6.0 |
| Weighted-average risk free interest rate | 3.98% |
| Weighted-average annualized volatility | 35.8% |
| Weighted-average dividend yields | 2.60% |
| Weighted-average fair value of options granted during the six months ended June 30, 2026 | $16.03 |
A summary of the activity within the *2013* Plan follows:
| Line item | Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term in Years | Intrinsic Value |
| --- | --- | --- | --- | --- |
| Options outstanding at January 1, 2025 | 131,847 | $22.58 | | |
| Options exercised | (45,505) | 22.64 | | |
| Options cancelled | (3,200) | 22.19 | | |
| Options outstanding at December 31, 2025 | 83,142 | $22.56 | | |
| Options cancelled | (2,400) | $24.40 | | |
| Options exercised | (47,450) | 23.24 | | |
| Options outstanding at June 30, 2026 | 33,292 | $21.45 | 1.3 | $1,231,471 |
| Options exercisable at June 30, 2026 | 33,292 | $21.45 | 1.3 | $1,231,471 |
*17*
A summary of options activity within the *2022* Plan follows:
| Line item | Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term in Years | Intrinsic Value |
| --- | --- | --- | --- | --- |
| Options outstanding at January 1, 2025 | 210,200 | $32.55 | | |
| Options granted | 30,803 | 31.09 | | |
| Options cancelled | (21,980) | 32.41 | | |
| Options exercised | (5,100) | 31.36 | | |
| Options outstanding at December 31, 2025 | 213,923 | $32.38 | | |
| Options granted | 80,500 | 50.30 | | |
| Options cancelled | (2,920) | 39.63 | | |
| Options exercised | (15,097) | 31.63 | | |
| Options outstanding at June 30, 2026 | 276,406 | $37.56 | 7.4 | $5,770,219 |
| Options exercisable at June 30, 2026 | 109,346 | $32.00 | 6.5 | $2,891,012 |
| Options expected to vest after June 30, 2026 | 167,780 | $41.17 | 8.1 | $2,572,607 |
As of *June 30, 2026*, there was $1.8 million in total unrecognized compensation cost related to non-vested stock options under the *2022* plan. That cost is expected to be recognized over a weighted average period of 2.4 years. There were no unrecognized costs remaining under the *2013* plan as of *June 30, 2026*.
Information related to the stock options plans during the *three* months ended *June 30, 2026* and *2025*
| Fair value of options vested | 2026 / - | 2025 / - |
| --- | --- | --- |
| Intrinsic value of options exercised | $101,000 | $243,000 |
| Cash received from option exercises | $101,000 | $254,000 |
| Tax benefit from option exercises | $- | $2,000 |
| Compensation cost | $150,000 | $96,000 |
| Tax benefit associated with compensation cost | $8,000 | $5,000 |
Information related to the stock options plans during the *six* months ended *June 30, 2026* and *2025*
| Line item | 2026 | 2025 |
| --- | --- | --- |
| Fair value of options vested | $173,000 | $193,000 |
| Intrinsic value of options exercised | $1,525,000 | $614,000 |
| Cash received from option exercises | $1,489,000 | $583,000 |
| Tax benefit from option exercises | $220,000 | $19,000 |
| Compensation cost | $251,000 | $163,000 |
| Tax benefit associated with compensation cost | $14,000 | $9,000 |
During the *six* months ended *June 30, 2026*, the Company granted 35,400 restricted stock units with a weighted-average fair value of $47.07 per share and a weighted-average vesting period of 3 years. Compensation costs related to these units during the *three* months ended *June 30, 2026* and *2025*, were $57,000 and $0 respectively. Compensation costs related to these units during the *six* months ended *June 30, 2026* and *2025*, were $76,000 and $14,000 respectively.
***8.* INCOME TAXES**
The Company files its income taxes on a consolidated basis with its subsidiary. Income tax expense is the total of current year income tax due or refundable and the change in deferred tax assets and liabilities.
Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the reported amount of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. A valuation allowance is recognized if, based on the weight of available evidence, management believes it is more likely than *not* that some portion or all of the deferred tax assets will *not* be realized. On the consolidated balance sheet, net deferred tax assets are included in accrued interest receivable and other assets.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than *not* that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are *not* offset or aggregated with other positions. Tax positions that meet the more-likely-than-*not* recognition threshold are measured as the largest amount of tax benefit that is more than *50* percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
Interest expense and penalties associated with unrecognized tax benefits, if any, are classified as income tax expense in the consolidated statements of income. There have been *no* significant changes to unrecognized tax benefits or accrued interest and penalties for the *six* months ended *June 30, 2026* and *2025*.
*18*
***9.* FAIR VALUE MEASUREMENT**
FASB ASC *820,* “Fair Value Measurement and Disclosures,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC *820* also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes *three* levels of inputs that *may* be used to measure fair value:
The Company measures fair value under the fair value hierarchy described below.
Level *1:* Quoted prices for identical instruments traded in active exchange markets.
Level *2:* Quoted prices (unadjusted) for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are *not* active and model-based valuation techniques for which all significant assumptions are observable or can be corroborated by observable market data.
Level *3:* Model based techniques that use *one* significant assumption *not* observable in the market. These unobservable assumptions reflect the Company’s estimates of assumptions that market participants would use on pricing the asset or liability. Valuation techniques include management judgment and estimation which *may* be significant.
In certain cases, the inputs used to measure fair value *may* fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Management monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques *may* require the transfer of financial instruments from *one* fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period.
Management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities or total earnings.
Fair Value of Financial Instruments
FASB ASC *825,* Financial Instruments, requires disclosure about fair value of financial instruments, including those financial assets and financial liabilities that are *not* required to be measured and reported at fair value on a recurring or nonrecurring basis. ASC *825* excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented *may* *not* necessarily represent the underlying fair value of the Company. The carrying amounts and estimated fair values of the Company’s financial instruments are presented in the following tables whether or *not* recognized on the Consolidated Balance Sheets at fair value.
The carrying amounts and estimated fair values of financial instruments, at *June 30, 2026* follows:
| ($ in thousands) / Financial assets: | Carrying Value | Fair Value Measurements at June 30, 2026, Using: / Level 1 | Fair Value Measurements at June 30, 2026, Using: / Level 2 | Fair Value Measurements at June 30, 2026, Using: / Level 3 | Total Fair Value |
| --- | --- | --- | --- | --- | --- |
| Loans, net | $$1,496,190 | - | - | $1,446,845 | 1,446,845 |
| Financial liabilities: | | | | | |
| Time deposits | 242,305 | - | 237,037 | - | 237,037 |
| Repurchase agreements | 59,217 | - | 59,217 | - | 59,217 |
| Borrowings | 16,033 | - | 15,788 | - | 15,788 |
The carrying amounts and estimated fair values of financial instruments, at *December 31, 2025* follows:
| ($ in thousands) / Financial assets: | Carrying Value | Fair Value Measurements at December 31, 2025, Using: / Level 1 | Fair Value Measurements at December 31, 2025, Using: / Level 2 | Fair Value Measurements at December 31, 2025, Using: / Level 3 | Total Fair Value |
| --- | --- | --- | --- | --- | --- |
| Loans, net | $1,495,834 | - | - | $1,494,830 | $1,494,830 |
| Financial liabilities: | | | | | |
| Time deposits | 210,729 | - | 209,147 | - | 209,147 |
| Repurchase agreements | 97,855 | - | 97,855 | - | 97,855 |
| Borrowings | 21,013 | - | 20,599 | - | 20,599 |
*19*
The methods and assumptions used to estimate the fair value of each class of financial instruments *not* measured at fair value are as follows:
Loans - Loans are generally valued by discounting expected cash flows using market inputs with adjustments based on cohort level assumptions for certain loan types as well as internally developed estimates at a business segment level. Due to the significance of the unobservable market inputs and assumptions, as well as the absence of a liquid secondary market for most loans, these loans are classified as Level *3.* Nonaccrual loans are written down and reported at their estimated recovery value which approximates their fair value and classified as Level *3.*
Time Deposits - The fair value of time deposits was estimated based on a discounted cash flow technique using Level *2* inputs appropriate to the contractual maturity.
Repurchase agreements - The fair value of the repurchase agreement is based on Level *2* inputs. The primary inputs used in the valuation include the market interest rate and the credit quality of the underlying securities.
Borrowings - The cash flows were calculated using the contractual features of the borrowing and then discounted using observable market rates.
Because *no* market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments and other factors. Those estimates that are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision are included in Level *3.* Changes in assumptions could significantly affect the fair values presented.
These estimates do *not* reflect any premium or discount that could result from offering the Company's entire holdings of a particular financial instrument for sale at *one* time, nor do they attempt to estimate the value of anticipated future business related to the instruments. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have *not* been considered in any of these estimates.
The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of *June 30, 2026* and *December 31, 2025*, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:
Assets and liabilities measured at fair value on a recurring basis at *June 30, 2026* are summarized below, in thousands:
_June 30, 2026 Using_
| Total Fair Value | Fair Value Measurements at / Quoted / Prices in / Active / Markets for / Identical / Assets / (Level 1) | Fair Value Measurements at / Significant / Other / Observable / Inputs / (Level 2) | Fair Value Measurements at / Significant / Unobservable / Inputs / (Level 3) |
| --- | --- | --- | --- |
| $234,965 | - | $234,965 | - |
| 142,106 | - | 142,106 | - |
| 88,920 | - | 88,920 | - |
| $465,991 | - | $465,991 | - |
Assets and liabilities measured at fair value on a recurring basis at *December 31, 2025* are summarized below:
| Total Fair Value | Fair Value Measurements at / December 31, 2025 Using / Quoted / Prices in / Active / Markets for / Identical / Assets / (Level 1) | Fair Value Measurements at / December 31, 2025 Using / Significant / Other / Observable / Inputs / (Level 2) | Fair Value Measurements at / December 31, 2025 Using / Significant / Unobservable / Inputs / (Level 3) |
| --- | --- | --- | --- |
| $253,165 | - | $253,165 | - |
| 134,764 | - | 134,764 | - |
| 88,666 | - | 88,666 | - |
| $476,595 | - | $476,595 | - |
*20*
The fair value of securities available-for-sale equals quoted market price, if available. If quoted market prices are *not* available, fair value is determined using quoted market prices for similar securities or matrix pricing. There were *no* changes in the valuation techniques used during *2026* or *2025*. Transfers between hierarchy measurement levels are recognized by the Company as of the beginning of the reporting period. Changes in fair market value are recorded in other comprehensive income.
Assets and liabilities measured at fair value on a non-recurring basis at *June 30, 2026* are summarized below:
| ($ in thousands) | Total Fair Value | Fair Value Measurements at / June 30, 2026 Using / Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value Measurements at / June 30, 2026 Using / Significant Other Observable Inputs (Level 2) | Fair Value Measurements at / June 30, 2026 Using / Significant Unobservable Inputs (Level 3) | Total Losses Six Months Ended June 30, 2026 |
| --- | --- | --- | --- | --- | --- |
| Assets: | | | | | |
| Collateral-dependent loans | | | | | |
| Commercial | - | - | - | - | $221 |
| Agricultural | 743 | - | - | 743 | 613 |
| Total | $743 | - | - | $743 | $834 |
| Other Real Estate Owned: | | | | | |
| Equity lines of credit | $135 | - | - | $135 | - |
Assets and liabilities measured at fair value on a non-recurring basis at *December 31, 2025* are summarized below:
| ($ in thousands) | Total Fair Value | Fair Value Measurements at / December 31, 2025 Using / Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value Measurements at / December 31, 2025 Using / Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value Measurements at / December 31, 2025 Using / Significant Other Observable Inputs (Level 2) | Fair Value Measurements at / December 31, 2025 Using / Significant Other Observable Inputs (Level 2) | Fair Value Measurements at / December 31, 2025 Using / Significant Unobservable Inputs (Level 3) | Total Losses Six Months Ended June 30, 2025 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Assets: | | | | | | | |
| Collateral-dependent loans | | | | | | | |
| Commercial | $84 | $ | - | $ | - | $84 | - |
| Agricultural | 1,904 | | - | | - | 1,904 | 931 |
| Total | $1,988 | $ | - | $ | - | $1,988 | $931 |
| Other Real Estate Owned: | | | | | | | |
| RE – Residential | 91 | | - | | - | 91 | - |
| Equity lines of credit | 135 | | | | | 135 | - |
| Total | $226 | $ | - | $ | - | $226 | - |
The following methods were used to estimate fair value.
Collateral-Dependent Loans: The Bank does *not* record loans at fair value on a recurring basis. However, from time to time, fair value adjustments are recorded on these loans to reflect partial write-downs, through charge-offs or specific reserve allowances, that are based on fair value estimates of the underlying collateral. The fair value estimates for collateral-dependent loans are generally based on recent real estate appraisals or broker opinions, obtained from independent *third* parties, which are frequently adjusted by management to reflect current conditions and estimated selling costs (Level *3*). Impairment charges recognized during the *three* months and *six* months ended *June 30, 2026*, related to the above collateral dependent loans, totaled $389 thousand and $834 thousand, respectively, and were recorded through the allowance for credit losses. Impairment charges recognized during the *three* and *six* months ended *June 30, 2025* totaled $931 thousand. The collateral-dependent loans at *June 30, 2026*, consists of *eight* loans which had been allocated specific credit reserves. The collateral-dependent loans at *December 31, 2025,* consist of *nine* loans which had been allocated a specific credit reserve.
Other Real Estate: Nonrecurring adjustments to certain real estate properties classified as other real estate owned are measured at the lower of carrying amount or fair value, less costs to sell. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized. Fair values are generally based on *third* party appraisals of the property which are commonly adjusted by management to reflect current conditions and selling costs (Level *3*).
Appraisals for both collateral-dependent loans and other real estate are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Loan Administration Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On a quarterly basis, the Company compares the actual selling price of similar collateral that has been liquidated to the most recent appraised value for unsold properties to determine what additional adjustment, if any, should be made to the appraisal value to arrive at fair value. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.
*21*
The following table presents quantitative information about Level *3* fair value measurements for financial instruments measured at fair value on a non-recurring basis at *June 30, 2026* and *December 31, 2025*:
| ($ in thousands) | Fair Value | Fair Value | Range / (Weighted Average) |
| --- | --- | --- | --- |
| Description | 6/30/2026 | 12/31/2025 | 12/31/2025 |
| Collateral-dependent loans: | | | |
| Commercial | - | $84 | 14% - 100% (45%) |
| Agricultural | 743 | 1,904 | 2% - 100% (43%) |
| Total | $743 | $1,988 | |
| Other Real Estate: | | | |
| RE – Residential | - | $91 | 60% |
| Equity lines of credit | 135 | 135 | 10%% |
| | $135 | $226 | |
- ***10.* OTHER COMPREHENSIVE LOSS**
- The changes in the accumulated balances for each component of other comprehensive loss, net of tax for the *three* and *six* months ended *June 30, 2025* and *June 30, 2026* were as follows:
| ($ in thousands) | Unrealized / Losses / on AFS Securities | Accumulated / Comprehensive / Loss, net of tax |
| --- | --- | --- |
| Beginning Balance, April 1, 2025 | $(30,184) | $(21,262) |
| Current quarter-to-date other comprehensive income | 829 | 584 |
| Ending balance, June 30, 2025 | $(29,355) | $(20,678) |
| Beginning Balance, April 1, 2026 | $(18,618) | $(13,114) |
| Current quarter-to-date other comprehensive income | (665) | (468) |
| Ending balance, June 30, 2026 | $(19,283) | $(13,582) |
| ($ in thousands) | Unrealized / Losses / on AFS Securities | Accumulated / Comprehensive / Loss, net of tax |
| --- | --- | --- |
| Beginning Balance, January 1, 2025 | $(35,698) | $(25,145) |
| Current year-to-date other comprehensive income | 6,343 | 4,467 |
| Ending balance, June 30, 2025 | $(29,355) | $(20,678) |
| Beginning Balance, January 1, 2026 | $(14,895) | $(10,491) |
| Current year-to-date other comprehensive income | (4,388) | (3,091) |
| Ending balance, June 30, 2026 | $(19,283) | $(13,582) |
There were no reclassifications out of accumulated other comprehensive loss during the *three* and *six* months ended *June 30, 2026.* During the *three* and *six* months ended *June 30, 2025,* the Company recognized a $3 thousand gain on the sale of investment securities that was reclassified from accumulated other comprehensive loss to earnings, with an associated tax effect of $1 thousand, resulting in a net reclassification of $2 thousand.
*22*
***11.* BUSINESS COMBINATIONS - ACQUISITION OF CORNERSTONE COMMUNITY BANCORP**
On *July 1, 2025,* pursuant to a previously announced Agreement and Plan of Reorganization and Merger dated as of *January 18, 2025 (*the “Merger Agreement”) between the Company and Cornerstone Community Bancorp (“Cornerstone”), Cornerstone merged with and into the Company with the Company continuing as the surviving corporation (the “Merger”). Immediately after the Merger, Cornerstone Community Bank ("CCB") the wholly owned bank subsidiary of Cornerstone, merged with and into Plumas Bank, with the Plumas Bank continuing as the surviving bank. The Merger and Bank Merger are collectively referred to as the “Transaction.”
As part of its business strategy, the Company regularly reviews its business strategies and opportunities to enhance the value of its franchise, including through acquisitions. The Transaction is consistent with the Company’s business strategy, which will (*1*) expand Plumas’s geographic presence in existing and new markets in Northern California, (*2*) diversify and bring new expertise to Plumas’s lending business, and (*3*) strengthen the Company’s talent base.
Pursuant to the terms of the Merger Agreement, upon the completion of the Merger, each share of Cornerstone common stock outstanding immediately prior was converted into the right to receive 0.6608 shares of common stock of the Company and $9.75 cash, with cash paid in lieu of fractional shares. The total aggregate consideration delivered to holders of Cornerstone common stock in the Merger was 1,003,718 shares of Company common stock and $16.1 million cash. *No* contingent consideration was included as part of the purchase price for the acquisition of Cornerstone. The Company also assumed options to purchase 35,000 shares of Cornerstone common stock representing, on an as-converted basis, options to purchase 30,803 shares of the Company’s common stock. The value of the total deal consideration was approximately $61.3 million, which is based upon the average closing trading price of Plumas common stock for the 20 trading days ending on and including the *second* trading day prior to *July 1, 2025,* the closing date of the Merger.
Immediately after the Transaction, the newly combined company, operating as Plumas Bancorp with its banking subsidiary, Plumas Bank, had total assets of approximately $2.3 billion.
The transaction was accounted for using the acquisition method of accounting in accordance with ASC *805,* Business Combinations. The following table summarizes the preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date in thousands:
| Identifiable Assets: | ( in thousands) |
| --- | --- |
| Cash and cash equivalents | $51,916 |
| Investment Securities | 88,067 |
| Loans | 462,489 |
| Core deposit intangible | 11,610 |
| Bank premises and equipment | 12,567 |
| Bank owned life insurance | 16,399 |
| Other assets | 16,300 |
| Total identifiable assets acquired | $659,348 |
| Liabilities: | |
| Deposits: | |
| Non-interest bearing | $88,557 |
| Interest bearing | |
| Savings accounts | 21,797 |
| Money market accounts | 334,289 |
| Time accounts | 136,239 |
| Total deposits | 580,882 |
| FHLB borrowings | 15,000 |
| Subordinated debentures | 11,623 |
| Other liabilities | 9,240 |
| Total liabilities assumed | $616,745 |
| Net identifiable assets | $42,603 |
| Book value of net assets acquired from Cornerstone | 41,727 |
| --- | --- |
| Fair value adjustments: | |
| Loans (net of Cornerstone's deferred costs/fees and allowance) | (9,152) |
| Bank premises and equipment | (1,123) |
| Core deposit intangible asset | 11,610 |
| Subordinated debentures | 379 |
| Time Deposits | (556) |
| Other | (317) |
| Total purchase accounting adjustments | $841 |
| Deferred tax asset (tax effect of purchase accounting adjustments at 29.56% plus tax on cash paid on termination of stock options) | 35 |
| Fair value of net identifiable assets acquired from Cornerstone | $42,603 |
| Merger consideration (cash payments of $16.1 million and $45.2 million in stock) | 61,316 |
| Less: fair value of net assets acquired from Cornerstone | (42,603) |
| Goodwill recognized | $18,713 |
*23*
As a result of the Acquisition, we recorded $18.7 million in goodwill, which represents the excess of the total purchase price paid over the fair value of the assets acquired, net of the fair values of liabilities assumed. Goodwill mainly reflects expected value created through the combined operations of Plumas Bank and CCB and is *not* tax deductible. The core deposit intangible will be amortized over 10 years. The fair value of loans includes both credit and interest-related discounts.
The results of operations of Cornerstone have been included in the Company’s consolidated financial statements since the acquisition date. It is impracticable to disclose Cornerstone’s separate revenue and net income since the acquisition because its operations were fully integrated into the Company’s existing business structure immediately upon acquisition, and separate financial information is *not* maintained.
As part of the acquisition of Cornerstone on *July 1, 2025,* the Company acquired PCD loans. At acquisition, the Company recorded PCD loans at their purchase price and simultaneously established an allowance for credit losses based on expected credit losses over the life of the loans. A reconciliation of the purchase price of the PCD loans to the par value of these loans follows:
**Reconciliation of Purchase Price to Par Value (in thousands):**
| Par value of Acquired PCD Loans | 34,115 |
| --- | --- |
| Less Credit Mark (ACL) | (315) |
| Less: Interest Mark (Non-Credit Discount) | (3,609) |
| Fair Value (Purchase Price) | $30,191 |
The fair value of PCD loans acquired in the Cornerstone acquisition was determined using a DCF model. Key inputs and assumptions included:
- Expected cash flows based on contractual terms adjusted for estimated prepayments and defaults
- Discount rates reflecting current market rates for similar loans, adjusted for credit risk
- Loss expectations derived from historical performance and forward-looking economic forecasts
- Segmentation by loan type (e.g., commercial, consumer, real estate) to reflect differing risk profiles
The resulting fair value represents the present value of expected future cash flows, net of credit losses, and includes a gross-up for the allowance for credit losses under ASC *326.*
The following unaudited pro forma financial information presents the combined results of Plumas Bancorp and Cornerstone as if the acquisition had occurred on *January 1, 2025,* in thousands. Acquisition expenses totaling $681 thousand and $1.3 million, net of tax, are included in net income for the *three* and *six* months ended *June 30, 2025*, respectively. These results are *not* necessarily indicative of future performance.
| Period Ended | Net Interest Income | Net Income |
| --- | --- | --- |
| Three Months Ended June 30, 2026 | $24,997 | $9,289 |
| Six Months Ended June 30, 2026 | 49,915 | 18,896 |
| Three Months Ended June 30, 2025 | 23,889 | 4,248 |
| Six Months Ended June 30, 2025 | 48,469 | 9,368 |
**Pro Forma Adjustments Included for the Six Months Ended *June 30, 2025:***
| ● | Amortization of acquired intangibles | 1,127 |
| --- | --- | --- |
| ● | Accretion of discount on loans | $1,100 |
| ● | Accretion of premium on time deposits acquired | $655 |
| ● | Amortization of discount on subordinated debentures | $142 |
| ● | Income tax benefit of adjustments | $144 |
*24*
**PART I – FINANCIAL INFORMATION**
## ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain matters discussed in this Quarterly Report are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Such risks and uncertainties include, among others, (1) significant increases in competitive pressures in the financial services industry; (2) changes in the interest rate environment resulting in reduced margins; (3) general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality; (4) changes in regulatory environment; (5) loss of key personnel; (6) fluctuations in the real estate market; (7) changes in business conditions and inflation; (8) operational risks including data processing systems failures or fraud; and (9) changes in securities markets. Therefore, the information set forth herein should be carefully considered when evaluating the business prospects of Plumas Bancorp (the “Company”).
When the Company uses in this Quarterly Report the words “anticipate”, “estimate”, “expect”, “project”, “intend”, “commit”, “believe” and similar expressions, the Company intends to identify forward-looking statements. Such statements are not guarantees of performance and are subject to certain risks, uncertainties and assumptions, including those described in this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected, projected, intended, committed or believed. The future results and stockholder values of the Company may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond the Company’s ability to control or predict. For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
**INTRODUCTION**
The following discussion and analysis sets forth certain statistical information relating to the Company as of June 30, 2026 and December 31, 2025 and for the six and three-month periods ended June 30, 2026 and 2025. This discussion should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto included in Plumas Bancorp’s Annual Report filed on Form 10-K for the year ended December 31, 2025.
Plumas Bancorp trades on The NASDAQ Capital Market under the ticker symbol “PLBC”.
**CRITICAL ACCOUNTING POLICIES AND ESTIMATES**
See the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 for a complete discussion of the Company’s significant accounting policies and critical accounting estimates.
Allowance for Credit Losses
During the second quarter of 2026, the Company completed its annual review of the allowance for credit losses methodology and refined certain assumptions and model inputs used in estimating expected credit losses within its existing CECL framework. The refinements included updates to the reasonable and supportable forecast period, which was extended from four quarters to eight quarters, and certain model inputs. These refinements were implemented through the Company's regular model governance and review process and reflect management's current assessment of portfolio dynamics and the period over which forecast information is considered sufficiently reliable for estimating expected credit losses.
**BUSINESS COMBINATIONS - ACQUISITION OF CORNERSTONE COMMUNITY BANCORP**
On July 1, 2025 (the “Closing Date”), Plumas Bancorp (the “Company”) completed its previously announced acquisition of Cornerstone Community Bancorp (“Cornerstone”) pursuant to an Agreement and Plan of Merger and Reorganization, dated as of January 28, 2025, by and between the Company and Cornerstone (the “Merger Agreement”). Total book value of assets acquired from Cornerstone, excluding fair value adjustments, were $658 million, gross loans totaled $478 million, and deposits totaled $580 million. Goodwill associated with the acquisition of Cornerstone was $18.7 million; the core deposit intangible was $11.6 million. In addition, the Company recorded a discount on the acquired loans totaling $15.8 million. With the completion of the merger, Plumas Bank adds four branches in Anderson, Red Bluff and Redding (two branches), California.
Pursuant to the Merger Agreement, on the Closing Date, Cornerstone merged with and into the Company (the “Merger”) with the Company continuing as the surviving corporation. Immediately following the Merger, Cornerstone’s subsidiary, Cornerstone Community Bank (CCB) merged with and into the Company’s subsidiary, Plumas Bank with Plumas Bank as the surviving bank. Pursuant to the terms of the Merger Agreement, upon the completion of the Merger, each share of Cornerstone common stock outstanding immediately prior was converted into the right to receive 0.6608 shares of common stock of the Company and $9.75 cash, with cash paid in lieu of fractional shares. The total aggregate consideration delivered to holders of Cornerstone common stock in the Merger was 1,003,718 shares of Company common stock and $14.8 million cash. In addition, in accordance with the Merger Agreement, the Company paid approximately $1.3 million to holders of options to purchase Cornerstone common stock that were terminated in connection with the Merger. The Company also assumed options to purchase 35,000 shares of Cornerstone common stock representing, on an as-converted basis, options to purchase 30,803 shares of the Company’s common stock.
In connection with the acquisition of Cornerstone, the Company assumed $12 million of subordinated debentures, including $2 million of 4.75% Fixed‑to‑Floating Rate Subordinated Notes due November 30, 2035 (the “2035 Notes”). The 2035 Notes, which were issued in 2020, have a fixed interest rate of 4.75% for the first ten years and thereafter a quarterly variable interest rate equal to the then current three-month term Secured Overnight Financing Rate (“SOFR”) plus 4.14%. The remaining subordinated notes were called in 2025 and are no longer outstanding. Interest expense recognized on the subordinated notes for the six months ended June 30, 2026, was $97 thousand.
25
**RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED June 30, 2026**
**Net Income.** The Company recorded net income of $9.9 million or $1.43 per share during the current quarter, an increase of $3.6 million from $6.3 million or $1.07 per share during the second quarter of 2025. Diluted earnings per share increased to $1.41 per share during the three months ended June 30, 2026 up from $1.05 per share during the quarter ended June 30, 2025. Return on average assets was 1.79% during the current quarter, up from 1.56% during the second quarter of 2025. Return on average equity increased to 15.0% for the three months ended June 30, 2026, up from 13.4% during the second quarter of 2025.
Net interest income increased by $7.8 million from $18.2 million during the three months ended June 30, 2025, to $26 million during the current quarter. The provision for credit losses decreased from $860 thousand during the second quarter of 2025 to $600 thousand during the current quarter. Non-interest income increased by $390 thousand from $2.4 million during the three months ended June 30, 2025 to $2.8 million during the second quarter of 2026. Non-interest expense increased by $3.5 million from $11.0 million during the second quarter of 2025 to $14.5 million during the current quarter. The provision for income taxes increased by $1.3 million from $2.4 million, during the three months ended June 30, 2025 to $3.7 million during the current quarter. The average effective tax rate was 27.1% in both periods.
The following is a detailed discussion of each component of the change in net income.
**Net interest income before provision for credit losses.** Driven primarily by growth in the loan portfolio mostly related to the acquisition of Cornerstone, net interest income increased by $7.8 million from $18.2 million during the three months ended June 30, 2025, to $26.0 million for the three months ended June 30, 2026. The increase in net interest income includes an increase of $9.7 million in interest income partially offset by an increase of $1.9 million in interest expense.
Interest and fees on loans increased by $9.2 million to $24.8 million related to an increase in average balance and an increase in yield. Average loan balances increased by $484 million, while the average yield on these loans increased by 47 basis points from 6.14% during the second quarter of 2025 to 6.61% during the current quarter. The increase in yield relates to several factors including the accretion of discount on purchased loans, the repricing of a portion of our commercial real estate loans most of which reprice every five years from the date of origination, the reversal of $344 thousand in accrued interest on a large loan relationship during the second quarter of 2025 and growth in fixed rate SBA loans which totaled $123 million at June 30, 2026, and $75 million at June 30, 2025. The weighted average rate earned on this portfolio at June 30, 2026, was 8.1%.
The accretion of discounts on loans acquired from Cornerstone totaled $1.3 million during the quarter an increase of $800 thousand from $500 thousand during the first quarter of 2026. The increase in accretion during the current quarter relates to an increase in prepayments on this portfolio. Partially offsetting the discount accretion was the reversal of approximately $375 thousand in interest on loans placed on nonaccrual during the current quarter. The average prime interest rate decreased from 7.5% during the second quarter of 2025 to 6.75% during the current quarter. Approximately 15% of the Company's loans are tied to the prime interest rate and most of these reprice within one to three months of a change in prime.
Interest earned on investment securities increased by $484 thousand related to an increase in yield on investment securities of 21 basis points to 4.29% and an increase in average balance of $24 million. The increase in investment yields is consistent with the partial restructuring of the investment portfolio during the fourth quarter of 2025 and market conditions. Average investment securities increased from $442 million during the three months ended June 30, 2025 to $466 million during the current period.
Interest earned on cash balances increased by $78 thousand related to an increase in average balance of $17 million partially offset by a decrease in average rate paid on cash balances of 73 basis points from 4.47% during the second quarter of 2025 to 3.74% during the current quarter. This decline in yield was mostly related to a decline in rate paid on balances held at the Federal Reserve Bank of San Francisco (FRB). The average rate earned on FRB balances decreased from 4.40% during the second quarter of 2025 to 3.65% during the current quarter.
Interest expense on deposits increased by $1.6 million and is broken down by product type as follows: money market accounts - $844 thousand, savings deposits - $29 thousand and time deposits - $747 thousand. The increase in interest expense primarily relates to the growth in money market and time deposits related to the acquisition of Cornerstone. The average rate paid on interest-bearing deposits increased from 1.30% during the second quarter of 2025 to 1.59% during the current quarter and relates to an increase in the percentage of average money market and time deposits to average interest bearing deposits from 58% during the second quarter of 2025 to 68% during the current quarter as well as an increase in the average rate paid on these deposits.
The average rate paid on interest bearing liabilities increased from 1.33% during the 2025 quarter to 1.62% in 2026 related to the increase in the cost of interest-bearing deposits and repurchase agreements. The average rate paid on repurchase agreements increased from 0.46% during the second quarter of 2025 to 1.48% during the current quarter. This increase is related to higher rate repurchase agreements acquired in the acquisition of Cornerstone.
Net interest margin for the three months ended June 30, 2026, increased 30 basis points to 5.13%, up from 4.83% for the same period in 2025.
26
The following table presents for the three-month periods indicated the distribution of consolidated average assets, liabilities and shareholders' equity. It also presents the amounts of interest income from interest earning assets and the resultant annualized yields expressed in both dollars and annualized yield percentages, as well as the amounts of interest expense on interest bearing liabilities and the resultant cost expressed in both dollars and annualized rate percentages. Average balances are based on daily averages. Nonaccrual loans are included in the calculation of average loans while nonaccrued interest thereon is excluded from the computation of yields earned:
| Line item | For the Three Months Ended / June 30, 2026 / Average / Balance / (in thousands) | For the Three Months Ended / June 30, 2026 / Interest / (in thousands) | For the Three Months Ended / June 30, 2026 / Yield/ / Rate | For the Three Months Ended / June 30, 2025 / Average / Balance / (in thousands) | For the Three Months Ended / June 30, 2025 / Interest / (in thousands) | For the Three Months Ended / June 30, 2025 / Yield/ / Rate |
| --- | --- | --- | --- | --- | --- | --- |
| Interest-earning assets: | | | | | | |
| Loans (2) (3) | $1,504,438 | $24,777 | 6.61% | $1,020,004 | $15,612 | 6.14% |
| Taxable investment securities | 390,618 | 4,329 | 4.45% | 369,624 | 3,913 | 4.25% |
| Non-taxable investment securities (1) | 75,412 | 659 | 3.51% | 72,719 | 591 | 3.26% |
| Interest-bearing deposits | 63,781 | 595 | 3.74% | 46,368 | 517 | 4.47% |
| Total interest-earning assets | 2,034,249 | 30,360 | 5.99% | 1,508,715 | 20,633 | 5.48% |
| Cash and due from banks | 34,281 | | | 26,880 | | |
| Other assets | 163,174 | | | 87,117 | | |
| Total assets | $2,231,704 | | | $1,622,712 | | |
| Interest-bearing liabilities: | | | | | | |
| Money market deposits | $457,580 | 2,127 | 1.86% | $287,707 | $1,283 | 1.79% |
| Savings deposits | 308,364 | 286 | 0.37% | 298,989 | 257 | 0.34% |
| Time deposits | 221,275 | 1,491 | 2.70% | 118,057 | 744 | 2.53% |
| Total interest-bearing deposits | 987,219 | 3,904 | 1.59% | 704,753 | 2,284 | 1.30% |
| Other borrowings | 16,027 | 176 | 4.40% | 15,000 | 146 | 3.90% |
| Repurchase agreements & other | 74,023 | 273 | 1.48% | 17,265 | 20 | 0.46% |
| Total interest-bearing liabilities | 1,077,269 | 4,353 | 1.62% | 737,018 | 2,450 | 1.33% |
| Non-interest-bearing deposits | 842,509 | | | 659,554 | | |
| Other liabilities | 44,920 | | | 37,112 | | |
| Shareholders' equity | 267,006 | | | 189,028 | | |
| Total liabilities & equity | $2,231,704 | | | $1,622,712 | | |
| Cost of funding interest-earning assets (4) | | | 0.86% | | | 0.65% |
| Net interest income and margin (5) | | $26,007 | 5.13% | | $18,183 | 4.83% |
---
| (1) | Not computed on a tax-equivalent basis. |
| --- | --- |
| (2) | Average nonaccrual loan balances of $14.2 million for 2026 and $4.1 million for 2025 are included in average loan balances for computational purposes. |
| (3) | Net loan origination costs included in loan interest income for the three-month period ended June 30, 2026 and 2025 were $226 thousand and $196 thousand, respectively. |
| (4) | Total annualized interest expense divided by the average balance of total earning assets. |
| (5) | Annualized net interest income divided by the average balance of total earning assets. |
27
The following table sets forth changes in interest income and interest expense for the three-months ended June 30, 2026, and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates:
| ($ in thousands) | 2026 over 2025 change in net interest income / for the three months ended June 30, / Volume (1) | 2026 over 2025 change in net interest income / for the three months ended June 30, / Rate (2) | 2026 over 2025 change in net interest income / for the three months ended June 30, / Mix (3) | 2026 over 2025 change in net interest income / for the three months ended June 30, / Total |
| --- | --- | --- | --- | --- |
| Interest-earning assets: | | | | |
| Loans | $$7,415 | $1,187 | $563 | 9,165 |
| Taxable investment securities | 222 | 183 | 11 | 416 |
| Non-taxable investment securities | 22 | 44 | 2 | 68 |
| Interest-bearing deposits | 194 | (84) | (32) | 78 |
| Total interest income | 7,853 | 1,330 | 544 | 9,727 |
| Interest-bearing liabilities: | | | | |
| Money market deposits | 758 | 54 | 32 | 844 |
| Savings deposits | 8 | 20 | 1 | 29 |
| Time deposits | 650 | 52 | 45 | 747 |
| Other borrowings | 10 | 19 | 1 | 30 |
| Repurchase agreements & other | 66 | 44 | 143 | 253 |
| Total interest expense | 1,492 | 189 | 222 | 1,903 |
| Net interest income | $$6,361 | $1,141 | $322 | 7,824 |
---
| (1) | The volume change in net interest income represents the change in average balance divided by the previous year’s rate. |
| --- | --- |
| (2) | The rate change in net interest income represents the change in rate divided by the previous year’s average balance. |
| (3) | The mix change in net interest income represents the change in average balance multiplied by the change in rate. |
**Provision for credit losses.** During the three months ended June 30, 2026, the provision for credit losses totaled $600 thousand consisting of a provision for credit losses on loans of $601 thousand and a decrease in the reserve for unfunded commitments of $1 thousand. This compares to a provision for credit losses of $1.1 million consisting of a provision for credit losses on loans of $1.1 million and a decrease in the reserve for unfunded commitments of $40 thousand during the six months ended June 30, 2025. See “Analysis of Asset Quality and Allowance for Loan Losses” for a discussion of loan quality trends and the provision for credit losses.
**Non-interest income.** During the three months ended June 30, 2026, non-interest income totaled $2.8 million, an increase of $390 thousand from the three months ended June 30, 2025. Significant increases in non-interest income during the current quarter were $168 thousand in earnings on Bank Owned Life Insurance (BOLI) and $97 thousand in interchange income. Each of these items benefited from the acquisition of Cornerstone. Additionally, during the current period non-interest income included a gain of $104 thousand on sale of an OREO property.
The following table describes the components of non-interest income for the three-month periods ended June 30, 2026 and 2025:
| ($ in thousands) | For the Three Months Ended / June 30, 2026 | For the Three Months Ended / June 30, 2025 | Dollar Change | Percentage Change |
| --- | --- | --- | --- | --- |
| Interchange revenue | $$881 | $784 | 97 | 12.4% |
| Service charges on deposit accounts | 813 | 781 | 32 | 4.1% |
| Earnings on life insurance policies | 276 | 108 | 168 | 155.6% |
| Loan servicing fees | 150 | 148 | 2 | 1.4% |
| FHLB Dividends | 104 | 135 | (31) | (23.0 |
| Other | 527 | 405 | 122 | 30.1% |
| Total non-interest income | $$2,751 | $2,361 | 390 | 16.5% |
28
**Non-interest expense.** During the three months ended June 30, 2026, total non-interest expense increased by $3.5 million from $11.0 million during the second quarter of 2025 to $14.5 million during the current quarter. Much of this increase was driven by the acquisition of Cornerstone. Salary and benefit expense increased by $2.0 million which includes an increase in salary expense of $1.2 million primarily related to an increase in Full-Time Equivalent (FTE) employees of 56 to 238 FTE at June 30, 2026 and to a much lesser extent merit and promotional increases. Primarily related to an increase in pre-tax income, bonus expense increased by $315 thousand.
Occupancy and equipment expense increased by $598 thousand from $2.0 million during the second quarter of 2025 to $2.6 million during the current quarter, primarily related to the acquisition of Cornerstone and to a lesser extent the sales/leaseback completed during the fourth quarter of 2025. Amortization of Core Deposit Intangible increased by $522 thousand related to the acquisition of Cornerstone. The largest reduction in non-interest expense was $481 thousand in merger expenses incurred during the second quarter of 2025.
The following table describes the components of non-interest expense for the three-month periods ended June 30, 2026 and 2025:
| ($ in thousands) | For the Three Months Ended / June 30, 2026 | For the Three Months Ended / June 30, 2025 | Dollar Change | Percentage Change |
| --- | --- | --- | --- | --- |
| Salaries and employee benefits | $$7,520 | $5,553 | 1,967 | 35.4% |
| Occupancy and equipment | 2,648 | 2,050 | 598 | 29.2% |
| Outside service fees | 1,499 | 1,160 | 339 | 29.2% |
| Amortization of Core Deposit Intangible | 566 | 44 | 522 | 1186.4% |
| Professional fees | 399 | 219 | 180 | 82.2% |
| Advertising and shareholder relations | 374 | 273 | 101 | 37.0% |
| Armored car and courier | 283 | 224 | 59 | 26.3% |
| Business development | 250 | 188 | 62 | 33.0% |
| Deposit insurance | 247 | 180 | 67 | 37.2% |
| Director compensation and expense | 209 | 155 | 54 | 34.8% |
| Telephone and data communication | 146 | 124 | 22 | 17.7% |
| Loan collection expenses | 136 | 51 | 85 | 166.7% |
| Merger and acquisition expenses | - | 481 | (481) | (100.0 |
| Other | 227 | 310 | (83) | (26.8 |
| Total non-interest expense | $$14,504 | $11,012 | 3,492 | 31.7% |
**Provision for income taxes.** The provision for income taxes increased by $1.3 million from $2.4 million, during the three months ended June 30, 2025 to $3.7 million during the current quarter. The average effective tax rate was 27.1% in both periods. The percentages for 2026 and 2025 differ from statutory rates as tax exempt items of income such as earnings on BOLI and municipal securities interest decrease taxable income while non-deductible merger transaction costs incurred during the 2025 quarter effectively increase taxable income.
29
**RESULTS OF OPERATIONS FOR THE six MONTHS ENDED June 30, 2026**
**Net Income.** The Company recorded net income of $19.7 million or $2.83 per share during the current six-month period, an increase of $6.2 million from $13.5 million or $2.28 per share earned during the six months ended June 30, 2025. Earnings per diluted share increased to $2.79 during the six months ended June 30, 2026, up $0.54 from $2.25 during the first six months of 2025. Return on average assets was 1.79% during the six months ended June 30, 2026, up from 1.67% during the first half of 2025. Return on average equity increased to 14.9% for the six months ended June 30, 2026, up from 14.7% during the first half of 2025.
Net interest income increased by $14.4 million from $36.7 million during the six months ended June 30, 2025, to $51.1 million during the current period. The provision for credit losses decreased from $1.1 million during the first half of 2025 to $270 thousand during the current period. Non-interest income increased by $174 thousand from $5.6 million during the six months ended June 30, 2025 to $5.7 million during the first half of 2026. Non-interest expense increased by $7.3 million from $22.5 million during the first half of 2025 to $29.8 million during the current period. The provision for income taxes increased by $1.9 million from $5.2 million, or 27.8% of pre-tax income, during the six months ended June 30, 2025 to $7.1 million, or 26.5% of pre-tax income, during the current period.
The following is a detailed discussion of each component of the change in net income.
**Net interest income before provision for credit losses.** Net interest income for the six months ended June 30, 2026 was $51.1 million, an increase of $14.4 million from the $36.7 million earned during the same period in 2025. The increase in net interest income includes an increase of $18.5 million in interest income partially offset by an increase of $4.1 million in interest expense.
Interest and fees on loans increased by $17.7 million related to increases in average balance and yield. The average balance of loans during the six months ended June 30, 2026 was $1.5 billion, an increase of $490 million from $1.0 billion during the same period in 2025. The average yield on loans increased by 38 basis points from 6.15% during the first six months of 2025 to 6.53% during the current period. Included in interest and fees on loans for the six months ended June 30, 2026 was $1.8 million of discount accretion related to loans acquired in the Cornerstone acquisition. As the acquisition closed on July 1, 2025, no comparable accretion income was recognized during the first six months of 2025.
Interest on investment securities increased by $973 thousand related to an increase in yield of 18 basis points to 4.28% and an increase in average balance of $27 million to $470 million. The increase in investment yield is consistent with the partial restructuring of the investment portfolio during the fourth quarter of 2025 and market conditions.
Interest on cash balances declined by $195 thousand related to a decline in yield. The rate earned on cash balances declined by 73 basis points to 3.77%. The average balance in interest bearing cash remained unchanged at $53.8 million.
Primarily related to an increase in balance and rate paid on deposits and repurchase agreements, interest expense increased from $4.5 million during the six months ended June 30, 2025 to $8.6 million during the current period. The average rate paid on interest bearing liabilities increased from 1.24% during the 2025 period to 1.61% in 2026.
Interest expense on deposits increased by $3.3 million and is broken down by product type as follows: money market accounts - $1.6 million, savings deposits - $100 thousand and time deposits - $1.6 million. The average rate paid on interest-bearing deposits increased from 1.21% during the six months ended June 30, 2025 to 1.55% during the current period. Average interest-bearing deposits totaled $972 million during the first half of 2026, an increase of $274 million from $698 million during the first half of 2025.
Interest expense on repurchase agreements increased by $683 thousand related to an increase in average balance of $67.7 million and an increase in rate paid of 1.33%.
Net interest margin for the six months ending June 30, 2026 increased 19 basis points to 5.08%, up from 4.89% for the same period in 2025.
30
The following table presents for the six-month periods indicated the distribution of consolidated average assets, liabilities and shareholders' equity. It also presents the amounts of interest income from interest earning assets and the resultant annualized yields expressed in both dollars and annualized yield percentages, as well as the amounts of interest expense on interest bearing liabilities and the resultant cost expressed in both dollars and annualized rate percentages. Average balances are based on daily averages. Nonaccrual loans are included in the calculation of average loans while nonaccrued interest thereon is excluded from the computation of yields earned:
| Line item | For the Six Months Ended / June 30, 2026 / Average / Balance / (in thousands) | For the Six Months Ended / June 30, 2026 / Interest / (in thousands) | For the Six Months Ended / June 30, 2026 / Yield/ / Rate | For the Six Months Ended / June 30, 2025 / Average / Balance / (in thousands) | For the Six Months Ended / June 30, 2025 / Interest / (in thousands) | For the Six Months Ended / June 30, 2025 / Yield/ / Rate |
| --- | --- | --- | --- | --- | --- | --- |
| Interest-earning assets: | | | | | | |
| Loans (2) (3) | $1,505,631 | $48,734 | 6.53% | $1,016,008 | $31,008 | 6.15% |
| Taxable investment securities | 394,397 | 8,672 | 4.43% | 369,376 | 7,840 | 4.28% |
| Non-taxable investment securities (1) | 76,056 | 1,315 | 3.49% | 73,795 | 1,174 | 3.21% |
| Interest-bearing deposits | 53,834 | 1,006 | 3.77% | 53,845 | 1,201 | 4.50% |
| Total interest-earning assets | 2,029,918 | 59,727 | 5.93% | 1,513,024 | 41,223 | 5.49% |
| Cash and due from banks | 33,663 | | | 26,679 | | |
| Other assets | 164,290 | | | 86,732 | | |
| Total assets | $2,227,871 | | | $1,626,435 | | |
| Interest-bearing liabilities: | | | | | | |
| Money market deposits | $445,224 | 4,003 | 1.81% | $283,469 | $2,429 | 1.73% |
| Savings deposits | 310,415 | 563 | 0.37% | 311,151 | 463 | 0.30% |
| Time interest-bearing deposits | 215,912 | 2,925 | 2.73% | 103,304 | 1,288 | 2.51% |
| Total deposits | 971,551 | 7,491 | 1.55% | 697,924 | 4,180 | 1.21% |
| Other borrowings | 16,583 | 375 | 4.56% | 15,000 | 290 | 3.90% |
| Repurchase agreements & other | 86,946 | 715 | 1.66% | 19,216 | 31 | 0.33% |
| Total interest-bearing liabilities | 1,075,080 | 8,581 | 1.61% | 732,140 | 4,501 | 1.24% |
| Non-interest-bearing deposits | 840,276 | | | 670,961 | | |
| Other liabilities | 45,895 | | | 37,602 | | |
| Shareholders' equity | 266,620 | | | 185,732 | | |
| Total liabilities & equity | $2,227,871 | | | $1,626,435 | | |
| Cost of funding interest-earning assets (4) | | | 0.85% | | | 0.60% |
| Net interest income and margin (5) | | $51,146 | 5.08% | | $36,722 | 4.89% |
---
| (1) | Not computed on a tax-equivalent basis. |
| --- | --- |
| (2) | Average nonaccrual loan balances of $14.4 million for 2026 and $3.9 million for 2025 are included in average loan balances for computational purposes. |
| (3) | Net loan origination costs included in loan interest income for the six-month period ended June 30, 2026 and 2025 were $518 thousand and $471 thousand, respectively. |
| (4) | Total annualized interest expense divided by the average balance of total earning assets. |
| (5) | Annualized net interest income divided by the average balance of total earning assets. |
31
The following table sets forth changes in interest income and interest expense for the six-months ended June 30, 2026, and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates:
| ($ in thousands) | 2026 over 2025 change in net interest income / for the six months ended June 30, / Volume (1) | 2026 over 2025 change in net interest income / for the six months ended June 30, / Rate (2) | 2026 over 2025 change in net interest income / for the six months ended June 30, / Mix (3) | 2026 over 2025 change in net interest income / for the six months ended June 30, / Total |
| --- | --- | --- | --- | --- |
| Interest-earning assets: | | | | |
| Loans | $$14,943 | $1,878 | $905 | 17,726 |
| Taxable investment securities | 531 | 282 | 19 | 832 |
| Non-taxable investment securities | 36 | 102 | 3 | 141 |
| Interest-bearing deposits | 0 | (195) | 0 | (195) |
| Total interest income | 15,510 | 2,067 | 927 | 18,504 |
| Interest-bearing liabilities: | | | | |
| Money market deposits | 1,386 | 120 | 68 | 1,574 |
| Savings deposits | (1) | 101 | 0 | 100 |
| Time deposits | 1,404 | 111 | 122 | 1,637 |
| Other borrowings | 31 | 49 | 5 | 85 |
| Repurchase agreements & other | 109 | 127 | 448 | 684 |
| Total interest expense | 2,929 | 508 | 643 | 4,080 |
| Net interest income | $$12,581 | $1,559 | $284 | 14,424 |
---
| (1) | The volume change in net interest income represents the change in average balance divided by the previous year’s rate. |
| --- | --- |
| (2) | The rate change in net interest income represents the change in rate divided by the previous year’s average balance. |
| (3) | The mix change in net interest income represents the change in average balance multiplied by the change in rate. |
**Provision for credit losses.** During the first half of 2026 the provision for credit losses totaled $270 thousand consisting of a provision for credit losses on loans of $200 thousand and an increase in the reserve for unfunded commitments of $70 thousand. This compares to a provision for credit losses of $1.1 million consisting of a provision for credit losses on loans of $1.1 million and a decrease in the reserve for unfunded commitments of $40 thousand during the six months ended June 30, 2025. See “Analysis of Asset Quality and Allowance for Loan Losses” for a discussion of loan quality trends and the provision for credit losses.
**Non-interest income.** During the six months ended June 30, 2026, non-interest income totaled $5.7 million, an increase of $174 thousand from the six months ended June 30, 2025. Significant increases in non-interest income during the current period were $278 thousand in FHLB dividends, $327 thousand in earnings on BOLI and $238 thousand in interchange income. Each of these items benefited from the acquisition of Cornerstone. Additionally, the FHLB paid a special dividend of $252 thousand during the first quarter of 2026. These increases were mostly offset by a $1.1 million settlement related to the Dixie Fire during the first quarter of 2025.
The following table describes the components of non-interest income for the six-month periods ended June 30, 2026 and 2025:
| ($ in thousands) | For the Six Months Ended / June 30, 2026 | For the Six Months Ended / June 30, 2025 | Dollar Change | Percentage Change |
| --- | --- | --- | --- | --- |
| Interchange revenue | $$1,712 | 1,486 | 226 | 15.2% |
| Service charges on deposit accounts | 1,598 | $1,474 | 124 | 8.4% |
| FHLB Dividends | 550 | 272 | 278 | 102.2% |
| Earnings on life insurance policies | 544 | 217 | 327 | 150.7% |
| Loan servicing fees | 332 | 334 | (2) | (0.6 |
| Loss on sale of investment securities | - | 3 | (3) | (100.0 |
| Other | 1,012 | 1,788 | (776) | (43.4 |
| Total non-interest income | $$5,748 | $5,574 | 174 | 3.1% |
32
**Non-interest expense.** Primarily driven by the acquisition of Cornerstone, non-interest expense increased by $7.3 million from $22.5 million during the first half of 2025 to $29.8 million during the current period. The four largest increases were $3.8 million in salary and benefit expense, $1.3 million in occupancy and equipment expense, $1.1 million in amortization of core deposit intangible and $637 thousand in other.
Salary and benefit expense totaled $15.3 million during the current six month period and $11.4 million during the six months ended June 30, 2025. Salary expense increased by $2.1 million, mostly related to an increase in FTE. Related to an increase in pre-tax income, bonus expense increased by $595 thousand. Other significant increases in salary and benefit expense include $316 thousand in payroll taxes and $226 thousand in insurance expense.
Primarily related to the acquisition of Cornerstone and to a lesser extent the sales/leaseback completed during the fourth quarter of 2025, occupancy and equipment expenses increased by $1.2 million from $4.1 million during the first six months of 2025 to $5.3 million during the current period. Amortization of Core Deposit Intangible increased by $1.1 million related to the acquisition of Cornerstone. Other expense increased by $637 thousand related to a $726 thousand loss associated with two fraudulent wire transfers during the first quarter of 2026. The largest reduction in non-interest expense was $1.1 million in merger expenses incurred during the first half of 2025.
The following table describes the components of non-interest expense for the six-month periods ended June 30, 2026 and 2025:
| ($ in thousands) | For the Six Months Ended / June 30, 2026 | For the Six Months Ended / June 30, 2025 | Dollar Change | Percentage Change |
| --- | --- | --- | --- | --- |
| Salaries and employee benefits | $$15,250 | $11,433 | 3,817 | 33.4% |
| Occupancy and equipment | 5,322 | 4,064 | 1,258 | 31.0% |
| Outside service fees | 2,956 | 2,424 | 532 | 21.9% |
| Amortization of Core Deposit Intangible | 1,147 | 87 | 1,060 | 1218.4% |
| Professional fees | 751 | 448 | 303 | 67.6% |
| Merger and acquisition expenses | - | 1,050 | (1,050) | (100.0 |
| Advertising and shareholder relations | 665 | 535 | 130 | 24.3% |
| Armored car and courier | 546 | 441 | 105 | 23.8% |
| Deposit insurance | 495 | 362 | 133 | 36.7% |
| Business development | 455 | 355 | 100 | 28.2% |
| Director compensation and expense | 384 | 321 | 63 | 19.6% |
| Loan collection expenses | 355 | 122 | 233 | 191.0% |
| Telephone and data communication | 291 | 298 | (7) | (2.3 |
| Other | 1,174 | 537 | 637 | 118.6% |
| Total non-interest expense | $$29,791 | $22,477 | 7,314 | 32.5% |
**Provision for income taxes.** The provision for income taxes increased by $1.9 million from $5.2 million, or 27.8% of pre-tax income, during the six months ended June 30, 2025 to $7.1 million, or 26.5% of pre-tax income, during the current period. The percentages for 2026 and 2025 differ from statutory rates as tax exempt items of income such as earnings on BOLI and municipal securities interest decrease taxable income while non-deductible merger transaction costs incurred during the 2025 period effectively increase taxable income.
33
**FINANCIAL CONDITION**
Total assets were $2.3 billion on June 30, 2026, an increase of $39 million from December 31, 2025. The largest component of this increase was $55 million in cash and cash equivalents. The largest decline was $11 million in investment securities. Total liabilities increased by $28 million related to an increase of $76 million in deposits partially offset by a decline of $39 million in repurchase agreements and $7 million in all other liabilities. Total shareholders' equity increased by $11 million.
**Loan Portfolio.** Gross loans totaled $1.5 billion on June 30, 2026, and December 31, 2025. Increases of $23 million in commercial real estate loans, $9 million in construction loans and $1 million in equity lines of credit were offset by declines of $15 million in agricultural loans, $10 million in automobile loans, $6 million in commercial loans, and $2 million in other loans. Although the Company offers a broad array of financing options, it continues to concentrate its focus on small to medium sized commercial businesses. These loans offer diversification as to industries and types of businesses, thus limiting material exposure in any industry concentrations. The Company offers both fixed and floating rate loans and obtains collateral in the form of real property, business assets and deposit accounts, but looks to business and personal cash flows as its primary source of repayment. In the fourth quarter of 2023 we terminated our indirect automobile loan program. Ending this program, which was our lowest yielding loan segment, also improved our loan loss risk profile since this program had historically higher charge-off rates. Terminating this program also improved our consumer compliance risk profile.
As shown in the following table, the Company's largest lending categories are commercial real estate loans, commercial loans, agricultural loans, and equity lines of credits.
| ($ in thousands) | Balance at End / of Period / 06/30/2026 | Percent of / Loans in Each / Category to / Total Loans / 06/30/2026 | Balance at End / of Period / 12/31/2025 | Percent of / Loans in Each / Category to / Total Loans / 12/31/2025 |
| --- | --- | --- | --- | --- |
| Commercial | $162,128 | 10.7% | $167,851 | 11.1% |
| Agricultural | 142,940 | 9.5% | 157,526 | 10.4% |
| Real estate – residential | 32,223 | 2.1% | 33,116 | 2.2% |
| Real estate – commercial | 1,026,049 | 67.9% | 1,002,627 | 66.3% |
| Real estate – construction and land development | 48,672 | 3.2% | 40,168 | 2.7% |
| Equity Lines of Credit | 54,993 | 3.6% | 53,647 | 3.5% |
| Auto | 29,616 | 2.0% | 39,595 | 2.6% |
| Other | 15,552 | 1.0% | 17,526 | 1.2% |
| Total Gross Loans | $1,512,173 | 100% | $1,512,056 | 100% |
34
The Company’s real estate related loans, including real estate mortgage loans, real estate construction and land development loans, consumer equity lines of credit, and agricultural loans secured by real estate, comprised 84% of the total loan portfolio at June 30, 2026. Moreover, the business activities of the Company currently are focused in the California counties of Butte, Lassen, Modoc, Nevada, Placer, Plumas, Shasta, Sutter and Tehama and in Washoe and Carson City Counties in Northern Nevada. Consequently, the results of operations and financial condition of the Company are dependent upon the general trends in these economies and, in particular, the commercial real estate markets. In addition, the concentration of the Company's operations in these areas of Northeastern California and Northwestern Nevada exposes it to greater risk than other banking companies with a wider geographic base in the event of catastrophes, such as earthquakes, fires and floods in these regions.
Commercial real estate loans (“CRE”) comprised 68% of the lending portfolio at June 30, 2026. CRE loans were 44% owner-occupied, 43% investor-owned, and 13% multi-family. Concentrations by real estate type within the CRE portfolio, excluding multi-family, were 14% Office, 13% Mixed Commercial Real Estate, 13% Retail, 11% Hospitality, 9% Industrial, 8% Gas Stations, 6% Residential, 5% Special Purpose, and 5% Medical Buildings, with all remaining concentrations below 5%. There were no rent-controlled properties within the multi-family category. Office facilities are typically small and located in more rural areas. 22% of CRE loans were located in northern Nevada and 54% were located in northern California. Non-accrual loans totaled $21.9 million at June 30, 2026, of which approximately 32% were CRE. Substandard loans totaled $42.8 million at June 30, 2026, of which approximately 32% were CRE.
CRE loans consist of term loans secured by a mortgage lien on real property and include both owner occupied CRE loans as well as investor-owned loans. Investor- owned CRE loans consist of mortgage loans to finance investments in real property that may include, but are not limited to, multi-family, industrial, office, retail and other specific use properties. The primary risk characteristics in the investor-owned portfolio include impacts of overall leasing rates, absorption timelines, levels of vacancy rates and operating expenses. The Company requires collateral values in excess of the loan amounts, cash flows in excess of expected debt service requirements and equity investment in the project. The expected cash flows from all significant new or renewed income producing property commitments are stress tested to reflect the risks in varying interest rates, vacancy rates and rental rates. Inherent lending risks are monitored on a continuous basis through quarterly monitoring and the Bank’s annual underwriting process, incorporating an analysis of cash flow, collateral, market conditions and guarantor liquidity, if applicable. CRE loan policies are specific to individual product types and underwriting parameters vary depending on the risk profile of each asset class. CRE loan policies are reviewed no less than annually by management and approved by the Company’s Board of Directors to ensure they align with current market conditions and the Company’s moderate risk appetite. CRE concentration limits have been established by product type and are monitored quarterly by the Company’s Board of Directors.
The rates of interest charged on variable rate loans are set at specific increments in relation to the Company's lending rate or other indexes such as the published prime interest rate or U.S. Treasury rates and vary with changes in these indexes. The frequency in which variable rate loans reprice can vary from one day to several years. On June 30, 2026, and December 31, 2025, approximately 79% and 80%, respectively of the Company's loan portfolio was comprised of variable rate loans. Loans indexed to the prime interest rate were approximately 20% of the Company’s variable rate loan portfolio on June 30, 2026; these loans reprice within one day to three months of a change in the prime rate. The remainder of the Company's variable rate loans mostly consist of commercial real estate loans tied to U.S. Treasury rates and reprice every five years. Approximately 77% of the variable rate loans are indexed to the five-year T-Bill rate and reprice every five years. While real estate mortgage, agricultural, commercial and consumer lending remain the foundation of the Company's historical loan mix, some changes in the mix have occurred due to the changing economic environment and the resulting change in demand for certain loan types
**Analysis of Asset Quality and Allowance for Credit Losses.** The Company attempts to minimize credit risk through its underwriting and credit review policies. The Company’s credit review process includes internally prepared credit reviews as well as contracting with an outside firm to conduct periodic credit reviews. The Company’s management and lending officers evaluate the loss exposure of classified and nonaccrual loans on a quarterly basis, or more frequently as loan conditions change. The Management Asset Resolution Committee (MARC) reviews the asset quality of criticized and past due loans monthly and reports the findings to the full Board of Directors. In management's opinion, this loan review system helps facilitate the early identification of potential criticized loans. MARC also provides guidance for the maintenance and timely disposition of OREO properties including developing financing and marketing programs to incent individuals to purchase OREO. MARC consists of the Bank’s Chief Executive Officer, Chief Financial Officer, Chief Banking Officer, Regional President and Chief Credit Officer, and the activities are governed by a formal written charter. The MARC meets monthly and reports to the Board of Directors.
The Allowance for Credit Loss (ACL) is established as management’s estimate of expected credit losses inherent in the Company’s lending activities; it is increased by the provision for credit losses and decreased by net charge-offs. The ACL is evaluated quarterly by management based on periodic reviews of the collectability of the Company's loans and current economic conditions. The ACL represents the portion of a loan’s amortized cost basis that the Company does not expect to collect due to anticipated credit losses over the loan’s remaining contractual life, adjusted for expected prepayments and curtailments. To estimate the collective ACL, the Company utilizes the Discounted Cash Flow (DCF) methodology. This method uses loan level repayment terms to determine expected cash flows which are then discounted by various assumptions such as prepayment or curtailment rates, Probability of Default (PD) and Loss Given Default (LGD) rates.
The Company incorporates forward-looking information using macroeconomic forecast data obtained from publicly available sources, including variables considered key drivers of changes in credit losses. The Company applies a reasonable and supportable forecast period, followed by a reversion to historical loss information.
In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. Loans that do not share similar risk characteristics are generally evaluated individually. Nonaccrual loans are generally individually evaluated. Loans for which borrowers are experiencing financial difficulty may require evaluation of the source of repayment to determine whether such loans should be categorized as collateral dependent.
The PD is determined by reviewing loans with similar risk characteristics that are combined into loan pools and statistically correlated with historical credit losses, defaults, and various economic metrics, including California unemployment rates, California housing prices, and California gross domestic product. Pool balances identified as having a probability of default are then adjusted for expected loss given default. The Company utilizes the Frye Jacobs Index as a basis for LGD. Model forecasts may be adjusted for inherent limitations or biases identified through independent validation and annual back-testing of model performance to actual realized results.
The Company considers the impact of portfolio concentrations, changes in underwriting practices, and other risk factors that may influence its loss estimation process.
35
The following table provides certain information for the dates indicated with respect to the Company's allowance for credit losses as well as charge-off and recovery activity.
| ($ in thousands) | For the Six Months Ended / June 30, 2026 | For the Six Months Ended / June 30, 2025 | For the Year Ended / December 31, 2025 | For the Year Ended / December 31, 2024 | For the Year Ended / December 31, 2023 |
| --- | --- | --- | --- | --- | --- |
| Balance at beginning of period | $19,959 | $13,196 | $13,196 | $12,867 | $10,717 |
| Initial allowance on acquired PCD loans | - | - | 315 | - | 529 |
| Adjusted balance | 19,959 | 13,196 | 13,511 | 12,867 | 11,246 |
| Charge-offs: | | | | | |
| Commercial | 202 | 165 | 355 | 302 | 123 |
| Agricultural | 6 | 11 | 11 | - | - |
| Real estate – residential | - | - | - | - | - |
| Real estate – commercial | - | - | - | - | - |
| Real estate – construction and land development | - | - | - | - | - |
| Equity Lines of Credit | 75 | - | 66 | - | - |
| Auto | 353 | 251 | 528 | 1,643 | 1,550 |
| Other | 27 | 79 | 135 | 94 | 129 |
| Total charge-offs | 663 | 506 | 1,095 | 2,039 | 1,802 |
| Recoveries: | | | | | |
| Commercial | 52 | 10 | 38 | 25 | 44 |
| Agricultural | - | - | - | - | - |
| Real estate – residential | - | 2 | 49 | 4 | 3 |
| Real estate – commercial | - | - | 7 | 1 | 1 |
| Real estate – construction and land development | - | - | - | - | - |
| Equity Lines of Credit | - | - | - | - | - |
| Auto | 177 | 349 | 544 | 928 | 746 |
| Other | 15 | 8 | 15 | 35 | 54 |
| Total recoveries | 244 | 369 | 653 | 993 | 848 |
| Net charge-offs | 419 | 137 | 442 | 1,046 | 954 |
| Provision for credit losses - loans | 200 | 1,150 | 6,890 | 1,375 | 2,575 |
| Balance at end of period | $19,740 | $14,209 | $19,959 | $13,196 | $12,867 |
| Net charge-offs during the period to average loans (annualized for the six-month periods) | 0.06% | 0.03% | 0.11% | 0.11% | 0.10% |
| Allowance for credit losses to total loans | 1.30% | 1.39% | 1.30% | 1.30% | 1.34% |
The following table provides a breakdown of the allowance for credit losses at June 30, 2026, and December 31, 2025:
| (dollars in thousands) | Balance at End / of Period / 6/30/2026 | Percent of / Loans in Each / Category to / Total Loans / 6/30/2026 | Balance at End / of Period / 12/31/2025 | Percent of / Loans in Each / Category to / Total Loans / 12/31/2025 |
| --- | --- | --- | --- | --- |
| Commercial | $3,117 | 10.7% | $3,246 | 11.1% |
| Agricultural | 4,525 | 9.5% | 3,973 | 10.4% |
| Real estate – residential | 216 | 2.1% | 258 | 2.2% |
| Real estate – commercial | 10,400 | 67.9% | 10,605 | 66.3% |
| Real estate – construction and land development | 360 | 3.2% | 514 | 2.7% |
| Equity Lines of Credit | 475 | 3.6% | 502 | 3.5% |
| Auto | 434 | 2.0% | 591 | 2.6% |
| Other | 213 | 1.0% | 270 | 1.2% |
| Total | $19,740 | 100% | $19,959 | 100% |
36
The following table sets forth the amount of the Company's nonperforming assets as of the dates indicated.
| ($ in thousands) | At / June 30, 2026 | At December 31, 2025 | At December 31, 2024 | At December 31, 2023 |
| --- | --- | --- | --- | --- |
| Nonaccrual loans | $$21,850 | $15,089 | $4,105 | 4,820 |
| Loans past due 90 days or more and still accruing | 1,623 | - | - | - |
| Total nonperforming loans | 23,473 | 15,089 | 4,105 | 4,820 |
| Other real estate owned | 135 | 226 | 91 | 357 |
| Other vehicles owned | 25 | 6 | 111 | 138 |
| Total nonperforming assets | $$23,633 | $15,321 | $4,307 | 5,315 |
| Interest income forgone on nonaccrual loans | $$905 | $1,167 | $301 | 257 |
| Interest income recorded on a cash basis on nonaccrual loans | - | - | - | - |
| Nonperforming loans to total loans | 1.55% | 1.00% | 0.40% | 0.50% |
| Nonperforming assets to total assets | 1.04% | 0.68% | 0.27% | 0.33% |
The Company places loans 90 days or more past due on nonaccrual status unless the loan is well secured and in the process of collection. A loan is considered to be in the process of collection if, based on a probable specific event, it is expected that the loan will be repaid or brought current. Generally, this collection period would not exceed 90 days. When a loan is placed on nonaccrual status the Company's general policy is to reverse and charge against current income previously accrued but unpaid interest. Interest income on such loans is subsequently recognized only to the extent that cash is received and future collection of principal is deemed by management to be probable. Where the collectability of the principal or interest on a loan is considered to be doubtful by management, it is placed on nonaccrual status prior to becoming 90 days delinquent.
Nonperforming assets (which are comprised of nonperforming loans, other real estate owned (“OREO”) and repossessed vehicle holdings) at June 30, 2026, were $23.6 million, up from $15.3 million at December 31, 2025. Nonperforming assets as a percentage of total assets increased to 1.04% at June 30, 2026, up from 0.68% at December 31, 2025. OREO totaled $135 thousand at June 30, 2026, and $226 thousand at December 31, 2025.
Nonperforming loans were $23.5 million at June 30, 2026 and $15.1 million at December 31, 2025. Nonperforming loans as a percentage of total loans increased to 1.55% at June 30, 2026, up from 1.00% at December 31, 2025. The increase in nonperforming loans during the period was primarily attributable to one larger lending relationship and several smaller credits. These loans have been individually evaluated as appropriate under the Company's allowance methodology and are generally supported by collateral values that management believes are sufficient based on current information. Included in nonperforming loans was one loan totaling $1.6 million which was past due 90 days at June 30, 2026 and still accruing interest. This loan was paid in full in July 2026.
During the first half of 2026 we recorded a provision for credit losses of $270 thousand consisting of a provision for credit losses on loans of $200 thousand and an increase in the reserve for unfunded commitments of $70 thousand. This compares to a provision for credit losses of $1.1 million during the same period in 2025. The prior-year provision included $931 thousand of specific reserves associated with an agricultural lending relationship that was placed on nonaccrual status during the second quarter of 2025.
Net charge-offs totaled $419 thousand and $137 thousand during the six months ended June 30, 2026 and 2025, respectively. The allowance for credit losses totaled $19.7 million at June 30, 2026, and $20.0 million at December 31, 2025. Specific reserves related to collateral dependent loans totaled $2.4 million and $1.5 million at June 30, 2026, and December 31, 2025, respectively. The allowance for credit losses as a percentage of total loans was 1.30% at June 30, 2026, and 1.32% at December 31, 2025.
The following table provides a summary of the change in the number and balance of OREO properties for the six months ended June 30, 2026 and 2025 (dollars in thousands):
| ($ in thousands) | Six Months Ended June 30, / # | Six Months Ended June 30, 2026 | Six Months Ended June 30, / # | Six Months Ended June 30, 2025 |
| --- | --- | --- | --- | --- |
| Beginning Balance | $2 | 226 | $1 | 91 |
| Additions | - | - | - | - |
| Dispositions | (1) | (195) | - | - |
| Gain on Sale of OREO | - | 104 | - | - |
| Ending Balance | $1 | 135 | $1 | 91 |
**Investment Portfolio and Federal Reserve Balances.** Total investment securities were $466 million as of June 30, 2026, and $477 million at December 31, 2025. Unrealized losses on available-for-sale investment securities totaling $19.3 million were recorded, net of $5.7 million in tax benefit, as accumulated other comprehensive loss within shareholders' equity at June 30, 2026. No investment securities were sold during the six months ended June 30, 2026. During six months ending June 30, 2025 we sold $1.2 million in available for sale investment securities recording a net gain on sale of $3 thousand.
Unrealized losses on available-for-sale investment securities totaling $14.9 million were recorded, net of $4.4 million in tax benefits, as accumulated other comprehensive loss within shareholders' equity at December 31, 2025.
The investment portfolio at June 30, 2026, consisted of $377 million in securities of U.S. Government-sponsored agencies and U.S. Government agencies, and 155 municipal securities totaling $89 million. The investment portfolio at December 31, 2025, consisted of $388 million in securities of U.S. Government-sponsored agencies and U.S. Government agencies, and 156 municipal securities totaling $89 million.
There were no Federal funds sold at June 30, 2026, and December 31, 2025; however, the Bank maintained interest earning balances at the Federal Reserve Bank totaling $99 million at June 30, 2026, and $39 million at December 31, 2025. The balance on June 30, 2026, earns interest at the rate of 3.65%.
The Company classifies its investment securities as available-for-sale or held-to-maturity. Currently all securities are classified as available-for-sale. Securities classified as available-for-sale may be sold to implement the Company's asset/liability management strategies and in response to changes in interest rates, prepayment rates and similar factors.
37
**Deposits.** Deposits totaled $1.9 billion on June 30, 2026 and $1.8 billion at December 31, 2025. During the six months ended June 30, 2026 total deposits increased by $75 million, or 4% of which $41 million represents accounts that were moved from repurchase agreements to money market deposits during the current period. On June 30, 2026, 46% of the Company’s deposits were in the form of non-interest-bearing demand deposits. At June 30, 2026, brokered deposits consist of a $10 million time deposit acquired from CCB. The rate paid on this deposit is 3.80%.
The following table shows the distribution of deposits by type at June 30, 2026 and December 31, 2025.
| ($ in thousands) | Balance at End / of Period | Percent of / Deposits in Each / Category to / Total Deposits | Balance at End / of Period | Percent of / Deposits in Each / Category to / Total Deposits |
| --- | --- | --- | --- | --- |
| Distribution of Deposits by Type | 06/30/2026 | 06/30/2026 | 12/31/2025 | 12/31/2025 |
| Non-interest bearing | $864,075 | 45.8% | $848,986 | 46.9% |
| Money Market | 474,436 | 25.2% | 440,552 | 24.3% |
| Savings | 304,249 | 16.1% | 309,337 | 17.1% |
| Time | 242,305 | 12.9% | 210,729 | 11.7% |
| Total Deposits | $1,885,065 | 100% | $1,809,604 | 100% |
Deposits represent the Bank's primary source of funds. Deposits are primarily core deposits in that they are demand, savings and time deposits generated from local businesses and individuals. These sources are considered to be relatively stable, long-term relationships thereby enhancing steady growth of the deposit base without major fluctuations in overall deposit balances. The Company experiences, to a small degree, some seasonality with the slower growth period between November through April, and the higher growth period from May through October. To assist in meeting any funding demands, the Company maintains several borrowing agreements as described below.
The Company estimates that it has approximately $811 million in uninsured deposits on June 30, 2026, which includes uninsured deposits of Plumas Bancorp. Of this amount, $230 million represents deposits that are collateralized such as deposits of states, municipalities and tribal accounts. Uninsured amounts are estimated based on the portion of the account balances in excess of FDIC insurance limits.
The following table presents the maturity distribution of the portion of time deposits in excess of the FDIC insurance limit.
| Maturity Distribution of Estimated Uninsured Time Deposits / (dollars in thousands) | June 30, 2026 | December 31, 2025 |
| --- | --- | --- |
| Remaining maturity: | | |
| Three months or less | $45,257 | $18,804 |
| After three through six months | 31,648 | 25,834 |
| After six through twelve months | 33,140 | 15,891 |
| After twelve months | 55,540 | 45,909 |
| Total | $165,585 | $106,438 |
**Short-term Borrowing Arrangements.** The Company is a member of the Federal Home Loan Bank of San Francisco (FHLB) and can borrow up to $441 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $707 million. Based on its current level of FHLB stock holdings the Company can borrow up to $326 million. To borrow the full $441 million in available credit the Company would need to purchase $3 million in additional FHLB stock. The Company is also eligible to borrow at the Federal Reserve Bank (FRB) Discount Window. At June 30, 2026, the Company could borrow up to $38 million at the Discount Window secured by investment securities with a fair value of $39 million. In addition to its FHLB borrowing line and the Discount Window, the Company has unsecured short-term borrowing agreements with two of its correspondent banks in the amounts of $50 million and $20 million. There were no outstanding borrowings to the FHLB, FRB Discount Window or the correspondent banks at June 30, 2026 and December 31, 2025.
38
**Note Payable.** Plumas Bancorp had outstanding borrowings of $14.3 million with a correspondent bank at June 30, 2026. This loan matures on January 25, 2035, and can be prepaid at any time. This borrowing bears interest at a fixed rate of 3.85% for the first 5 years and then beginning January 25, 2027 at a floating interest rate linked to WSJ Prime Rate for the remaining eight-year term. Interest expense recognized on this loan for the six-months ended June 30, 2026 and 2025, was $278 thousand and $290 thousand, respectively.
The Note is secured by the common stock of the Bank. The Loan Agreement contains certain financial and non-financial covenants, which include, but are not limited to, a minimum leverage ratio at the Bank, a minimum total risk-based capital ratio at the Bank, a maximum Texas Ratio at the Bank, a minimum level of Tier 1 capital at the Bank and a return on average assets needed to generate a 1.25X debt service coverage ratio. The Loan Agreement also contains customary events of default, including, but not limited to, failure to pay principal or interest, the commencement of certain bankruptcy proceedings, and certain adverse regulatory events affecting the Company or the Bank. Upon the occurrence of an event of default under the Loan Agreement, the Company’s obligations under the Loan Agreement may be accelerated. The Company was in compliance with all covenants related to the Term Note at June 30, 2026.
**Subordinated Debentures.** In connection with the acquisition of Cornerstone, the Company assumed $12 million of subordinated debentures, including $2 million of 4.75% Fixed‑to‑Floating Rate Subordinated Notes due November 30, 2035 (the “2035 Notes”). The 2035 Notes, which were issued in 2020, have a fixed interest rate of 4.75% for the first ten years and thereafter a quarterly variable interest rate equal to the then current three-month term Secured Overnight Financing Rate (“SOFR”) plus 4.14%. The remaining subordinated notes were called in 2025 and are no longer outstanding. Interest expense recognized on the subordinated notes for the six-months ended June 30, 2026, was $97 thousand.
**Repurchase Agreements.** The Bank offers a repurchase agreement product for its larger customers which use securities sold under agreements to repurchase as an alternative to interest-bearing deposits. Securities sold under agreements to repurchase totaled $59 million and $98 million at June 30, 2026 and December 31, 2025, respectively. The balances at June 30, 2026, are secured by U.S. Government agency securities with a carrying amount of $85 million. Interest expense recognized on repurchase agreements for the six months ended June 30, 2026 and 2025, was $714 thousand and $31 thousand, respectively.
**Shareholders’ Equity**. Shareholders’ equity increased by $11 million from $261 million at December 31, 2025 to $272 million at June 30, 2026. The $11 million increase includes earnings during the three-month period of $19.7 million, stock option exercises of $1.5 million and stock-based compensation expense of $328 thousand. These items were partially offset by an increase in accumulated other comprehensive loss of $3.1 million, the payment of cash dividends totaling $4.6 million and common stock repurchases of $2.8 million.
It is the policy of the Company to periodically distribute excess retained earnings to the shareholders through the payment of cash dividends. Such dividends help promote shareholder value and capital adequacy by enhancing the marketability of the Company’s stock. All authority to provide a return to the shareholders in the form of a cash or stock dividend or split rests with the Board of Directors. The Board will periodically, but on no regular schedule, review the appropriateness of a cash dividend payment. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. The Company paid quarterly cash dividends of $0.33 per share on May 15, 2026 and February 18, 2026 and a quarterly cash dividend of $0.30 per share on February 17, 2025, May 15, 2025, August 15, 2025 and November 17, 2025.
**Capital Standards.** The Company uses a variety of measures to evaluate its capital adequacy. Management reviews these capital measurements on a monthly basis and takes appropriate action to ensure that they are within established internal and external guidelines. The FDIC has promulgated risk-based capital guidelines for all state non-member banks such as the Bank. These guidelines establish a risk-adjusted ratio relating capital to different categories of assets and off-balance sheet exposures.
In July, 2013, the federal bank regulatory agencies adopted rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. depository organizations, sometimes called “Basel III,” that increased the minimum regulatory capital requirements for bank holding companies and depository institutions and implemented strict eligibility criteria for regulatory capital instruments. The Basel III capital rules include a minimum common equity Tier 1 ratio of 4.5%, a Tier 1 capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a minimum leverage ratio of 4.0% (calculated as Tier 1 capital to average consolidated assets). The minimum capital levels required to be considered “well capitalized” include a common equity Tier 1 ratio of 6.5%, a Tier 1 risk-based capital ratio of 8.0%, a total risk-based capital ratio of 10.0% and a leverage ratio of 5.0%. In addition, the Basel III capital rules require that banking organizations maintain a capital conservation buffer of 2.5% above the minimum capital requirements in order to avoid restrictions on their ability to pay dividends, repurchase stock or pay discretionary bonuses. Including the capital conservation buffer of 2.5%, the Basel III capital rules require the following minimum ratios for a bank holding company or bank to be considered well capitalized: a common equity Tier 1 capital ratio of 7.0%, a Tier 1 capital ratio of 8.5%, and a total capital ratio of 10.5%. At June 30, 2026, the Company’s and the Bank’s capital ratios exceeded the thresholds necessary to be considered “well capitalized” under the Basel III framework.
Under the FRB’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement (the “Policy Statement”), qualifying bank holding companies with less than $3 billion in consolidated assets are exempt from the Basel III consolidated capital rules. The Company qualifies for treatment under the Policy Statement and is not currently subject to the Basel III consolidated capital rules at the bank holding company level. The Basel III capital rules continue to apply to the Bank.
In 2019, the federal bank regulators issued a rule establishing a “community bank leverage ratio” (the ratio of a bank’s tier 1 capital to average total consolidated assets) that qualifying institutions with less than $10 billion in assets may elect to use in lieu of the generally applicable leverage and risk-based capital requirements under Basel III. During 2026 this rule was modified to lower the minimum leverage ratio requirement from greater than 9 percent to greater than 8 percent. A qualifying banking organization that elects to use the new ratio will be considered to have met all applicable federal regulatory capital and leverage requirements, including the minimum capital levels required to be considered “well capitalized,” if it maintains a community bank leverage ratio exceeding 8%. The new rule became effective on January 1, 2020. Plumas Bank has chosen to opt into the community bank leverage ratio effective June 30, 2026. The election did not impact the Bank's capital position, which remains well above all regulatory well-capitalized thresholds.
39
The following table sets forth the Bank's actual capital amounts and ratios (dollar amounts in thousands):
| ($ in thousands) / June 30, 2026 | Actual / Amount | Actual / Ratio | Minimum Amount of Capital Required / For Capital / Adequacy Purposes (1) / Amount | Minimum Amount of Capital Required / For Capital / Adequacy Purposes (1) / Ratio | Minimum Amount of Capital Required / To be Well-Capitalized / Under Prompt / Corrective Provisions / Amount | Minimum Amount of Capital Required / To be Well-Capitalized / Under Prompt / Corrective Provisions / Ratio |
| --- | --- | --- | --- | --- | --- | --- |
| Common Equity Tier 1 Ratio | $260,803 | $15.8% | 74,477 | $4.5% | 107,578 | 6.5% |
| Tier 1 Leverage Ratio | 260,803 | 11.8% | 88,670 | 4.0% | 110,837 | 5.0% |
| Tier 1 Risk-Based Capital Ratio | 260,803 | 15.8% | 99,303 | 6.0% | 132,404 | 8.0% |
| Total Risk-Based Capital Ratio | 281,194 | 17.0% | 132,404 | 8.0% | 165,505 | 10.0% |
| December 31, 2025 | | | | | | |
| Common Equity Tier 1 Ratio | $247,747 | $14.8% | 75,265 | $4.5% | 108,717 | 6.5% |
| Tier 1 Leverage Ratio | 247,747 | 11.1% | 89,237 | 4.0% | 111,547 | 5.0% |
| Tier 1 Risk-Based Capital Ratio | 247,747 | 14.8% | 100,354 | 6.0% | 133,805 | 8.0% |
| Total Risk-Based Capital Ratio | 268,425 | 16.0% | 133,805 | 8.0% | 167,257 | 10.0% |
(1) Does not include amounts required to maintain the capital conservation buffer under the new capital rules.
Management believes that Plumas Bank currently meets all its capital adequacy requirements.
The current and projected capital positions of the Bank and the impact of capital plans and long-term strategies are reviewed regularly by management. The Company policy is to maintain the Bank’s ratios above the prescribed well-capitalized ratios at all times.
**Off-Balance Sheet Arrangements**
**Loan Commitments.**In the normal course of business, there are various commitments outstanding to extend credits that are not reflected in the financial statements. Commitments to extend credit and letters of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Annual review of commercial credit lines, letters of credit and ongoing monitoring of outstanding balances reduces the risk of loss associated with these commitments. As of June 30, 2026, the Company had $247 million in unfunded loan commitments and $7.5 million in letters of credit. This compares to $249 million in unfunded loan commitments at December 31, 2025 and $1.6 million in letters of credit. Of the $247 million in unfunded loan commitments, $164 million and $83 million represent commitments to commercial and consumer customers, respectively. Of the total unfunded commitments at June 30, 2026, $126 million were secured by real estate, of which $52 million was secured by commercial real estate and $74 million was secured by residential real estate mostly in the form of equity lines of credit. The commercial loan commitments not secured by real estate primarily represent business lines of credit, while the consumer loan commitments not secured by real estate primarily represent revolving credit card lines and overdraft protection lines. Since some of the commitments are expected to expire without being drawn upon the total commitment amounts do not necessarily represent future cash requirements.
**Operating Leases.** The Company leases eleven branches. Our Yuba City branch is classified as owned; however, it is subject to a long-term land lease. The Company also leases two lending offices and five administrative offices. The Company also leases two lending offices and two administrative offices. The expiration dates of the leases vary, with the first such lease expiring during 2026 and the last such lease expiring during 2044. Including variable lease expense, total rent expense for the six months ended June 30, 2026, and 2025 was $2.1 million and $1.7 million, respectively.
**Liquidity**
The Company manages its liquidity to provide the ability to generate funds to support asset growth, meet deposit withdrawals (both anticipated and unanticipated), fund customers' borrowing needs and satisfy maturity of short-term borrowings. The Company’s liquidity needs are managed using assets or liabilities, or both. On the asset side, in addition to cash and due from banks, the Company maintains an investment portfolio which includes unpledged U.S. Government-sponsored agency securities that are classified as available-for-sale. On the liability side, liquidity needs are managed by offering competitive rates on deposit products and the use of established credit lines.
The Company can borrow up to $441 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $707 million. At June 30, 2026, the Company could borrow up to $38 million at the FRB Discount Window secured by investment securities with a fair value of $39 million. In addition to its FHLB borrowing line and the Discount Window, the Company has unsecured short-term borrowing agreements with two of its correspondent banks in the amounts of $50 million and $20 million. There were no outstanding borrowings to the FHLB, FRB Discount Window or the correspondent banks at June 30, 2026 and December 31 2025.
Customer deposits are the Company’s primary source of funds. Total deposits increased by $75 million from $1.8 billion at December 31, 2025, to $1.9 billion at June 30, 2026. Deposits are held in various forms with varying maturities. The Company estimates that it has approximately $811 million in uninsured deposits which include uninsured deposits of Plumas Bancorp. Of this amount, $230 million represents deposits that are collateralized such as deposits of states, municipalities and tribal accounts.
The Company’s securities portfolio, Discount Window advances, FHLB advances, and cash and due from banks serve as the primary sources of liquidity, providing adequate funding for loans during periods of high loan demand. During periods of decreased lending, funds obtained from the maturing or sale of investments, loan payments, and new deposits are invested in short-term earning assets, such as cash held at the FRB and investment securities, to serve as a source of funding for future loan growth. Management believes that the Company’s available sources of funds, including borrowings, will provide adequate liquidity for its operations in the near future.
40
## ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
## ITEM 4. CONTROLS AND PROCEDURES
**Disclosure Controls and Procedures**
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of June 30, 2026. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2026.
**Changes in Internal Control over Financial Reporting**
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2026 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
41
**PART II — OTHER INFORMATION**
## ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company and/or its subsidiary are a party to claims and legal proceedings arising in the ordinary course of business. In the opinion of the Company's management, the amount of ultimate liability with respect to such proceedings will not have a material adverse effect on the financial condition or results of operations of the Company taken as a whole.
## Item 1A. RISK FACTORS
In addition to the other information set forth in this Form 10-Q you should carefully consider the risk factors that appeared under Item 1A, “Risk Factors” in the Company’s 2025 Annual Report. There are no material changes from the risk factors included within the Company’s 2025 Annual Report.
## ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None.
(c)
On February 2, 2026 the Company’s announced a share repurchase program permitting the repurchase of up to $25.0 million of the Company’s outstanding common stock through the fourth quarter of 2026. During the three months ended June 30, 2026, the Company repurchased 15 thousand shares of its common stock for an aggregate purchase price of approximately $756,000, inclusive of commissions, at an average price of $50.39 per share. All repurchases were executed in open‑market transactions and were funded using available cash on hand.
As of June 30, 2026, approximately $22.2 million remained available for future repurchases under the existing authorization. The Company is not obligated to repurchase any specific number of shares and expects that any future repurchases will depend on market conditions, capital availability, and other corporate considerations.
**Issuer Purchases of Equity Securities**
| Period | Total Number of Shares Purchased | Average Price Paid per Share (1) | Shares Purchased as Part of Announced Plans | Approximate Dollar Value of Shares That May Yet Be Purchased |
| --- | --- | --- | --- | --- |
| April 1-30, 2026 | 10,000 | $49.91 | 10,000 | $22,473,000 |
| May 1-31, 2026 | 5,000 | $51.19 | 5,000 | $22,217,000 |
(1) Excludes commissions, no shares were purchased during June 2026.
## ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
## ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
**ITEM *5.* OTHER INFORMATION**
None.
42
## ITEM 6. EXHIBITS
The following documents are included or incorporated by reference in this Quarterly Report on Form 10Q:
| 2.1 | Agreement and Plan of Merger and Reorganization dated as of January 28, 2025, by and between Plumas Bancorp and Cornerstone Community Bancorp included as Exhibit 2.1 to the Registrant's 8-K filed on January 29, 2025, which is incorporated by this reference herein. |
| --- | --- |
| 3.1 | Articles of Incorporation as amended of Registrant included as Exhibit 3.1 to the Registrant’s Form S-4, File No. 333-84534, which is incorporated by reference herein. |
| 3.2 | Bylaws of Registrant as amended on August 16, 2023 included as Exhibit 3.1 to the Registrant’s Form 8-K for August 17, 2023, which is incorporated by reference herein. |
| 3.3 | Amendment of the Articles of Incorporation of Registrant dated November 1, 2002, is included as Exhibit 3.3 to the Registrant’s 10-Q for March 31, 2005, which is incorporated by this reference herein. |
| 3.4 | Amendment of the Articles of Incorporation of Registrant dated August 17, 2005, is included as Exhibit 3.4 to the Registrant’s 10-Q for March 31, 2005, which is incorporated by this reference herein. |
| 4 | Specimen form of certificate for Plumas Bancorp included as Exhibit 4 to the Registrant’s Form S-4, File No. 333-84534, which is incorporated by reference herein. |
| 4.1 | Description of Securities of Plumas Bancorp Registered Under Section 12 of the Exchange Act, is included as Exhibit 4.1 to the Registrant's 10-K for December 31, 2023, which is incorporated by this reference herein. |
| 10.1 | Form of Indemnification Agreement (Plumas Bancorp) is included as Exhibit 10.1 to the Registrant’s 8-K filed on August 20,2020 which is incorporated by this reference herein. |
| 10.2 | Form of Indemnification Agreement (Plumas Bank) is included as Exhibit 10.2 to the Registrant’s 8-K filed on August 20,2020 which is incorporated by this reference herein. |
| 10.3* | Salary Continuation Agreement of Kevin Kaiser dated May 1, 2026. |
| 10.4* | Salary Continuation Agreement of Jack Prescott dated May 1, 2026. |
| 31.1* | Rule 13a-14(a) [Section 302] Certification of Principal Financial Officer dated August 5, 2026. |
| 31.2* | Rule 13a-14(a) [Section 302] Certification of Principal Executive Officer dated August 5, 2026. |
| 32.1* | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated August 5, 2026. |
| 32.2* | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated August 5, 2026. |
43
| 101.INS* | Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
| --- | --- |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed herewith |
**SIGNATURES**
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
**PLUMAS BANCORP**
(Registrant)
Date: August 5, 2026
/s/ Richard L. Belstock
Richard L. Belstock
*Chief Financial Officer*
/s/ Andrew J. Ryback
Andrew J. Ryback
*Director,* *President and Chief Executive Officer*
44
---
## EXHIBIT 10.3
SEC source: [ex_985901.htm](https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/ex_985901.htm)
**Exhibit 10.3**
PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
**PLUMAS BANK**
**SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT**
This SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT (“Agreement”) is made and entered into this first day of May, 2026, between Plumas Bank (“Bank”), a bank located in Quincy, CA, and Kevin Kaiser (“Executive”).
**Article 1**
**Benefits Tables**
The following tables describe the benefits available to the Executive, or the Executive’s Beneficiary, upon the occurrence of certain events. Capitalized terms have the meanings given in Article 3. Except for death, each benefit described is in lieu of any other benefit herein.
**Table A: Retirement Benefit**
**Normal Retirement Date (**“**NRD**”**) = May 1, 2036**
Distribution Event Amount of Benefit Form of Benefit Timing of Benefit Distribution
Executive’s Separation from Service following attainment of the Normal Retirement Date. Annual benefit equal to $80,000 per year (“Annual Benefit”). Annual Benefit shall be distributed through equal monthly installments representing 1/12th of the Annual Benefit. Payments shall commence on the first day of the month immediately following the month of Executive’s Separation from Service and shall continue for ten (10) years.
**Table B: Benefit Available Prior to Retirement**
Distribution Event Amount of Benefit Form of Benefit Timing of Benefit Distribution
Separation from Service prior to the Executive’s Normal Retirement Date for reasons other than Separation from Service within twenty-four (24) months following a Change in Control or Separation from Service for Cause. Accrued Liability Balance, as of the last day of the month immediately prior to Executive’s Separation from Service. The Accrued Liability Balance shall continue to accrue earnings at the Discount Rate until all monthly installments are completely distributed. Accrued Liability Balance shall be distributed in equal monthly installments. Payments shall commence on the first day of the month immediately following the Executive’s attainment of their Normal Retirement Date and shall continue for ten (10) years.
Change in Control followed within twenty-four (24) months by Executive’s Separation from Service. Annual Benefit as provided in Table A, hereinabove. Annual Benefit shall be distributed through equal monthly installments representing 1/12th of the Annual Benefit. Payments shall commence on the first day of the month immediately following the month of Executive’s Separation from Service and shall continue for ten (10) years.
PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
**Table C: Death Benefit**
Distribution Event Amount of Benefit Form of Benefit Timing of Benefit Distribution
Executive’s death while actively employed with the Bank. Accrued Liability Balance, as of the last day of the month immediately prior to Executive’s death. The Accrued Liability Balance shall continue to accrue earnings at the Discount Rate until all monthly installments are completely distributed. Accrued Liability Balance shall be distributed in equal monthly installments. Payments to the Beneficiary (ies) shall commence on the first day of the month immediately following the Executive’s death and shall continue for ten (10) years.
Death prior to commencement of payments under Table A or Table B. The same benefit to which the Executive was entitled to prior to the Executive’s death. Benefit shall be distributed in equally monthly installments. Payments to the Beneficiary (ies) shall commence on the first day of the month immediately following the Executive’s death and shall continue for ten (10) years.
Death during installment payout of benefit under Tables A or B. Remaining installment payments, if any, under Table A or B. In the same form of benefit distribution had the Executive lived. Payment(s) to the Beneficiary (ies) continue on same schedule as if Executive had lived.
**Article 2**
**Purpose**
The purpose of this Agreement is to further the growth and development of the Bank by providing Executive with supplemental retirement income and thereby encourage Executive’s productive efforts on behalf of the Bank and the Bank’s depositors, and to align the interests of the Executive and those depositors. The Bank promises to make certain payments to the Executive, or the Executive’s Beneficiary, at retirement, death, or upon some other qualifying event pursuant to the terms of this Agreement.
**Article 3**
**Definitions and Construction**
It is intended that this Agreement comply and be construed in accordance with Section 409A of the Internal Revenue Code (the “Code”). It is also intended that the Agreement be “unfunded” and maintained for a select group of management or highly compensated employees of the Bank, for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and not be construed to provide income to the Executive or Beneficiary under the Code prior to actual receipt of benefits.
Where the following words and phrases appear in the Agreement, they shall have the respective meanings set forth below, unless their context clearly indicates to the contrary:
3.1 “Accrued Liability Balance” shall mean the amount accrued by the Bank to fund the future benefit expense associated with this Agreement. The Bank shall account for this benefit using Generally Accepted Accounting Principles, regulatory accounting guidance of the Bank’s primary federal regulator, and other applicable accounting guidance, including APB 12 and FAS 106. Accordingly, the Bank shall establish a liability retirement account for the Executive into which appropriate accruals shall be made using a reasonable discount rate, which may be adjusted from time to time.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
3.2 “Beneficiary” shall mean the person(s) designated by the Executive, including the estate of the Executive, entitled to a benefit under this Agreement.
3.3 “Board” shall mean the Board of Directors of the Bank.
3.4 “Change in Control” shall mean a change in ownership or control of the Bank as defined in Treasury Regulation §1.409A-3(i)(5) or any subsequently applicable published authority or guidance.
3.5 “Code” shall mean the Internal Revenue Code of 1986, as amended, and all regulations and guidance thereunder.
3.6 “Discount Rate” shall mean the rate used by the Bank for determining the Accrued Liability Balance.
3.7 “Effective Date” shall mean May 1, 2026.
3.8 “Plan Year” shall mean each a twelve (12) month period commencing on January 1and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date of the Agreement and end on the following December 31.
3.9 “Separation from Service” shall mean that the Executive has retired or otherwise has a termination of employment with the Bank. For purposes of this Agreement, whether a termination of employment or service has occurred is determined based on whether the facts and circumstances indicate that the Bank and Executive reasonably anticipated that no further services would be performed after a certain date, or that the level of bona fide services the Executive would perform after such date (whether as an Executive or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an Executive or an independent contractor) over the immediately preceding thirty-six (36) month period (or the full period of services to the Bank if the Executive has been providing services to the Bank less than 36 months). Facts and circumstances to be considered in making this determination include, but are not limited to, whether the Executive continues to be treated as an Executive for other purposes (such as continuation of salary and participation in Executive benefit programs), whether similarly situated service providers have been treated consistently, and whether the Executive is permitted, and realistically available, to perform services for other service recipients in the same line of business. An Executive will be presumed not to have had a Separation from Service where the level of bona fide services performed continues at a level that is fifty percent (50%) or more of the average level of service performed by the Executive during the immediately preceding thirty-six (36) month period. A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence, provided Executive has the right to reemployment under an applicable statute or by contract.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
3.10 “Termination for Cause” shall mean a termination of employment for:
(a) Gross negligence or gross neglect of duties to the Bank; or
(b) Conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive’s employment with the Bank; or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Bank policy committed in connection with the Executive’s employment and resulting in a material adverse effect on the Bank.
3.11 “Unforeseeable Emergency” shall mean a severe financial hardship to the Executive resulting from an illness or accident of the Executive, the Executive’s spouse, the Executive’s dependent, or the Executive’s Beneficiary, loss of the Executive’s property due to casualty, other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Executive. The imminent foreclosure of or eviction from the service provider’s primary residence may constitute an Unforeseeable Emergency. In addition, the need to pay for medical expenses, including non-refundable deductibles, as well as for the costs of prescription drug medication, may constitute an Unforeseeable Emergency. Finally, the need to pay for the funeral expenses of a spouse, a beneficiary, or a dependent may also constitute an Unforeseeable Emergency. At all times this definition shall be construed in accordance with the definition under Section 409A. If the Executive seeks to terminate any current deferral elections or re-start the deferral election, it must be done in accordance with Section 409A.
**Article 4**
**Distributions During Lifetime**
4.1 Hardship Distribution. The Bank will permit early withdrawals for an Unforeseeable Emergency under certain circumstances arising as a result of events beyond the control of the Executive. The Executive may submit an application for an in-service early withdrawal due to an Unforeseeable Emergency to the Board of Directors. If, in the discretion of the Board, the Executive is permitted to take an early withdrawal due to an Unforeseeable Emergency, the Board shall make a distribution to such Executive from the Deferral Account. Such distribution shall be paid in one (1) lump sum within thirty (30) days, after the Board determines that the Executive is permitted to take an early withdrawal due to an Unforeseeable Emergency. The amount of such lump sum payment shall be limited to the amount reasonably necessary to meet the Executive’s requirements to the extent such emergency is not relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Executive’s assets, (to the extent the liquidation of such assets will not cause severe financial hardship) or by cessation of deferrals.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
4.2 Restriction on Timing of Distributions. Solely to the extent necessary to avoid penalties under Section 409A, distributions under this Agreement may not commence earlier than six (6) months after a Separation from Service (as described under the “Separation from Service” provision herein) if, pursuant to Internal Revenue Code Section 409A, the Executive hereto is considered a “Specified Employee” of a publicly-traded company. In the event a distribution is delayed pursuant to this Section, the originally scheduled distribution shall be delayed for six (6) months and shall commence instead on the first day of the seventh month following Separation from Service. If payments are scheduled to be made in installments, the first six (6) months of installment payments shall be delayed, aggregated, and paid instead on the first day of the seventh month, after which all installment payments shall be made on their regular schedule. If payment is scheduled to be made in a lump sum, the lump sum payment shall be delayed for six (6) months and instead be made on the first day of the seventh month.
4.3 Distributions Upon Income Inclusion Under Section 409A of the Code. If any amount is required to be included in income by the Executive prior to receipt due to a failure of this Agreement to meet the requirements of Code Section 409A, the Executive may petition the Plan Administrator for a distribution of that portion of the amount the Bank has accrued with respect to the Bank’s obligations hereunder that is required to be included in the Executive’s income. Upon the grant of such petition, which grant shall not be unreasonably withheld, the Bank shall distribute to the Executive immediately available funds in an amount equal to the portion of the amount the Bank has accrued with respect to the Bank’s obligations hereunder required to be included in income as a result of the failure of this Agreement to meet the requirements of Code Section 409A, within ninety (90) days of the date when the Executive’s petition is granted. Such a distribution shall effect and reduce the Executive’s benefits to be paid under this Agreement.
4.4 Change in Form or Timing of Distributions. Any change to the form or timing of distributions hereunder shall be considered made only when it becomes irrevocable under the terms of the Agreement. Any change will be considered irrevocable not later than thirty (30) days following acceptance of the change by the Plan Administrator and must comply with the following rules:
| (1) | The change may not accelerate the time or schedule of any distribution, except as provided in Code Section 1.409A-3(j)(4); |
| --- | --- |
| (2) | The subsequent deferral election may not take effect until at least twelve (12) months after the date on which the election is made; |
| (3) | The payment (except in the case of death, Disability, or Unforeseeable Emergency) upon which the subsequent deferral election is made is deferred for a period of not less than five (5) years from the date such payment would otherwise have been paid; and |
| (4) | In the case of a payment made at a specified time, the election must be made not less than twelve (12) months before the date the payment is scheduled to be paid. |
**Article 5**
**Beneficiary**
5.1 Beneficiary. Executive shall have the right to name a Beneficiary of the death benefit, if any, described in Article 1 herein. Executive shall have the right to name such Beneficiary at any time prior to Executive’s death and submit it to the Plan Administrator (or Plan Administrator’s representative) on the form provided. Once received and acknowledged by the Plan Administrator, the form shall be effective. The Executive may change the Beneficiary designation at any time by submitting a new form to the Plan Administrator. Any such change shall follow the same rules as for the original Beneficiary designation and shall automatically supersede the existing Beneficiary form on file with the Plan Administrator.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
5.2 Failure to Designate a Beneficiary. If Executive dies without a valid Beneficiary designation on file with the Plan Administrator, the Executive’s surviving spouse, if any, shall become the designated Beneficiary. If Executive has no surviving spouse, death benefits shall be paid to the personal representative of Executive’s estate.
5.3 Facility of Distribution. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount.
**Article 6**
**General Limitations**
6.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if Executive’s employment is terminated for Cause.
6.2 Removal.Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.
6.3 Suicide or Misstatement. The Bank shall not pay any benefit under this Agreement if the Executive commits suicide within three (3) years after the date of this Agreement. In addition, the Bank shall not pay any benefit under this Agreement if the Executive has made any material misstatement of fact on an employment application or resume provided to the Bank, or on any application for any benefits provided by the Bank to the Executive.
**Article 7**
**Administration of Agreement**
7.1 Plan Administrator Duties. The Bank shall be the Plan Administrator, unless the Bank appoints a committee to be the Plan Administrator. The Bank may appoint a committee (“Committee”) of one or more individuals in the employment of Bank for the purpose of discharging the administrative responsibilities of the Bank under the Plan. The Bank may remove a Committee member for any reason by giving such member ten (10) days’ written notice and may thereafter fill any vacancy thus created. The Committee shall represent the Bank in all matters concerning the administration of this Plan; provided however, the final authority for all administrative and operational decisions relating to the Plan remains with the Bank.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
7.2 Authority of Plan Administrator. The Plan Administrator shall have full power and authority to adopt rules and regulations for the administration of the Plan, provided they are not inconsistent with the provisions of this Plan, and Section 409A of the Code, to interpret, alter, amend or revoke any rules and regulations so adopted, to enter into contracts on behalf of the Bank with respect to this Agreement, to make discretionary decisions under this Plan, to demand satisfactory proof of the occurrence of any event that is a condition precedent to the commencement of any payment or discharge of any obligation under the Plan, and to perform any and all administrative duties under this Plan.
7.3 Recusal. An individual serving as Plan Administrator may be eligible to participate in the Plan, but such person shall not be entitled to participate in discretionary decisions under Article 8 relating to such person’s own interests in the Plan.
7.4 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time-to-time consult with counsel who may be counsel to the Bank.
7.5 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement.
7.6 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by such contracted party.
7.7 Bank Information. To enable any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement to perform its functions, the Bank shall supply full and timely information to such contracted party on all matters relating to the date and circum‐stances of any event triggering a benefit hereunder.
7.8 Annual Statement. Any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement shall provide to the Bank, on the schedule set forth in the Administrative Services Contract, a statement setting forth the benefits to be distributed under this Agreement.
**Article 8**
**Claims and Review Procedures**
8.1 Claims Procedure. If Executive, beneficiary or his or her representative is denied all or a portion of an expected Agreement benefit for any reason and the Executive, beneficiary or his or her representative desires to dispute the decision of the Administrator, he or she must file a written notification of his or her claim with the Plan Administrator ("Claimant").
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
8.1.1 Initiation – Written Claim. Upon receipt of any written claim for benefits, the Plan Administrator shall be notified and shall give due consideration to the claim presented. If any Claimant claims to be entitled to benefits under the Agreement and the Plan Administrator determines that the claim should be denied in whole or in part, the Plan Administrator shall, in writing, notify such Claimant within ninety (90) days of receipt of the claim that the claim has been denied. The Plan Administrator may extend the period of time for making a determination with respect to any claim for a period of up to ninety (90) days, provided that the Plan Administrator determines that such an extension is necessary because of special circumstances and notifies the Claimant, prior to the expiration of the initial ninety (90) day period, of the circumstances requiring the extension of time and the date by which the Agreement expects to render a decision. If the claim is denied to any extent by the Plan Administrator, the Plan Administrator shall furnish the Claimant with a written notice setting forth:
(a) the specific reason or reasons for denial of the claim;
(b) a specific reference to the Agreement provisions on which the denial is based;
(c) a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary; and
(d) an explanation of the provisions of this Article.
Under no circumstances shall any failure by the Plan Administrator to comply with the provisions of this Section 8.1.1 be considered to constitute an allowance of the Claimant’s claim.
8.2 Review Procedure. A Claimant who has a claim denied wholly or partially under Section 8.1.1 may appeal to the Plan Administrator for reconsideration of that claim. A request for reconsideration under this Section 8.2 must be filed by written notice within sixty (60) days after receipt by the Claimant of the notice of denial under Section 8.1.1.
8.2.1 Upon receipt of an appeal the Plan Administrator shall promptly take action to give due consideration to the appeal. Such consideration may include a hearing of the parties involved, if the Plan Administrator feels such a hearing is necessary. In preparing for this appeal the Claimant shall be given the right to review pertinent documents and the right to submit in writing a statement of issues and comments. After consideration of the merits of the appeal the Plan Administrator shall issue a written decision which shall be binding on all parties. The decision shall specifically state its reasons and pertinent Agreement provisions on which it relies. The Plan Administrator’s decision shall be issued within sixty (60) days after the appeal is filed, except that the Plan Administrator may extend the period of time for making a determination with respect to any claim for a period of up one-hundred and twenty (120) days, provided that the Plan Administrator determines that such an extension is necessary because of special circumstances and notifies the Claimant, prior to the expiration of the initial one-hundred and twenty (120) day period, of the circumstances requiring the extension of time and the date by which the Plan Administrator expects to render a decision. Under no circumstances shall any failure by the Plan Administrator to comply with the provisions of this Section 8.2.1 be considered to constitute an allowance of the Claimant’s claim. For issues involving medical judgment, the employee must consult with an independent health care professional who may not be the health care professional who rendered the initial claim.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
8.3 Designation. The Plan Administrator may designate any other person of its choosing to make any determination otherwise required under this Article. Any person so designated shall have the same authority and discretion granted to the Plan Administrator hereunder.
**Article 9**
**Amendments and Termination**
9.1 Amendments. This Agreement may be amended only by a written agreement signed by the Bank and the Executive. However, the Bank may unilaterally amend this Agreement to conform to written directives to the Bank from its auditors or bank regulators or to comply with legislative changes or tax law, including without limitation Section 409A of the Code and any and all Treasury regulations and guidance promulgated thereunder.
9.2 Plan Termination – Generally. This Agreement may be terminated only by a written agreement signed by the Bank and the Executive. Except as provided in Section 9.3, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, after such termination, benefit distributions will be made at the earliest distribution event permitted under Table A.
9.3 Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 9.2, if this Agreement terminates in the following circumstances:
(a) Within thirty (30) days before or twelve (12) months after a Change in Control, provided that all distributions are made no later than twelve (12) months following such termination of the Agreement and further provided that all the Bank’s arrangements which are substantially similar to the Agreement are terminated so the Trustee and all participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of such terminations;
(b) Upon the Bank’s dissolution or with the approval of a bankruptcy court provided that the amounts deferred under the Agreement are included in the Trustee’s gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or
(c) Upon the Bank’s termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulations Section 1.409A-1(c) if the Trustee participated in such arrangements (“Similar Arrangements”), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) all termination distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and (iii) the Bank does not adopt any new arrangements that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Agreement;
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
the Bank may distribute the appropriate benefit as provided for within this Agreement and determined as of the date of the termination of the Agreement, to the Trustee in a lump sum subject to the above terms.
**Article 10**
**Miscellaneous**
10.1 Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, administrators and transferees.
10.2 No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain an employee of the Bank, nor does it interfere with the Bank's right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.
10.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
10.4 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. The Executive acknowledges that the Bank’s sole liability regarding taxes is to forward any amount withheld to the appropriate taxing authority (ies).
10.5 Applicable Law. This Agreement shall be governed by, construed and administered in accordance with the applicable provisions of ERISA, Code Section 409(A), Treasury Regulation § 1.409A and any other applicable federal law, provided, however, that to the extent not preempted by federal law this Agreement shall be governed by the laws of the state where the Bank’s primary corporate headquarters is located, except to the extent preempted by the laws of the United States of America.
10.6 Unfunded Arrangement. The Executive is a general unsecured creditor of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive's life or other informal funding asset is a general asset of the Bank to which the Executive has no preferred or secured claim.
10.7 Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor bank.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
10.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.
10.9 Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.
10.10 Alternative Action. In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement, the Bank or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank.
10.11 Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.
10.12 Validity. If any provision of this Agreement is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provision of this Agreement and this Agreement shall be construed and enforced as if such provision had not been included therein.
10.13 Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:
Plumas Bank
35 S. Lindan Ave.
Quincy, CA 95971
Atten: Andrew Ryback
Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.
10.14 Right to Setoff. The Bank may, to the extent permitted by applicable law, deduct from and setoff against any amounts payable to an Executive from this Agreement such amounts as may be owed by a Executive to the Bank, although the Executive shall remain liable for any part of the Executive’s payment obligation not satisfied through such deduction and setoff. By participating in the Agreement, the Executive agrees to any deduction or setoff under this Section 10.14, which is allowed by law.
10.15 Limitation on Actions. Executive or Beneficiary who disagrees with a denial of his appealed claim under Article 9 of this Agreement must file any complaint in a federal District Court to dispute such determination (a) within three (3) years of the earlier of the date on which such claim for benefits first accrued or arose under the terms of the Agreement, or (b) within one (1) year after the such claim was denied upon appeal, or deemed denied under Article 9 hereof.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
10.16 No Guarantee of Tax Consequences. While the Agreement is intended to provide tax deferral for Executive, the Agreement is not a guarantee that the intended tax deferral will be achieved. Executive is solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with this Agreement. Neither the Bank nor any of its directors, officers or employees shall have any obligation to indemnify or otherwise hold Executive harmless from any such taxes.
10.17 Deduction Limitation on Benefit Payments. If the Bank reasonably anticipates that the Bank’s deduction with respect to any distribution under this Agreement would be limited or eliminated by application of Code Section 162(m), then to the extent deemed necessary by the Bank to ensure that the entire amount of any distribution from this Agreement is deductible, the Bank may delay payment of any amount that would otherwise be distributed under this Agreement. The delayed amounts shall be distributed to the Executive (or Beneficiary in the event of the Executive’s death) at the earliest date the Bank reasonably anticipates that the deduction of the payment of the amount will not be limited or eliminated by application of Code Section 162(m).
10.18 Suicide or Misstatement. No benefit shall be distributed if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Bank denies coverage for misstatements of fact made by the Executive on an application for such life insurance or for any other reason.
10.19 Opportunity to Consult with Independent Advisors. The Executive acknowledges that he has been afforded the opportunity to consult with independent advisors of his choosing including, without limitation, accountants or tax advisors and counsel regarding both the benefits granted to him under the terms of this Agreement and the (i) terms and conditions which may affect the Executive's right to these benefits, and (ii) personal tax effects of such benefits including, without limitation, the effects of any federal or state taxes, Section 280G of the Code, Section 409A of the Code, and any other taxes, costs, expenses or liabilities whatsoever related to such benefits, which in any of the foregoing instances the Executive acknowledges and agrees shall be the sole responsibility of the Executive notwithstanding any other term or provision of this Agreement. The Executive further acknowledges and agrees that the Bank shall have no liability whatsoever related to any such personal tax effects or other personal costs, expenses, or liabilities applicable to the Executive and further specifically waives any right for himself or herself, and his or her heirs, beneficiaries, legal representatives, agents, successor and assign to claim or assert liability on the part of the Bank related to the matters described above in this Section 10.19. The Executive further acknowledges that he has read, understands and consents to all of the terms and conditions of this Agreement, and that he enters into this Agreement with a full understanding of its terms and conditions.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement as of the date indicated above.
- **EXECUTIVE:** **BANK:**
- **Plumas Bank**
- **By**
- **Kevin Kaiser**
- **Title**
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
**BENEFICIARY DESIGNATION FORM**
**( )** **New Designation**
**( )** **Change in Designation**
I, ______________________, designate the following as Beneficiary under the Agreement:
Primary:
Name Relationship
Name Relationship
\_\_\_\_\_%
\_\_\_\_\_%
Contingent:
Name Relationship
Name Relationship
Name Relationship
\_\_\_\_\_%
\_\_\_\_\_%
\_\_\_\_\_%
**Notes:**
- **Please PRINT CLEARLY or TYPE the names of the beneficiaries.**
- **To name a trust as beneficiary, please provide the name of the trustee(s) and the** **exact** **name and date of the trust agreement.**
- **To name your estate as beneficiary, please write** “**Estate of** **[your name]**”**.**
- **Be aware that none of the contingent beneficiaries will receive anything unless ALL of the primary beneficiaries predecease you.**
I understand that I may change these beneficiary designations by delivering a new written designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death.
**Name:** **_______________________________**
**Signature:** **________________________________** **Date:** **____________**
**SPOUSAL CONSENT (Required if Spouse is not named beneficiary):**
I consent to the beneficiary designation above and acknowledge that if I am named Beneficiary and our marriage is subsequently dissolved, the designation will automatically be revoked.
Spouse Name: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Signature: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Date: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Received by the Plan Administrator this _____ day of __________________, 2026
By: _______________________________
Title: _____________________________
13
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## EXHIBIT 10.4
SEC source: [ex_985902.htm](https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/ex_985902.htm)
**Exhibit 10.4**
PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
**PLUMAS BANK**
**SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT**
This SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT (“Agreement”) is made and entered into this first day of May, 2026, between Plumas Bank (“Bank”), a bank located in Quincy, CA, and Jack Prescott (“Executive”).
**Article 1**
**Benefits Tables**
The following tables describe the benefits available to the Executive, or the Executive’s Beneficiary, upon the occurrence of certain events. Capitalized terms have the meanings given in Article 3. Except for death, each benefit described is in lieu of any other benefit herein.
**Table A: Retirement Benefit**
**Normal Retirement Date (**“**NRD**”**) = May 1, 2036**
Distribution Event Amount of Benefit Form of Benefit Timing of Benefit Distribution
Executive’s Separation from Service following attainment of the Normal Retirement Date. Annual benefit equal to $80,000 per year (“Annual Benefit”). Annual Benefit shall be distributed through equal monthly installments representing 1/12th of the Annual Benefit. Payments shall commence on the first day of the month immediately following the month of Executive’s Separation from Service and shall continue for ten (10) years.
**Table B: Benefit Available Prior to Retirement**
Distribution Event Amount of Benefit Form of Benefit Timing of Benefit Distribution
Separation from Service prior to the Executive’s Normal Retirement Date for reasons other than Separation from Service within twenty-four (24) months following a Change in Control or Separation from Service for Cause. Accrued Liability Balance, as of the last day of the month immediately prior to Executive’s Separation from Service. The Accrued Liability Balance shall continue to accrue earnings at the Discount Rate until all monthly installments are completely distributed. Accrued Liability Balance shall be distributed in equal monthly installments. Payments shall commence on the first day of the month immediately following the Executive’s attainment of their Normal Retirement Date and shall continue for ten (10) years.
Change in Control followed within twenty-four (24) months by Executive’s Separation from Service. Annual Benefit as provided in Table A, hereinabove. Annual Benefit shall be distributed through equal monthly installments representing 1/12th of the Annual Benefit. Payments shall commence on the first day of the month immediately following the month of Executive’s Separation from Service and shall continue for ten (10) years.
PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
**Table C: Death Benefit**
Distribution Event Amount of Benefit Form of Benefit Timing of Benefit Distribution
Executive’s death while actively employed with the Bank. Accrued Liability Balance, as of the last day of the month immediately prior to Executive’s death. The Accrued Liability Balance shall continue to accrue earnings at the Discount Rate until all monthly installments are completely distributed. Accrued Liability Balance shall be distributed in equal monthly installments. Payments to the Beneficiary (ies) shall commence on the first day of the month immediately following the Executive’s death and shall continue for ten (10) years.
Death prior to commencement of payments under Table A or Table B. The same benefit to which the Executive was entitled to prior to the Executive’s death. Benefit shall be distributed in equally monthly installments. Payments to the Beneficiary (ies) shall commence on the first day of the month immediately following the Executive’s death and shall continue for ten (10) years.
Death during installment payout of benefit under Tables A or B. Remaining installment payments, if any, under Table A or B. In the same form of benefit distribution had the Executive lived. Payment(s) to the Beneficiary (ies) continue on same schedule as if Executive had lived.
**Article 2**
**Purpose**
The purpose of this Agreement is to further the growth and development of the Bank by providing Executive with supplemental retirement income and thereby encourage Executive’s productive efforts on behalf of the Bank and the Bank’s depositors, and to align the interests of the Executive and those depositors. The Bank promises to make certain payments to the Executive, or the Executive’s Beneficiary, at retirement, death, or upon some other qualifying event pursuant to the terms of this Agreement.
**Article 3**
**Definitions and Construction**
It is intended that this Agreement comply and be construed in accordance with Section 409A of the Internal Revenue Code (the “Code”). It is also intended that the Agreement be “unfunded” and maintained for a select group of management or highly compensated employees of the Bank, for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and not be construed to provide income to the Executive or Beneficiary under the Code prior to actual receipt of benefits.
Where the following words and phrases appear in the Agreement, they shall have the respective meanings set forth below, unless their context clearly indicates to the contrary:
3.1 “Accrued Liability Balance” shall mean the amount accrued by the Bank to fund the future benefit expense associated with this Agreement. The Bank shall account for this benefit using Generally Accepted Accounting Principles, regulatory accounting guidance of the Bank’s primary federal regulator, and other applicable accounting guidance, including APB 12 and FAS 106. Accordingly, the Bank shall establish a liability retirement account for the Executive into which appropriate accruals shall be made using a reasonable discount rate, which may be adjusted from time to time.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
3.2 “Beneficiary” shall mean the person(s) designated by the Executive, including the estate of the Executive, entitled to a benefit under this Agreement.
3.3 “Board” shall mean the Board of Directors of the Bank.
3.4 “Change in Control” shall mean a change in ownership or control of the Bank as defined in Treasury Regulation §1.409A-3(i)(5) or any subsequently applicable published authority or guidance.
3.5 “Code” shall mean the Internal Revenue Code of 1986, as amended, and all regulations and guidance thereunder.
3.6 “Discount Rate” shall mean the rate used by the Bank for determining the Accrued Liability Balance.
3.7 “Effective Date” shall mean May 1, 2026.
3.8 “Plan Year” shall mean each a twelve (12) month period commencing on January 1and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date of the Agreement and end on the following December 31.
3.9 “Separation from Service” shall mean that the Executive has retired or otherwise has a termination of employment with the Bank. For purposes of this Agreement, whether a termination of employment or service has occurred is determined based on whether the facts and circumstances indicate that the Bank and Executive reasonably anticipated that no further services would be performed after a certain date, or that the level of bona fide services the Executive would perform after such date (whether as an Executive or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an Executive or an independent contractor) over the immediately preceding thirty-six (36) month period (or the full period of services to the Bank if the Executive has been providing services to the Bank less than 36 months). Facts and circumstances to be considered in making this determination include, but are not limited to, whether the Executive continues to be treated as an Executive for other purposes (such as continuation of salary and participation in Executive benefit programs), whether similarly situated service providers have been treated consistently, and whether the Executive is permitted, and realistically available, to perform services for other service recipients in the same line of business. An Executive will be presumed not to have had a Separation from Service where the level of bona fide services performed continues at a level that is fifty percent (50%) or more of the average level of service performed by the Executive during the immediately preceding thirty-six (36) month period. A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence, provided Executive has the right to reemployment under an applicable statute or by contract.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
3.10 “Termination for Cause” shall mean a termination of employment for:
(a) Gross negligence or gross neglect of duties to the Bank; or
(b) Conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive’s employment with the Bank; or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Bank policy committed in connection with the Executive’s employment and resulting in a material adverse effect on the Bank.
3.11 “Unforeseeable Emergency” shall mean a severe financial hardship to the Executive resulting from an illness or accident of the Executive, the Executive’s spouse, the Executive’s dependent, or the Executive’s Beneficiary, loss of the Executive’s property due to casualty, other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Executive. The imminent foreclosure of or eviction from the service provider’s primary residence may constitute an Unforeseeable Emergency. In addition, the need to pay for medical expenses, including non-refundable deductibles, as well as for the costs of prescription drug medication, may constitute an Unforeseeable Emergency. Finally, the need to pay for the funeral expenses of a spouse, a beneficiary, or a dependent may also constitute an Unforeseeable Emergency. At all times this definition shall be construed in accordance with the definition under Section 409A. If the Executive seeks to terminate any current deferral elections or re-start the deferral election, it must be done in accordance with Section 409A.
**Article 4**
**Distributions During Lifetime**
4.1 Hardship Distribution. The Bank will permit early withdrawals for an Unforeseeable Emergency under certain circumstances arising as a result of events beyond the control of the Executive. The Executive may submit an application for an in-service early withdrawal due to an Unforeseeable Emergency to the Board of Directors. If, in the discretion of the Board, the Executive is permitted to take an early withdrawal due to an Unforeseeable Emergency, the Board shall make a distribution to such Executive from the Deferral Account. Such distribution shall be paid in one (1) lump sum within thirty (30) days, after the Board determines that the Executive is permitted to take an early withdrawal due to an Unforeseeable Emergency. The amount of such lump sum payment shall be limited to the amount reasonably necessary to meet the Executive’s requirements to the extent such emergency is not relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Executive’s assets, (to the extent the liquidation of such assets will not cause severe financial hardship) or by cessation of deferrals.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
4.2 Restriction on Timing of Distributions. Solely to the extent necessary to avoid penalties under Section 409A, distributions under this Agreement may not commence earlier than six (6) months after a Separation from Service (as described under the “Separation from Service” provision herein) if, pursuant to Internal Revenue Code Section 409A, the Executive hereto is considered a “Specified Employee” of a publicly-traded company. In the event a distribution is delayed pursuant to this Section, the originally scheduled distribution shall be delayed for six (6) months and shall commence instead on the first day of the seventh month following Separation from Service. If payments are scheduled to be made in installments, the first six (6) months of installment payments shall be delayed, aggregated, and paid instead on the first day of the seventh month, after which all installment payments shall be made on their regular schedule. If payment is scheduled to be made in a lump sum, the lump sum payment shall be delayed for six (6) months and instead be made on the first day of the seventh month.
4.3 Distributions Upon Income Inclusion Under Section 409A of the Code. If any amount is required to be included in income by the Executive prior to receipt due to a failure of this Agreement to meet the requirements of Code Section 409A, the Executive may petition the Plan Administrator for a distribution of that portion of the amount the Bank has accrued with respect to the Bank’s obligations hereunder that is required to be included in the Executive’s income. Upon the grant of such petition, which grant shall not be unreasonably withheld, the Bank shall distribute to the Executive immediately available funds in an amount equal to the portion of the amount the Bank has accrued with respect to the Bank’s obligations hereunder required to be included in income as a result of the failure of this Agreement to meet the requirements of Code Section 409A, within ninety (90) days of the date when the Executive’s petition is granted. Such a distribution shall effect and reduce the Executive’s benefits to be paid under this Agreement.
4.4 Change in Form or Timing of Distributions. Any change to the form or timing of distributions hereunder shall be considered made only when it becomes irrevocable under the terms of the Agreement. Any change will be considered irrevocable not later than thirty (30) days following acceptance of the change by the Plan Administrator and must comply with the following rules:
| (1) | The change may not accelerate the time or schedule of any distribution, except as provided in Code Section 1.409A-3(j)(4); |
| --- | --- |
| (2) | The subsequent deferral election may not take effect until at least twelve (12) months after the date on which the election is made; |
| (3) | The payment (except in the case of death, Disability, or Unforeseeable Emergency) upon which the subsequent deferral election is made is deferred for a period of not less than five (5) years from the date such payment would otherwise have been paid; and |
| (4) | In the case of a payment made at a specified time, the election must be made not less than twelve (12) months before the date the payment is scheduled to be paid. |
**Article 5**
**Beneficiary**
5.1 Beneficiary. Executive shall have the right to name a Beneficiary of the death benefit, if any, described in Article 1 herein. Executive shall have the right to name such Beneficiary at any time prior to Executive’s death and submit it to the Plan Administrator (or Plan Administrator’s representative) on the form provided. Once received and acknowledged by the Plan Administrator, the form shall be effective. The Executive may change the Beneficiary designation at any time by submitting a new form to the Plan Administrator. Any such change shall follow the same rules as for the original Beneficiary designation and shall automatically supersede the existing Beneficiary form on file with the Plan Administrator.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
5.2 Failure to Designate a Beneficiary. If Executive dies without a valid Beneficiary designation on file with the Plan Administrator, the Executive’s surviving spouse, if any, shall become the designated Beneficiary. If Executive has no surviving spouse, death benefits shall be paid to the personal representative of Executive’s estate.
5.3 Facility of Distribution. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount.
**Article 6**
**General Limitations**
6.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if Executive’s employment is terminated for Cause.
6.2 Removal.Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.
6.3 Suicide or Misstatement. The Bank shall not pay any benefit under this Agreement if the Executive commits suicide within three (3) years after the date of this Agreement. In addition, the Bank shall not pay any benefit under this Agreement if the Executive has made any material misstatement of fact on an employment application or resume provided to the Bank, or on any application for any benefits provided by the Bank to the Executive.
**Article 7**
**Administration of Agreement**
7.1 Plan Administrator Duties. The Bank shall be the Plan Administrator, unless the Bank appoints a committee to be the Plan Administrator. The Bank may appoint a committee (“Committee”) of one or more individuals in the employment of Bank for the purpose of discharging the administrative responsibilities of the Bank under the Plan. The Bank may remove a Committee member for any reason by giving such member ten (10) days’ written notice and may thereafter fill any vacancy thus created. The Committee shall represent the Bank in all matters concerning the administration of this Plan; provided however, the final authority for all administrative and operational decisions relating to the Plan remains with the Bank.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
7.2 Authority of Plan Administrator. The Plan Administrator shall have full power and authority to adopt rules and regulations for the administration of the Plan, provided they are not inconsistent with the provisions of this Plan, and Section 409A of the Code, to interpret, alter, amend or revoke any rules and regulations so adopted, to enter into contracts on behalf of the Bank with respect to this Agreement, to make discretionary decisions under this Plan, to demand satisfactory proof of the occurrence of any event that is a condition precedent to the commencement of any payment or discharge of any obligation under the Plan, and to perform any and all administrative duties under this Plan.
7.3 Recusal. An individual serving as Plan Administrator may be eligible to participate in the Plan, but such person shall not be entitled to participate in discretionary decisions under Article 8 relating to such person’s own interests in the Plan.
7.4 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time-to-time consult with counsel who may be counsel to the Bank.
7.5 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement.
7.6 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by such contracted party.
7.7 Bank Information. To enable any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement to perform its functions, the Bank shall supply full and timely information to such contracted party on all matters relating to the date and circum‐stances of any event triggering a benefit hereunder.
7.8 Annual Statement. Any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement shall provide to the Bank, on the schedule set forth in the Administrative Services Contract, a statement setting forth the benefits to be distributed under this Agreement.
**Article 8**
**Claims and Review Procedures**
8.1 Claims Procedure. If Executive, beneficiary or his or her representative is denied all or a portion of an expected Agreement benefit for any reason and the Executive, beneficiary or his or her representative desires to dispute the decision of the Administrator, he or she must file a written notification of his or her claim with the Plan Administrator ("Claimant").
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
8.1.1 Initiation – Written Claim. Upon receipt of any written claim for benefits, the Plan Administrator shall be notified and shall give due consideration to the claim presented. If any Claimant claims to be entitled to benefits under the Agreement and the Plan Administrator determines that the claim should be denied in whole or in part, the Plan Administrator shall, in writing, notify such Claimant within ninety (90) days of receipt of the claim that the claim has been denied. The Plan Administrator may extend the period of time for making a determination with respect to any claim for a period of up to ninety (90) days, provided that the Plan Administrator determines that such an extension is necessary because of special circumstances and notifies the Claimant, prior to the expiration of the initial ninety (90) day period, of the circumstances requiring the extension of time and the date by which the Agreement expects to render a decision. If the claim is denied to any extent by the Plan Administrator, the Plan Administrator shall furnish the Claimant with a written notice setting forth:
(a) the specific reason or reasons for denial of the claim;
(b) a specific reference to the Agreement provisions on which the denial is based;
(c) a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary; and
(d) an explanation of the provisions of this Article.
Under no circumstances shall any failure by the Plan Administrator to comply with the provisions of this Section 8.1.1 be considered to constitute an allowance of the Claimant’s claim.
8.2 Review Procedure. A Claimant who has a claim denied wholly or partially under Section 8.1.1 may appeal to the Plan Administrator for reconsideration of that claim. A request for reconsideration under this Section 8.2 must be filed by written notice within sixty (60) days after receipt by the Claimant of the notice of denial under Section 8.1.1.
8.2.1 Upon receipt of an appeal the Plan Administrator shall promptly take action to give due consideration to the appeal. Such consideration may include a hearing of the parties involved, if the Plan Administrator feels such a hearing is necessary. In preparing for this appeal the Claimant shall be given the right to review pertinent documents and the right to submit in writing a statement of issues and comments. After consideration of the merits of the appeal the Plan Administrator shall issue a written decision which shall be binding on all parties. The decision shall specifically state its reasons and pertinent Agreement provisions on which it relies. The Plan Administrator’s decision shall be issued within sixty (60) days after the appeal is filed, except that the Plan Administrator may extend the period of time for making a determination with respect to any claim for a period of up one-hundred and twenty (120) days, provided that the Plan Administrator determines that such an extension is necessary because of special circumstances and notifies the Claimant, prior to the expiration of the initial one-hundred and twenty (120) day period, of the circumstances requiring the extension of time and the date by which the Plan Administrator expects to render a decision. Under no circumstances shall any failure by the Plan Administrator to comply with the provisions of this Section 8.2.1 be considered to constitute an allowance of the Claimant’s claim. For issues involving medical judgment, the employee must consult with an independent health care professional who may not be the health care professional who rendered the initial claim.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
8.3 Designation. The Plan Administrator may designate any other person of its choosing to make any determination otherwise required under this Article. Any person so designated shall have the same authority and discretion granted to the Plan Administrator hereunder.
**Article 9**
**Amendments and Termination**
9.1 Amendments. This Agreement may be amended only by a written agreement signed by the Bank and the Executive. However, the Bank may unilaterally amend this Agreement to conform to written directives to the Bank from its auditors or bank regulators or to comply with legislative changes or tax law, including without limitation Section 409A of the Code and any and all Treasury regulations and guidance promulgated thereunder.
9.2 Plan Termination – Generally. This Agreement may be terminated only by a written agreement signed by the Bank and the Executive. Except as provided in Section 9.3, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, after such termination, benefit distributions will be made at the earliest distribution event permitted under Table A.
9.3 Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 9.2, if this Agreement terminates in the following circumstances:
(a) Within thirty (30) days before or twelve (12) months after a Change in Control, provided that all distributions are made no later than twelve (12) months following such termination of the Agreement and further provided that all the Bank’s arrangements which are substantially similar to the Agreement are terminated so the Trustee and all participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of such terminations;
(b) Upon the Bank’s dissolution or with the approval of a bankruptcy court provided that the amounts deferred under the Agreement are included in the Trustee’s gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or
(c) Upon the Bank’s termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulations Section 1.409A-1(c) if the Trustee participated in such arrangements (“Similar Arrangements”), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) all termination distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and (iii) the Bank does not adopt any new arrangements that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Agreement;
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
the Bank may distribute the appropriate benefit as provided for within this Agreement and determined as of the date of the termination of the Agreement, to the Trustee in a lump sum subject to the above terms.
**Article 10**
**Miscellaneous**
10.1 Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, administrators and transferees.
10.2 No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain an employee of the Bank, nor does it interfere with the Bank's right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.
10.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
10.4 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. The Executive acknowledges that the Bank’s sole liability regarding taxes is to forward any amount withheld to the appropriate taxing authority (ies).
10.5 Applicable Law. This Agreement shall be governed by, construed and administered in accordance with the applicable provisions of ERISA, Code Section 409(A), Treasury Regulation § 1.409A and any other applicable federal law, provided, however, that to the extent not preempted by federal law this Agreement shall be governed by the laws of the state where the Bank’s primary corporate headquarters is located, except to the extent preempted by the laws of the United States of America.
10.6 Unfunded Arrangement. The Executive is a general unsecured creditor of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive's life or other informal funding asset is a general asset of the Bank to which the Executive has no preferred or secured claim.
10.7 Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor bank.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
10.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.
10.9 Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.
10.10 Alternative Action. In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement, the Bank or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank.
10.11 Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.
10.12 Validity. If any provision of this Agreement is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provision of this Agreement and this Agreement shall be construed and enforced as if such provision had not been included therein.
10.13 Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:
Plumas Bank
35 S. Lindan Ave.
Quincy, CA 95971
Atten: Andrew Ryback
Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.
10.14 Right to Setoff. The Bank may, to the extent permitted by applicable law, deduct from and setoff against any amounts payable to an Executive from this Agreement such amounts as may be owed by a Executive to the Bank, although the Executive shall remain liable for any part of the Executive’s payment obligation not satisfied through such deduction and setoff. By participating in the Agreement, the Executive agrees to any deduction or setoff under this Section 10.14, which is allowed by law.
10.15 Limitation on Actions. Executive or Beneficiary who disagrees with a denial of his appealed claim under Article 9 of this Agreement must file any complaint in a federal District Court to dispute such determination (a) within three (3) years of the earlier of the date on which such claim for benefits first accrued or arose under the terms of the Agreement, or (b) within one (1) year after the such claim was denied upon appeal, or deemed denied under Article 9 hereof.
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PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
10.16 No Guarantee of Tax Consequences. While the Agreement is intended to provide tax deferral for Executive, the Agreement is not a guarantee that the intended tax deferral will be achieved. Executive is solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with this Agreement. Neither the Bank nor any of its directors, officers or employees shall have any obligation to indemnify or otherwise hold Executive harmless from any such taxes.
10.17 Deduction Limitation on Benefit Payments. If the Bank reasonably anticipates that the Bank’s deduction with respect to any distribution under this Agreement would be limited or eliminated by application of Code Section 162(m), then to the extent deemed necessary by the Bank to ensure that the entire amount of any distribution from this Agreement is deductible, the Bank may delay payment of any amount that would otherwise be distributed under this Agreement. The delayed amounts shall be distributed to the Executive (or Beneficiary in the event of the Executive’s death) at the earliest date the Bank reasonably anticipates that the deduction of the payment of the amount will not be limited or eliminated by application of Code Section 162(m).
10.18 Suicide or Misstatement. No benefit shall be distributed if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Bank denies coverage for misstatements of fact made by the Executive on an application for such life insurance or for any other reason.
10.19 Opportunity to Consult with Independent Advisors. The Executive acknowledges that he has been afforded the opportunity to consult with independent advisors of his choosing including, without limitation, accountants or tax advisors and counsel regarding both the benefits granted to him under the terms of this Agreement and the (i) terms and conditions which may affect the Executive's right to these benefits, and (ii) personal tax effects of such benefits including, without limitation, the effects of any federal or state taxes, Section 280G of the Code, Section 409A of the Code, and any other taxes, costs, expenses or liabilities whatsoever related to such benefits, which in any of the foregoing instances the Executive acknowledges and agrees shall be the sole responsibility of the Executive notwithstanding any other term or provision of this Agreement. The Executive further acknowledges and agrees that the Bank shall have no liability whatsoever related to any such personal tax effects or other personal costs, expenses, or liabilities applicable to the Executive and further specifically waives any right for himself or herself, and his or her heirs, beneficiaries, legal representatives, agents, successor and assign to claim or assert liability on the part of the Bank related to the matters described above in this Section 10.19. The Executive further acknowledges that he has read, understands and consents to all of the terms and conditions of this Agreement, and that he enters into this Agreement with a full understanding of its terms and conditions.
11
PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement as of the date indicated above.
- **EXECUTIVE:** **BANK:**
- **Plumas Bank**
- **By**
- **Jack Prescott**
- **Title**
12
PLUMAS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
**BENEFICIARY DESIGNATION FORM**
**( )** **New Designation**
**( )** **Change in Designation**
I, ______________________, designate the following as Beneficiary under the Agreement:
Primary:
Name Relationship
Name Relationship
\_\_\_\_\_%
\_\_\_\_\_%
Contingent:
Name Relationship
Name Relationship
Name Relationship
\_\_\_\_\_%
\_\_\_\_\_%
\_\_\_\_\_%
**Notes:**
- **Please PRINT CLEARLY or TYPE the names of the beneficiaries.**
- **To name a trust as beneficiary, please provide the name of the trustee(s) and the** **exact** **name and date of the trust agreement.**
- **To name your estate as beneficiary, please write** “**Estate of** **[your name]**”**.**
- **Be aware that none of the contingent beneficiaries will receive anything unless ALL of the primary beneficiaries predecease you.**
I understand that I may change these beneficiary designations by delivering a new written designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death.
**Name:** **_______________________________**
**Signature:** **________________________________** **Date:** **____________**
**SPOUSAL CONSENT (Required if Spouse is not named beneficiary):**
I consent to the beneficiary designation above and acknowledge that if I am named Beneficiary and our marriage is subsequently dissolved, the designation will automatically be revoked.
Spouse Name: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Signature: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Date: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Received by the Plan Administrator this _____ day of __________________, 2026
By: _______________________________
Title: _____________________________
13
---
## EXHIBIT 31.1
SEC source: [ex_966512.htm](https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/ex_966512.htm)
Exhibit 31.1
**CERTIFICATION** **UNDER SECTION 302 OF THE SARBANES OXLEY ACT OF 2002**
I, Richard L. Belstock, Chief Financial Officer, certify that:
1. I have reviewed this report on Form 10-Q of Plumas Bancorp;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 5, 2026 /s/ Richard L. Belstock
Richard L. Belstock, Chief Financial Officer
---
## EXHIBIT 31.2
SEC source: [ex_966513.htm](https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/ex_966513.htm)
Exhibit 31.2
**CERTIFICATION** **UNDER SECTION 302 OF THE SARBANES OXLEY ACT OF 2002**
I, Andrew J. Ryback, Chief Executive Officer, certify that:
1. I have reviewed this report on Form 10-Q of Plumas Bancorp;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 5, 2026 /s/ Andrew J. Ryback
Andrew J. Ryback, Chief Executive Officer
---
## EXHIBIT 32.1
SEC source: [ex_966514.htm](https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/ex_966514.htm)
Exhibit 32.1
**CERTIFICATION OF** **CHIEF** **FINANCIAL** **OFFICER**
**Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Plumas Bancorp (the “Company”) hereby certifies, to such officer’s knowledge, that:
(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2026 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 5, 2026 /s/ Richard L. Belstock
Richard L. Belstock, Chief Financial Officer
---
## EXHIBIT 32.2
SEC source: [ex_966515.htm](https://www.sec.gov/Archives/edgar/data/1168455/000143774926025819/ex_966515.htm)
Exhibit 32.2
**Certification of Chief Executive Officer**
**Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Plumas Bancorp (the “Company”) hereby certifies, to such officer’s knowledge, that:
(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2026 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 5, 2026 /s/ Andrew J. Ryback
Andrew J. Ryback, Chief Executive Officer