Equibles

10-Q

FIRST NORTHERN COMMUNITY BANCORP (FNRN)

10-Q 2025-11-07 For: 2025-09-30
View Original
Added on April 06, 2026

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the Quarterly Period Ended September 30, 2025

OR

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

For the transition period from _______________ to _______________

Commission File Number 000-30707

First Northern Community Bancorp

(Exact name of registrant as specified in its charter)

California 68-0450397
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
195 N. First Street, Dixon, California 95620
--- ---
(Address of principal executive offices) (Zip Code)

707-678-3041

(Registrant’s telephone number including area code)

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

Title of each class Trading symbols(s) Name of each exchange on which registered
None Not Applicable Not Applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

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

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares of Common Stock outstanding as of November 3, 2025 was 15,724,784.

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FIRST NORTHERN COMMUNITY BANCORP

INDEX

Page
PART I  – Financial Information 3
ITEM I. – Financial Statements (Unaudited) 3
Condensed Consolidated Balance Sheets (Unaudited) 3
Condensed Consolidated Statements of Income (Unaudited) 4
Condensed Consolidated Statements of Comprehensive Income (Unaudited) 5
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) 6
Condensed Consolidated Statements of Cash Flows (Unaudited) 7
Notes to Condensed Consolidated Financial Statements 8
ITEM 2. – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 33
ITEM 3. – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 51
ITEM 4. – CONTROLS AND PROCEDURES 51
PART II – OTHER INFORMATION 51
ITEM 1. – LEGAL PROCEEDINGS 51
ITEM 1A. – RISK FACTORS 51
ITEM 2. – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 57
ITEM 3. – DEFAULTS UPON SENIOR SECURITIES 57
ITEM 4. – MINE SAFETY DISCLOSURES 57
ITEM 5. – OTHER INFORMATION 57
ITEM 6. – EXHIBITS 58
SIGNATURES 59

2

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PART I – FINANCIAL INFORMATION

FIRST NORTHERN COMMUNITY BANCORP

ITEM I. – FINANCIAL STATEMENTS (UNAUDITED)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share amounts) December 31, 2024
Assets **** ****
Cash and cash equivalents 149,510 $ 119,448
Certificates of deposit 12,890 16,074
Investment securities – available-for-sale, at estimated fair value, net of allowance for credit losses of 0; amortized cost of 627,245 at September 30, 2025 and 682,346 at December 31, 2024 601,502 633,853
Loans, net of allowance for credit losses of 15,699 at September 30, 2025 and 15,885 at December 31, 2024 1,055,971 1,046,852
Stock in Federal Home Loan Bank and other equity securities, at cost 10,871 10,518
Premises and equipment, net 8,523 9,248
Other real estate owned 1,241 —
Core deposit intangible, net 2,771 3,321
Interest receivable and other assets 64,929 52,408
Total Assets 1,908,208 $ 1,891,722
Liabilities and Stockholders’ Equity **** ****
Liabilities:
Deposits:
Demand deposits 700,088 $ 715,424
Interest-bearing transaction deposits 384,376 376,250
Savings and MMDA's 459,649 458,445
Time, 250,000 or less 88,253 108,598
Time, over 250,000 54,050 41,372
Total deposits 1,686,416 1,700,089
Interest payable and other liabilities 17,023 15,301
Total Liabilities 1,703,439 1,715,390
Commitments and contingencies (Note 7)
Stockholders' Equity:
Common stock, no par value; 32,000,000 shares authorized; 15,720,784 shares issued and outstanding at September 30, 2025 and 15,943,051 shares issued and outstanding at December 31, 2024 125,605 127,902
Additional paid-in capital 977 977
Retained earnings 96,094 81,304
Accumulated other comprehensive loss, net (17,907 ) (33,851 )
Total Stockholders’ Equity 204,769 176,332
Total Liabilities and Stockholders’ Equity 1,908,208 $ 1,891,722

All values are in US Dollars.

See notes to unaudited condensed consolidated financial statements.

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FIRST NORTHERN COMMUNITY BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three months ended Three months ended Nine months ended Nine months ended
(in thousands, except per share amounts) September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024
Interest and dividend income: **** **** **** ****
Loans $ 14,589 $ 14,315 $ 42,820 $ 41,620
Due from banks interest bearing accounts 1,223 1,820 3,278 5,619
Investment securities:
Taxable 4,068 3,586 12,553 9,519
Non-taxable 419 312 1,203 825
Other earning assets 245 261 767 784
Total interest and dividend income 20,544 20,294 60,621 58,367
Interest expense: **** **** **** ****
Deposits 3,697 3,798 10,803 10,531
FHLB advances — — 75 —
Total interest expense 3,697 3,798 10,878 10,531
Net interest income 16,847 16,496 49,743 47,836
(Reversal of) provision for credit losses — (550 ) 850 200
Net interest income after provision for credit losses 16,847 17,046 48,893 47,636
Non-interest income: **** **** **** ****
Service charges on deposit accounts 433 427 1,270 1,292
Gains on sales of loans held-for-sale 18 36 42 41
Investment and brokerage services income 145 146 446 422
Mortgage brokerage income — — — 20
Loan servicing income 70 75 217 208
Debit card income 690 710 2,041 2,074
Losses on sales/calls of available-for-sale securities (59 ) (75 ) (148 ) (155 )
Other income 361 219 780 627
Total non-interest income 1,658 1,538 4,648 4,529
Non-interest expenses: **** **** **** ****
Salaries and employee benefits 6,391 6,242 18,960 18,506
Occupancy and equipment 1,362 1,204 3,781 3,514
Data processing 1,236 1,079 3,431 3,065
Stationery and supplies 79 45 227 187
Advertising 126 109 356 303
Directors’ fees 77 74 211 229
Amortization of core deposit intangible 181 203 550 617
Other expense 2,471 1,978 6,890 6,039
Total non-interest expenses 11,923 10,934 34,406 32,460
Income before provision for income taxes 6,582 7,650 19,135 19,705
Provision for income taxes 569 2,162 3,985 5,517
Net income $ 6,013 $ 5,488 $ 15,150 $ 14,188
Basic earnings per common share $ 0.39 $ 0.35 $ 0.97 $ 0.89
Diluted earnings per common share $ 0.38 $ 0.34 $ 0.96 $ 0.88

See notes to unaudited condensed consolidated financial statements.

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FIRST NORTHERN COMMUNITY BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Three months ended Nine months ended Nine months ended
(in thousands) September 30, 2024 September 30, 2025 September 30, 2024
Net income 6,013 $ 5,488 $ 15,150 $ 14,188
Other comprehensive income, net of tax:
Unrealized holding gains arising during the period, net of tax effect of 1,939 and 5,084 for the three months ended September 30, 2025 and September 30, 2024, respectively and 6,762 and 4,462 for the nine months ended September 30, 2025 and September 30, 2024, respectively 4,692 12,114 15,840 10,631
Less: reclassification adjustment due to losses realized on sales of securities, net of tax effect of 17 and 22 for the three months ended September 30, 2025 and September 30, 2024, respectively and 44 and 46 for the nine months ended September 30, 2025 and September 30, 2024, respectively 42 53 104 109
Other comprehensive income, net of tax 4,734 $ 12,167 $ 15,944 $ 10,740
Comprehensive income 10,747 $ 17,655 $ 31,094 $ 24,928

All values are in US Dollars.

See notes to unaudited condensed consolidated financial statements.

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FIRST NORTHERN COMMUNITY BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

**** **** **** Accumulated ****
**** **** Additional **** Other ****
(in thousands, except share data) Common Stock Paid-in Retained Comprehensive ****
Shares Amounts Capital Earnings Loss, net of tax Total
Balance at December 31, 2023 15,482,332 $ 123,235 $ 977 $ 68,760 $ (33,727 ) $ 159,245
Net income 4,276 4,276
Other comprehensive loss, net of taxes (1,461 ) (1,461 )
Stock dividend adjustment 2,671 325 (325 ) —
Cash in lieu of fractional shares (148 ) (7 ) (7 )
Stock-based compensation 296 296
Common shares issued related to restricted stock grants, net of restricted stock forfeited 57,489 — —
Stock options exercised, net of swapped shares 8,387 — —
Balance at March 31, 2024 15,550,731 $ 123,856 $ 977 $ 72,704 $ (35,188 ) $ 162,349
Net income 4,424 4,424
Other comprehensive income, net of taxes 34 34
Stock-based compensation 159 159
Common shares issued related to restricted stock grants 4,470 — —
Stock repurchase and retirement (137,500 ) (1,239 ) (1,239 )
Stock options exercised, net of swapped shares 1,872 — —
Balance at June 30, 2024 15,419,573 $ 122,776 $ 977 $ 77,128 $ (35,154 ) $ 165,727
Net income 5,488 5,488
Other comprehensive income, net of taxes 12,167 12,167
Stock-based compensation 171 171
Restricted stock forfeited (768 ) — —
Stock repurchase and retirement (155,778 ) (1,556 ) (1,556 )
Balance at September 30, 2024 15,263,027 $ 121,391 $ 977 $ 82,616 $ (22,987 ) $ 181,997
Balance at December 31, 2024 15,943,051 $ 127,902 $ 977 $ 81,304 $ (33,851 ) $ 176,332
Net income 3,671 3,671
Other comprehensive income, net of taxes 8,886 8,886
Stock dividend adjustment (616 ) 352 (352 ) —
Cash in lieu of fractional shares (129 ) (8 ) (8 )
Stock-based compensation 198 198
Common shares issued related to restricted stock grants 64,807 — —
Stock options exercised, net of swapped shares 17,936 — —
Stock repurchase and retirement (127,120 ) (1,274 ) (1,274 )
Balance at March 31, 2025 15,897,929 $ 127,178 $ 977 $ 84,615 $ (24,965 ) $ 187,805
Net income 5,466 5,466
Other comprehensive income, net of taxes 2,324 2,324
Stock-based compensation 166 166
Stock options exercised, net of swapped shares 9,162 — —
Stock repurchase and retirement (88,763 ) (876 ) (876 )
Balance at June 30, 2025 15,818,328 $ 126,468 $ 977 $ 90,081 $ (22,641 ) $ 194,885
Net income 6,013 6,013
Other comprehensive income, net of taxes 4,734 4,734
Stock-based compensation 257 257
Stock repurchase and retirement (97,544 ) (1,120 ) (1,120 )
Balance at September 30, 2025 15,720,784 $ 125,605 $ 977 $ 96,094 $ (17,907 ) $ 204,769

See notes to unaudited condensed consolidated financial statements.

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FIRST NORTHERN COMMUNITY BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine months ended Nine months ended
(in thousands) September 30, 2025 September 30, 2024
Cash Flows From Operating Activities **** ****
Net income $ 15,150 $ 14,188
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 753 792
Accretion and amortization of investment securities premiums and discounts, net (1,027 ) 505
(Increase) decrease in deferred loan origination fees and costs, net (120 ) 43
Amortization of core deposit intangible 550 617
Provision for credit losses 850 200
Stock-based compensation 621 626
Losses on sales/calls of available-for-sale securities 148 155
Amortization of operating lease right-of-use asset 674 701
Gains on sales of loans held-for-sale (42 ) (41 )
Proceeds from sales of loans held-for-sale 2,683 3,155
Originations of loans held-for-sale (2,641 ) (3,114 )
Gain on purchase of tax credits (1,215 ) —
Purchase of tax credits (14,218 ) —
Changes in assets and liabilities:
Increase in interest receivable and other assets (7,111 ) (1,128 )
Increase (decrease) in interest payable and other liabilities 4,265 (3,492 )
Net cash (used in) provided by operating activities (680 ) 13,207
Cash Flows From Investing Activities **** ****
Proceeds from calls or maturities of available-for-sale securities 39,800 59,785
Proceeds from sales of available-for-sale securities 29,426 4,652
Principal repayments on available-for-sale securities 64,229 54,745
Purchases of available-for-sale securities (77,475 ) (164,641 )
Proceeds from maturities of certificates of deposit 4,124 6,166
Purchases of certificates of deposit (940 ) (5,700 )
Net (increase) decrease in loans (9,849 ) 9,918
Purchases of Federal Home Loan Bank stock and other equity securities, at cost (353 ) —
Purchases of premises and equipment (1,269 ) (221 )
Net cash provided by (used in) investing activities 47,693 (35,296 )
Cash Flows From Financing Activities **** ****
Net (decrease) increase in deposits (13,673 ) 39,598
Cash dividends paid in lieu of fractional shares (8 ) (7 )
Repurchases of common stock (3,270 ) (2,795 )
Net cash (used in) provided by financing activities (16,951 ) 36,796
Net increase in Cash and Cash Equivalents 30,062 14,707
Cash and Cash Equivalents, beginning of period 119,448 149,211
Cash and Cash Equivalents, end of period $ 149,510 $ 163,918
Supplemental Disclosures of Cash Flow Information: **** ****
Cash paid during the period for:
Interest $ 11,372 $ 10,753
Income taxes 3,970 6,320
Supplemental disclosures of non-cash investing and financing activities:
Stock dividend distributed 7,510 6,392
Unrealized holding gains on available-for-sale securities, net of taxes 15,944 10,740
Market value of shares tendered in-lieu of cash to pay for exercise of options 805 348
Recognition of right-of-use assets obtained in exchange for operating lease liabilities 2,543 —
Transfer of premises and equipment to other real estate owned 1,241 —

See notes to unaudited condensed consolidated financial statements.

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FIRST NORTHERN COMMUNITY BANCORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025 and 2024 and December 31, 2024

1.         BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of First Northern Community Bancorp (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of results expected for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the Securities and Exchange Commission ("SEC"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. All material intercompany balances and transactions have been eliminated in consolidation.

2.         ACCOUNTING POLICIES

The most significant accounting policies followed by the Company are presented in Note 1 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined.

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Among other things, these amendments provide additional transparency into an entity’s income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The standard requires that public business entities disclose, on an annual basis, specific categories in the rate reconciliation and additional information for reconciling items meeting a certain quantitative threshold. The amendments also require that entities disclose on an annual basis: 1) income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes and 2) the income taxes paid (net of refunds received) disaggregated by individual jurisdictions exceeding 5% of total income taxes paid (net of refunds received). The amendments are effective for public business entities for annual periods beginning after December 15, 2024. The Company has evaluated this ASU and does not expect the adoption to have a material impact on the Company's consolidated financial statements.

In March 2024, the FASB issued guidance within ASU 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. The amendments in the ASU apply to companies that provide employees and non-employees with profits interest and similar awards to align compensation with a company’s operating performance and provide those holders with the opportunity to participate in future profits and/or equity appreciation of the company. The purpose of the ASU is to clarify the application of the scope guidance in Accounting Standards Codification (ASC) paragraph 718-10-15-3 in determining if a profit interest award should be accounted for in accordance with Topic 718: Compensation—Stock Compensation. The amendment in ASC paragraph 718-10-15-3 is solely intended to improve the overall clarity and does not change the guidance. The ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. If a company adopts the amendments in an interim period, it should adopt them as of the beginning of the annual period that includes the interim period. The amendments should be applied either (1) retrospectively to all prior periods presented in the financial statements or (2) on a prospective basis. The Company has evaluated this ASU and does not expect the adoption to have a material impact on the Company’s consolidated financial statements, as the Company does not typically provide these types of awards.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.  This ASU requires public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period.

In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. ASU 2025-01 amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted.  The Company is evaluating the accounting and disclosure requirements of this update and the impact of adopting the new guidance on the consolidated financial statements.

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3.         INVESTMENT SECURITIES

The amortized cost, unrealized gains and losses, estimated fair values, and allowance for credit losses (ACL) of investments in debt and other securities at September 30, 2025 are summarized as follows:

Amortized Unrealized Unrealized Estimated
(in thousands) cost gains losses fair value ACL
Investment securities available-for-sale: ****
U.S. Treasury securities $ 92,385 $ 384 $ (607 ) $ 92,162 $ —
Securities of U.S. government agencies and corporations 86,522 426 (2,309 ) 84,639 —
Obligations of states and political subdivisions 75,885 246 (4,127 ) 72,004 —
Collateralized mortgage obligations 102,672 133 (11,538 ) 91,267 —
Mortgage-backed securities 269,781 1,425 (9,776 ) 261,430 —
Total debt securities $ 627,245 $ 2,614 $ (28,357 ) $ 601,502 $ —

The amortized cost, unrealized gains and losses and estimated fair values of investments in debt and other securities at December 31, 2024 are summarized as follows:

Amortized Unrealized Unrealized Estimated **** ****
(in thousands) cost gains losses fair value ACL
Investment securities available-for-sale: **** **** **** **** **** **** **** **** **** **** ****
U.S. Treasury securities $ 107,188 $ 134 $ (1,777 ) $ 105,545 $ —
Securities of U.S. government agencies and corporations 100,218 62 (4,596 ) 95,684 —
Obligations of states and political subdivisions 72,576 87 (5,072 ) 67,591 —
Collateralized mortgage obligations 113,641 5 (18,701 ) 94,945 —
Mortgage-backed securities 288,723 70 (18,705 ) 270,088 —
Total debt securities $ 682,346 $ 358 $ (48,851 ) $ 633,853 $ —

The Company generated $2,111,000 and $1,720,000 in proceeds from sales of available-for-sale securities for the three-month periods ended September 30, 2025 and 2024, respectively. The Company generated $29,426,000 and $4,652,000 in proceeds from sales of available-for-sale securities for the nine-month periods ended September 30, 2025 and 2024, respectively. There were no gross realized gains on sales or calls of available-for-sale securities for the three-month periods ended September 30, 2025 and 2024, respectively. Gross realized gains on sales or calls of available-for-sale securities were $93,000 and $0 for the nine-month periods ended September 30, 2025 and 2024, respectively. Gross realized losses on sales or calls of available-for-sale securities were $59,000 and $75,000 for the three-month periods ended September 30, 2025 and 2024, respectively. Gross realized losses on sales or calls of available-for-sale securities were $241,000 and $155,000 for the nine-month periods ended September 30, 2025 and 2024, respectively.

The amortized cost and estimated fair value of debt and other securities at September 30, 2025, by contractual maturity, are shown in the following table:

Amortized Estimated
(in thousands) cost fair value
Maturity in years:
Due in one year or less $ 54,943 $ 54,705
Due after one year through five years 118,246 116,335
Due after five years through ten years 37,586 36,587
Due after ten years 44,017 41,178
Subtotal 254,792 248,805
Mortgage-backed securities & collateralized mortgage obligations 372,453 352,697
Total $ 627,245 $ 601,502

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.  In addition, factors such as prepayments and interest rates may affect the yield on the carrying value of mortgage-related securities.

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An analysis of gross unrealized losses of the available-for-sale investment securities portfolio as of September 30, 2025, follows:

(in thousands) Less than 12 months 12 months or more Total
Unrealized Unrealized Unrealized
Fair Value losses Fair Value losses Fair Value losses
U.S. Treasury securities $ 15,561 $ (43 ) $ 23,177 $ (564 ) $ 38,738 $ (607 )
Securities of U.S. government agencies and corporations 2,730 (12 ) 51,952 (2,297 ) 54,682 (2,309 )
Obligations of states and political subdivisions 17,834 (597 ) 37,637 (3,530 ) 55,471 (4,127 )
Collateralized mortgage obligations 4,633 (11 ) 63,757 (11,527 ) 68,390 (11,538 )
Mortgage-backed securities 25,712 (239 ) 123,083 (9,537 ) 148,795 (9,776 )
Total $ 66,470 $ (902 ) $ 299,606 $ (27,455 ) $ 366,076 $ (28,357 )

Fifty-two securities, all considered investment grade, which had an aggregate fair value of $66,470,000 and a total unrealized loss of $902,000, have been in an unrealized loss position for less than twelve months as of September 30, 2025. Three hundred and thirty-seven securities, all considered investment grade, which had an aggregate fair value of $299,606,000 and a total unrealized loss of $27,455,000, have been in an unrealized loss position for more than twelve months as of September 30, 2025.  The unrealized losses on the Company's investment securities were caused by market conditions for these types of investments, particularly changes in risk-free interest rates.  The decline in fair value is attributable to changes in interest rates and not credit quality, and the Company does not intend to sell the securities. The Company has concluded it is not more likely than not that the Company will be required to sell these securities prior to recovery of their anticipated cost basis. Therefore, as of September 30, 2025 and December 31, 2024, the Company had not recorded an allowance for credit losses on these securities and the unrecognized or unrealized losses on these securities have not been recognized into income.

The fair value of investment securities could decline in the future if the general economy deteriorates, inflation and interest rates increase, credit ratings decline, the issuer's financial condition deteriorates, or the liquidity for securities declines. As a result, an allowance for credit loss may occur in the future.

An analysis of gross unrealized losses of the available-for-sale investment securities portfolio as of December 31, 2024, follows:

(in thousands) Less than 12 months 12 months or more Total
**** **** Unrealized **** **** Unrealized **** **** Unrealized
Fair Value losses Fair Value losses Fair Value losses
U.S. Treasury Securities $ 27,055 $ (431 ) $ 42,603 $ (1,346 ) $ 69,658 $ (1,777 )
Securities of U.S. government agencies and corporations 22,383 (471 ) 58,585 (4,125 ) 80,968 (4,596 )
Obligations of states and political subdivisions 33,078 (1,083 ) 29,025 (3,989 ) 62,103 (5,072 )
Collateralized Mortgage obligations 28,937 (1,860 ) 62,320 (16,841 ) 91,257 (18,701 )
Mortgage-backed securities 110,599 (2,715 ) 143,892 (15,990 ) 254,491 (18,705 )
Total $ 222,052 $ (6,560 ) $ 336,425 $ (42,291 ) $ 558,477 $ (48,851 )

Investment securities carried at $90,138,000 and $53,589,000 at September 30, 2025 and December 31, 2024, respectively, were pledged to secure public deposits or for other purposes as required or permitted by law.

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4.         LOANS AND ALLOWANCE FOR CREDIT LOSSES

The composition of the Company’s loan portfolio, by loan class, as of September 30, 2025 and December 31, 2024 was as follows:

(in thousands) September 30, 2025 December 31, 2024
Commercial $ 140,830 $ 117,921
Commercial Real Estate 710,651 723,650
Agriculture 95,008 92,564
Residential Mortgage 103,053 105,886
Residential Construction 6,498 6,858
Consumer 15,368 15,716
1,071,408 1,062,595
Allowance for credit losses (15,699 ) (15,885 )
Deferred origination fees and costs, net 262 142
Loans, net $ 1,055,971 $ 1,046,852

At September 30, 2025 and December 31, 2024, all loans were pledged under a blanket collateral lien to secure actual or potential borrowings from the Federal Home Loan Bank (“FHLB”).

Allowance for Credit Losses

The following tables summarize the activity in the allowance for credit losses on loans which is recorded as a contra asset, and the reserve for unfunded commitments which is recorded on the condensed consolidated balance sheet within other liabilities, as of and for the three and nine months ended September 30, 2025.

Allowance for Credit Losses – Three months ended September 30, 2025
Beginning **** Provision Ending
(in thousands) Balance Charge-offs Recoveries (Recovery) Balance
Commercial $ 2,523 $ (261 ) $ 200 $ 22 $ 2,484
Commercial Real Estate 9,782 — — 409 10,191
Agriculture 1,983 (474 ) — (321 ) 1,188
Residential Mortgage 1,038 — — 18 1,056
Residential Construction 499 — — (25 ) 474
Consumer 297 (12 ) 24 (3 ) 306
Allowance for credit losses on loans 16,122 (747 ) 224 100 15,699
Reserve for unfunded commitments 1,150 — — (100 ) 1,050
Total $ 17,272 $ (747 ) $ 224 $ — $ 16,749
Allowance for Credit Losses – Nine months ended September 30, 2025
--- --- --- --- --- --- --- --- --- --- --- --- ---
Beginning **** Provision Ending
(in thousands) Balance Charge-offs Recoveries (Recovery) Balance
Commercial $ 1,622 $ (456 ) $ 267 $ 1,051 $ 2,484
Commercial Real Estate 10,245 (26 ) — (28 ) 10,191
Agriculture 1,555 (474 ) — 107 1,188
Residential Mortgage 1,779 (5 ) — (718 ) 1,056
Residential Construction 433 — — 41 474
Consumer 251 (19 ) 27 47 306
Allowance for credit losses on loans 15,885 (980 ) 294 500 15,699
Reserve for unfunded commitments 700 — — 350 1,050
Total $ 16,585 $ (980 ) $ 294 $ 850 $ 16,749

The Company utilizes three economic variables, forecasted unemployment, gross domestic product and single-family home prices, as loss drivers for its allowance for credit losses. During the quarter ended September 30, 2025, the levels of forecasted economic variables remained relatively stable.  This coupled with an increase in loans receivable contributed to an increase in reserves for collectively evaluated loans during the quarter ended September 30, 2025. This was offset by a decrease in specific reserves due to a decrease in nonaccrual loans requiring specific reserves. Specific reserves recorded during the quarter ended June 30, 2025 were released during the quarter ended September 30, 2025 primarily due to charge-offs of nonaccrual loans and paydowns on a nonaccrual loan relationship. The Company recorded no provision for credit losses for the three months ended September 30, 2025. During the nine months ended September 30, 2025, the Company recorded provision for credit losses totaling $850,000 primarily due to increases in loans receivable and unfunded commitments coupled with the negative trends in forecast factors. Management believes the allowance for credit losses at September 30, 2025 appropriately reflected expected credit losses in the loan portfolio at that date.

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The following tables summarize the activity in the allowance for credit losses on loans which is recorded as a contra asset, and the reserve for unfunded commitments which is recorded on the balance sheet within other liabilities as of and for the three and nine months ended September 30, 2024.

Allowance for Credit Losses – Three months ended September 30, 2024
Beginning **** Provision Ending
(in thousands) Balance Charge-offs Recoveries (Recovery) Balance
Commercial $ 2,359 $ (49 ) $ — $ (739 ) $ 1,571
Commercial Real Estate 10,439 — — 83 10,522
Agriculture 1,680 — — (29 ) 1,651
Residential Mortgage 1,862 — — 50 1,912
Residential Construction 380 — — 86 466
Consumer 304 (5 ) 2 (1 ) 300
Allowance for credit losses on loans 17,024 (54 ) 2 (550 ) 16,422
Reserve for unfunded commitments 950 — — — 950
Total $ 17,974 $ (54 ) $ 2 $ (550 ) $ 17,372
Allowance for Credit Losses - Nine months ended September 30, 2024
--- --- --- --- --- --- --- --- --- --- --- --- ---
Beginning **** Provision Ending
(in thousands) Balance Charge-offs Recoveries (Recovery) Balance
Commercial $ 2,041 $ (606 ) $ 47 $ 89 $ 1,571
Commercial Real Estate 10,864 — — (342 ) 10,522
Agriculture 997 — — 654 1,651
Residential Mortgage 2,005 — — (93 ) 1,912
Residential Construction 334 — — 132 466
Consumer 355 (19 ) 4 (40 ) 300
Allowance for credit losses on loans 16,596 (625 ) 51 400 16,422
Reserve for unfunded commitments 1,150 — — (200 ) 950
Total $ 17,746 $ (625 ) $ 51 $ 200 $ 17,372

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Collateral-Dependent Loans

In accordance with ASC 326, a loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. All loans individually analyzed were collateral-dependent loans as of September 30, 2025 and December 31, 2024. The following table presents the amortized cost basis of collateral-dependent loans by class, which are individually evaluated to determine expected credit losses, as of September 30, 2025 and December 31, 2024:

September 30, 2025

(in thousands) Secured by 1-4 Family Residential Properties-1st lien Secured by 1-4 Family Residential Properties-junior lien Secured by 1-4 Family Residential Properties-revolving Commercial Construction and Land Development
Commercial $ — $ — $ — $ 401 $ —
Commercial Real Estate — — — — —
Agriculture — — — — —
Residential Mortgage 180 — — — —
Residential Construction — — — — —
Consumer — 255 353 — —
Total $ 180 $ 255 $ 353 $ 401 $ —
Loans Secured by Loans Secured by
--- --- --- --- --- --- --- --- --- --- ---
Owner-occupied, Other
Agriculture Nonfarm Nonfarm
Secured by Production Nonresidential Nonresidential
(in thousands) Farmland Loans Properties Properties Total
Commercial $ — $ — $ — $ — $ 401
Commercial Real Estate — — 672 — 672
Agriculture 662 4,280 — — 4,942
Residential Mortgage — — — — 180
Residential Construction — — — — —
Consumer — — — — 608
Total $ 662 $ 4,280 $ 672 $ — $ 6,803

December 31, 2024

(in thousands) Secured by 1-4 Family Residential Properties-1st lien Secured by 1-4 Family Residential Properties-junior lien Secured by 1-4 Family Residential Properties-revolving Commercial Construction and Land Development
Commercial $ — $ — $ — $ 139 $ —
Commercial Real Estate — — — — —
Agriculture — — — — —
Residential Mortgage 202 — — — —
Residential Construction — — — — —
Consumer — 282 360 — —
Total $ 202 $ 282 $ 360 $ 139 $ —
Loans Secured by Loans Secured by
--- --- --- --- --- --- --- --- --- --- ---
Owner-occupied, Other
Nonfarm Nonfarm
Secured by Agriculture Nonresidential Nonresidential
(in thousands) Farmland Production Loans Properties Properties Total
Commercial $ — $ — $ — $ — $ 139
Commercial Real Estate — — — 7,993 7,993
Agriculture 740 1,496 — — 2,236
Residential Mortgage — — — — 202
Residential Construction — — — — —
Consumer — — — — 642
Total $ 740 $ 1,496 $ — $ 7,993 $ 11,212

Foreclosure Proceedings

The Company had no residential real estate property in the process of foreclosure at September 30, 2025 and December 31, 2024.

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Non-accrual and Past Due Loans

The Company’s loans by delinquency and non-accrual status, as of September 30, 2025 and December 31, 2024, was as follows:

90 days Total
30-59 days 60-89 days or More Past Due & Current & Nonaccrual
Past Due & Past Due & Past Due & Nonaccrual Nonaccrual Accruing Total Loans with
(in thousands) Accruing Accruing Accruing Loans Loans Loans Loans No ACL
September 30, 2025
Commercial $ 2,213 $ 48 $ — $ 401 $ 2,662 $ 138,168 $ 140,830 $ 401
Commercial Real Estate 1,569 — — 672 2,241 708,410 710,651 672
Agriculture — — — 4,942 4,942 90,066 95,008 4,942
Residential Mortgage 120 72 — 180 372 102,681 103,053 180
Residential Construction — — — — — 6,498 6,498 —
Consumer — — — 608 608 14,760 15,368 608
Total $ 3,902 $ 120 $ — $ 6,803 $ 10,825 $ 1,060,583 $ 1,071,408 $ 6,803
December 31, 2024
Commercial $ 2,287 $ — $ — $ 139 $ 2,426 $ 115,495 $ 117,921 $ 139
Commercial Real Estate — — — 7,993 7,993 715,657 723,650 7,993
Agriculture 1,354 500 — 2,236 4,090 88,474 92,564 2,236
Residential Mortgage 749 — — 202 951 104,935 105,886 202
Residential Construction — — — — — 6,858 6,858 —
Consumer — 10 — 642 652 15,064 15,716 642
Total $ 4,390 $ 510 $ — $ 11,212 $ 16,112 $ 1,046,483 $ 1,062,595 $ 11,212

The Company recognized $43,000 and $119,000 of interest income on nonaccrual loans during the three months ended September 30, 2025 and September 30, 2024, respectively. The Company recognized $421,000 and $438,000 of interest income on nonaccrual loans during the nine months ended September 30, 2025 and September 30, 2024, respectively.

Loan Modifications

Occasionally, the Company modifies loans to borrowers in financial difficulty by providing principal forgiveness, term extension, payment delays or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL.

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

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The following tables present the amortized cost basis of loans that were experiencing both financial difficulty and modification during the periods indicated, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below.

The amortized cost basis of loans that were experiencing both financial difficulty and modification during the three months ended September 30, 2025 were as follows:

(in thousands, except percentages) Term Extension Combination Term Extension and Interest Rate Reduction Total Class of Financing Receivable
Commercial $ 1,108 $ — 0.79 %
Commercial Real Estate 374 — 0.05 %
Agriculture — 548 0.58 %
Residential Mortgage — — —
Residential Construction — — —
Consumer — — —
Total $ 1,482 $ 548 0.19 %

The amortized cost basis of loans that were experiencing both financial difficulty and modification during the nine months ended September 30, 2025 were as follows:

(in thousands, except percentages) Term Extension Combination Term Extension and Interest Rate Reduction Combination Term Extension and Payment Delay Total Class of Financing Receivable
Commercial $ 1,238 $ — $ 73 0.93 %
Commercial Real Estate 1,708 — — 0.24 %
Agriculture — 548 — 0.58 %
Residential Mortgage — — — —
Residential Construction — — — —
Consumer — — — —
Total $ 2,946 $ 548 $ 73 0.33 %

The amortized cost basis of loans that were experiencing both financial difficulty and modification during the three months ended September 30, 2024 were as follows:

Combination ****
Term Extension and Total Class of
(in thousands, except percentages) Term Extension Interest Rate Reduction Financing Receivable
Commercial $ 11 $ 47 0.05 %
Commercial Real Estate — — —
Agriculture — — —
Residential Mortgage — — —
Residential Construction — — —
Consumer — — —
Total $ 11 $ 47 0.01 %

The amortized cost basis of loans that were experiencing both financial difficulty and modification during the nine months ended September 30, 2024 were as follows:

Combination ****
Term Extension and Total Class of
(in thousands, except percentages) Term Extension Interest Rate Reduction Financing Receivable
Commercial $ 2,102 $ 47 1.96 %
Commercial Real Estate — — —
Agriculture — — —
Residential Mortgage — — —
Residential Construction — — —
Consumer — — —
Total $ 2,102 $ 47 0.20 %

The Company had no commitments to lend additional funds to borrowers whose loans were modified at September 30, 2025 and September 30, 2024.

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The following table presents the financial effect of the loan modifications to borrowers experiencing financial difficulty during the three-month period ended September 30, 2025:

Weighted-Average Weighted-Average
Interest Rate Term Extension
Reduction (in months)
Commercial — 2
Commercial Real Estate — 8
Agriculture 1.00 % 36
Residential Mortgage — —
Residential Construction — —
Consumer — —
Total 1.00 % 12

The following table presents the financial effect of the loan modifications to borrowers experiencing financial difficulty during the nine-month period ended September 30, 2025:

Weighted-Average Weighted-Average
Interest Rate Term Extension
Reduction (in months)
Commercial — 9
Commercial Real Estate — 4
Agriculture 1.00 % 36
Residential Mortgage — —
Residential Construction — —
Consumer — —
Total 1.00 % 11

The following table presents the financial effect of the loan modifications to borrowers experiencing financial difficulty during the three-month period ended September 30, 2024:

Weighted-Average Weighted-Average
Interest Rate Term Extension
Reduction (in months)
Commercial 3.00 % 19
Commercial Real Estate — —
Agriculture — —
Residential Mortgage — —
Residential Construction — —
Consumer — —
Total 3.00 % 19

The following table presents the financial effect of the loan modifications to borrowers experiencing financial difficulty during the nine-month period ended September 30, 2024:

Weighted-Average Weighted-Average
Interest Rate Term Extension
Reduction (in months)
Commercial 3.00 % 9
Commercial Real Estate — —
Agriculture — —
Residential Mortgage — —
Residential Construction — —
Consumer — —
Total 3.00 % 9

A commercial real estate loan modified within the previous twelve months totaling $1,334,000 was past due as of *September 30, 2025.*Loans that were modified within the previous twelve months were current on payments as of   September 30, 2024. There were no loans modified within the previous twelve months and for which there was a payment default during the three- and nine month periods ended September 30, 2025 and September 30, 2024.

Upon the Company's determination that a modified loan (or portion of a loan) has subsequently become uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.

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Credit Quality Indicators

All loans are rated using the credit risk ratings and criteria adopted by the Company.  Risk ratings are adjusted as future circumstances warrant.  All credits risk rated 1, 2, 3, 4 or 5 equate to a Pass as indicated by Federal and State bank regulatory agencies; a 6 equates to a Special Mention; a 7 equates to Substandard; an 8 equates to Doubtful; and a 9 equates to a Loss.  For the definitions of each risk rating, see Note 4 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

The following tables present the loan portfolio by loan class, origination year, and internal risk rating as of September 30, 2025. Generally, existing term loans that were re-underwritten are reflected in the table in the year of renewal. Lines of credit that have a conversion feature at the time of origination, such as construction to permanent loans, are presented by year of origination. Revolving loans converted to term loans totaled $2,291,000 and $3,121,000 as of September 30, 2025 and December 31, 2024, respectively.

(in thousands)
Term Loans Amortized Cost Basis by Origination Year - As of September 30, 2025 **** ****
**** **** **** **** Revolving ****
**** **** **** **** Loans ****
**** **** **** **** Amortized ****
2025 2024 2023 2022 2021 Prior Cost Basis Total
Commercial
Pass $ 40,734 $ 36,653 $ 11,494 $ 9,662 $ 4,334 $ 7,349 $ 25,471 $ 135,697
Special Mention 73 — — 767 806 — 1,239 2,885
Substandard 48 46 262 — — 755 1,137 2,248
Doubtful/Loss — — — — — — — —
Total Commercial loans $ 40,855 $ 36,699 $ 11,756 $ 10,429 $ 5,140 $ 8,104 $ 27,847 $ 140,830
Year-to-date Period Charge-offs — (119 ) (83 ) — (13 ) — (241 ) (456 )
Year-to-date Recoveries — — 251 — — 16 — 267
Year-to-date Net Charge-offs — (119 ) 168 — (13 ) 16 (241 ) (189 )
Commercial Real Estate
Pass $ 39,775 $ 59,728 $ 110,098 $ 157,813 $ 163,355 $ 145,478 $ 1,203 $ 677,450
Special Mention 1,334 2,868 — 12,691 2,037 3,978 — 22,908
Substandard 374 — 672 3,431 — 5,816 — 10,293
Doubtful/Loss — — — — — — — —
Total Commercial Real Estate loans $ 41,483 $ 62,596 $ 110,770 $ 173,935 $ 165,392 $ 155,272 $ 1,203 $ 710,651
Year-to-date Charge-offs — — (26 ) — — — — (26 )
Year-to-date Recoveries — — — — — — — —
Year-to-date Net Charge-offs — — (26 ) — — — — (26 )
Agriculture
Pass $ 4,247 $ 3,011 $ 6,263 $ 15,586 $ 18,477 $ 14,314 $ 21,599 $ 83,497
Special Mention — — — — — — — —
Substandard — — 58 2,741 4,739 — 3,973 11,511
Doubtful/Loss — — — — — — — —
Total Agriculture loans $ 4,247 $ 3,011 $ 6,321 $ 18,327 $ 23,216 $ 14,314 $ 25,572 $ 95,008
Year-to-date Charge-offs — — — (176 ) — — (298 ) (474 )
Year-to-date Recoveries — — — — — — — —
Year-to-date Net Charge-offs — — — (176 ) — — (298 ) (474 )

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(in thousands)
Term Loans Amortized Cost Basis by Origination Year - As of September 30, 2025 **** ****
**** **** **** **** **** Revolving ****
**** **** **** **** **** Loans ****
**** **** **** **** **** Amortized ****
2025 2024 2023 2022 2021 Prior Cost Basis Total
Residential Mortgage
Pass $ 2,958 $ 4,784 $ 18,386 $ 23,410 $ 24,856 $ 28,482 $ — $ 102,876
Special Mention — — — — — — — —
Substandard — — — — 32 145 — 177
Doubtful/Loss — — — — — — — —
Total Residential Mortgage loans $ 2,958 $ 4,784 $ 18,386 $ 23,410 $ 24,888 $ 28,627 $ — $ 103,053
Year-to-date Charge-offs (5 ) — — — — — — (5 )
Year-to-date Recoveries — — — — — — — —
Year-to-date Net Charge-offs (5 ) — — — — — — (5 )
Residential Construction
Pass $ 2,310 $ 1,415 $ 1,183 $ 491 $ 1,099 $ — $ — $ 6,498
Special Mention — — — — — — — —
Substandard — — — — — — — —
Doubtful/Loss — — — — — — — —
Total Residential Construction loans $ 2,310 $ 1,415 $ 1,183 $ 491 $ 1,099 $ — $ — $ 6,498
Year-to-date Charge-offs — — — — — — — —
Year-to-date Recoveries — — — — — — — —
Year-to-date Net Charge-offs — — — — — — — —
Consumer
Pass $ 196 $ 66 $ 77 $ 1,073 $ 97 $ 445 $ 12,307 $ 14,261
Special Mention — — — — — — — —
Substandard — — — — — — 1,107 1,107
Doubtful/Loss — — — — — — — —
Total Consumer loans $ 196 $ 66 $ 77 $ 1,073 $ 97 $ 445 $ 13,414 $ 15,368
Year-to-date Charge-offs (16 ) (3 ) — — — — — (19 )
Year-to-date Recoveries 2 — — — — 25 — 27
Year-to-date Net Charge-offs (14 ) (3 ) — — — 25 — 8
Total Loans
Pass $ 90,220 $ 105,657 $ 147,501 $ 208,035 $ 212,218 $ 196,068 $ 60,580 $ 1,020,279
Special Mention 1,407 2,868 — 13,458 2,843 3,978 1,239 25,793
Substandard 422 46 992 6,172 4,771 6,716 6,217 25,336
Doubtful/Loss — — — — — — — —
Total Loans $ 92,049 $ 108,571 $ 148,493 $ 227,665 $ 219,832 $ 206,762 $ 68,036 $ 1,071,408
Year-to-date Charge-offs $ (21 ) $ (122 ) $ (109 ) $ (176 ) $ (13 ) $ — $ (539 ) $ (980 )
Year-to-date Recoveries $ 2 $ — $ 251 $ — $ — $ 41 $ — $ 294
Year-to-date Net Charge-offs $ (19 ) $ (122 ) $ 142 $ (176 ) $ (13 ) $ 41 $ (539 ) $ (686 )

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(in thousands)
Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2024 **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** Revolving **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** Loans **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** Amortized **** **** ****
2024 2023 2022 2021 2020 Prior Cost Basis Total
Commercial
Pass $ 36,065 $ 14,319 $ 11,885 $ 11,894 $ 3,442 $ 8,030 $ 27,272 $ 112,907
Special Mention — — 874 1,561 — — 1,590 4,025
Substandard 227 — — 32 471 — 259 989
Doubtful/Loss — — — — — — — —
Total Commercial loans $ 36,292 $ 14,319 $ 12,759 $ 13,487 $ 3,913 $ 8,030 $ 29,121 $ 117,921
Year-to-date Period Charge-offs (47 ) (508 ) (224 ) (5 ) (163 ) (9 ) — (956 )
Year-to-date Recoveries — — 4 — — 56 — 60
Year-to-date Net Charge-offs (47 ) (508 ) (220 ) (5 ) (163 ) 47 — (896 )
Commercial Real Estate
Pass $ 68,278 $ 113,937 $ 178,142 $ 160,484 $ 39,913 $ 121,862 $ 6,529 $ 689,145
Special Mention 2,909 — — 7,156 — 5,737 — 15,802
Substandard — 381 — 2,052 1,638 14,632 — 18,703
Doubtful/Loss — — — — — — — —
Total Commercial Real Estate loans $ 71,187 $ 114,318 $ 178,142 $ 169,692 $ 41,551 $ 142,231 $ 6,529 $ 723,650
Year-to-date Charge-offs — — — — — — — —
Year-to-date Recoveries — — — — — — — —
Year-to-date Net Charge-offs — — — — — — — —
Agriculture
Pass $ 4,857 $ 6,562 $ 14,846 $ 17,245 $ 5,675 $ 10,252 $ 20,420 $ 79,857
Special Mention — — 3,884 5,477 726 — 300 10,387
Substandard — — — 740 — — 1,580 2,320
Doubtful/Loss — — — — — — — —
Total Agriculture loans $ 4,857 $ 6,562 $ 18,730 $ 23,462 $ 6,401 $ 10,252 $ 22,300 $ 92,564
Year-to-date Charge-offs — — — — — — — —
Year-to-date Recoveries — — — — — — — —
Year-to-date Net Charge-offs — — — — — — — —

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(in thousands)
Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2024 **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** Revolving **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** Loans **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** Amortized **** **** ****
2024 2023 2022 2021 2020 Prior Cost Basis Total
Residential Mortgage
Pass $ 4,873 $ 20,162 $ 22,408 $ 26,123 $ 13,233 $ 18,886 $ — $ 105,685
Special Mention — — — — — — — —
Substandard 79 — — 34 — 88 — 201
Doubtful/Loss — — — — — — — —
Total Residential Mortgage loans $ 4,952 $ 20,162 $ 22,408 $ 26,157 $ 13,233 $ 18,974 $ — $ 105,886
Year-to-date Charge-offs — — — — — — — —
Year-to-date Recoveries — — — — — — — —
Year-to-date Net Charge-offs — — — — — — — —
Residential Construction
Pass $ 1,525 $ 2,117 $ 1,998 $ 1,218 $ — $ — $ — $ 6,858
Special Mention — — — — — — — —
Substandard — — — — — — — —
Doubtful/Loss — — — — — — — —
Total Residential Construction loans $ 1,525 $ 2,117 $ 1,998 $ 1,218 $ — $ — $ — $ 6,858
Year-to-date Charge-offs — — — — — — — —
Year-to-date Recoveries — — — — — — — —
Year-to-date Net Charge-offs — — — — — — — —
Consumer
Pass $ 212 $ 145 $ 1,129 $ 109 $ 122 $ 286 $ 13,071 $ 15,074
Special Mention — — — — — — — —
Substandard — — — — — — 642 642
Doubtful/Loss — — — — — — — —
Total Consumer loans $ 212 $ 145 $ 1,129 $ 109 $ 122 $ 286 $ 13,713 $ 15,716
Year-to-date Charge-offs (28 ) — — — — — — (28 )
Year-to-date Recoveries 10 — — — — 3 — 13
Year-to-date Net Charge-offs (18 ) — — — — 3 — (15 )
Total Loans
Pass $ 115,810 $ 157,242 $ 230,408 $ 217,073 $ 62,385 $ 159,316 $ 67,292 $ 1,009,526
Special Mention 2,909 — 4,758 14,194 726 5,737 1,890 30,214
Substandard 306 381 — 2,858 2,109 14,720 2,481 22,855
Doubtful/Loss — — — — — — — —
Total Loans $ 119,025 $ 157,623 $ 235,166 $ 234,125 $ 65,220 $ 179,773 $ 71,663 $ 1,062,595
Year-to-date Charge-offs $ (75 ) $ (508 ) $ (224 ) $ (5 ) $ (163 ) $ (9 ) $ — $ (984 )
Year-to-date Recoveries $ 10 $ — $ 4 $ — $ — $ 59 $ — $ 73
Year-to-date Net Charge-offs $ (65 ) $ (508 ) $ (220 ) $ (5 ) $ (163 ) $ 50 $ — $ (911 )

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5.         MORTGAGE OPERATIONS

Transfers and servicing of financial assets and extinguishments of liabilities are accounted for and reported based on consistent application of a financial-components approach that focuses on control.  Transfers of financial assets that are sales are distinguished from transfers that are secured borrowings.  Retained servicing rights on loans sold are measured by allocating the previous carrying amount of the transferred assets between the loans sold and retained interest, if any, based on their relative fair value at the date of transfer.  Fair values are estimated using discounted cash flows based on a current market interest rate.

The Company recognizes a gain and a related asset for the fair value of the rights to service loans for others when loans are sold.  The Company sold a substantial portion of its portfolio of conforming long-term residential mortgage loans originated during the nine months ended September 30, 2025 for cash proceeds equal to the fair value of the loans. The Company serviced real estate mortgage loans for others totaling $167,459,000 and $174,464,000 at September 30, 2025 and December 31, 2024, respectively.

The recorded value of mortgage servicing rights is amortized in proportion to, and over the period of, estimated net servicing revenues.  The Company assesses capitalized mortgage servicing rights for impairment based upon the fair value of those rights at each reporting date. For purposes of measuring impairment, the rights are stratified based upon the product type, term and interest rates.  Fair value is determined by discounting estimated net future cash flows from mortgage servicing activities using discount rates that approximate current market rates and estimated prepayment rates, among other assumptions.  The amount of impairment recognized, if any, is the amount by which the capitalized mortgage servicing rights for a stratum exceeds their fair value.  Impairment, if any, is recognized through a valuation allowance for each individual stratum.  Changes in the carrying amount of mortgage servicing rights are reported in earnings under loan servicing income on the condensed consolidated statements of income.

Key assumptions used in measuring the fair value of mortgage servicing rights as of September 30, 2025 and December 31, 2024 were as follows:

September 30, 2025 December 31, 2024
Constant prepayment rate 6.90 % 6.76 %
Discount rate 9.50 % 10.00 %
Weighted average life (years) 7.48 7.55

The following tables summarize the changes to the Company’s mortgage servicing rights assets as of the periods presented.  Mortgage servicing rights are included in Interest Receivable and Other Assets on the condensed consolidated balance sheets.

(in thousands) June 30, 2025 Additions Reductions September 30, 2025
Mortgage servicing rights $ 1,242 $ 10 $ (46 ) $ 1,206
Valuation allowance — — — —
Mortgage servicing rights, net of valuation allowance $ 1,242 $ 10 $ (46 ) $ 1,206
(in thousands) December 31, 2024 Additions Reductions September 30, 2025
--- --- --- --- --- --- --- --- --- ---
Mortgage servicing rights $ 1,312 $ 34 $ (140 ) $ 1,206
Valuation allowance — — — —
Mortgage servicing rights, net of valuation allowance $ 1,312 $ 34 $ (140 ) $ 1,206

At September 30, 2025 and December 31, 2024, the estimated fair market value of the Company’s mortgage servicing rights assets was $1,847,000 and $1,910,000, respectively. The change in fair value of mortgage servicing rights during 2025 was primarily due to changes in prepayment speeds and the discount rate.

The Company received contractually specified servicing fees of $106,000 and $112,000 for the three months ended September 30, 2025 and September 30, 2024, respectively.  The Company received contractually specified servicing fees of $322,000 and $340,000 for the nine months ended September 30, 2025 and September 30, 2024, respectively. Loan servicing income on the condensed consolidated statements of income includes contractually specified servicing fees, mortgage servicing rights additions, amortization and changes in the valuation allowance.

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6.         FAIR VALUE MEASUREMENTS

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.  Securities available-for-sale and trading securities are recorded at fair value on a recurring basis.  Additionally, from time to time, the Company may be required to record at fair value other assets on a non-recurring basis, such as loans held-for-sale, loans held-for-investment and certain other assets.  These non-recurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.  Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally corresponds with the Company’s quarterly valuation process.

Assets Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024.

**** **** Quoted Prices Significant **** ****
**** **** in Active Other Significant
**** **** Markets for Observable Unobservable
(in thousands) **** **** Identical Assets Inputs Inputs
September 30, 2025 Fair Value (Level 1) (Level 2) (Level 3)
U.S. Treasury securities $ 92,162 $ 92,162 $ — $ —
Securities of U.S. government agencies and corporations 84,639 — 84,639 —
Obligations of states and political subdivisions 72,004 — 72,004 —
Collateralized mortgage obligations 91,267 — 91,267 —
Mortgage-backed securities 261,430 — 261,430 —
Total investments at fair value $ 601,502 $ 92,162 $ 509,340 $ —
**** **** Quoted Prices Significant **** ****
--- --- --- --- --- --- --- --- ---
**** **** in Active Other Significant
**** **** Markets for Observable Unobservable
(in thousands) **** **** Identical Assets Inputs Inputs
December 31, 2024 Fair Value (Level 1) (Level 2) (Level 3)
U.S. Treasury securities $ 105,545 $ 105,545 $ — $ —
Securities of U.S. government agencies and corporations 95,684 — 95,684 —
Obligations of states and political subdivisions 67,591 — 67,591 —
Collateralized mortgage obligations 94,945 — 94,945 —
Mortgage-backed securities 270,088 — 270,088 —
Total investments at fair value $ 633,853 $ 105,545 $ 528,308 $ —

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Assets Recorded at Fair Value on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis are included in the table below by level within the fair value hierarchy as of September 30, 2025.

(in thousands) Carrying **** **** **** **** **** ****
September 30, 2025 Value Level 1 Level 2 Level 3
Collateral dependent loans $ 1,117 $ — $ — $ 1,117
Total assets at fair value $ 1,117 $ — $ — $ 1,117
(in thousands) Carrying **** **** **** **** **** ****
--- --- --- --- --- --- --- --- ---
December 31, 2024 Value Level 1 Level 2 Level 3
Collateral dependent loans $ 139 $ — $ — $ 139
Total assets at fair value $ 139 $ — $ — $ 139

There were no liabilities measured at fair value on a recurring or non-recurring basis at September 30, 2025 and December 31, 2024.

Key methods and assumptions used in measuring the fair value of collateral dependent loans as of September 30, 2025 were as follows:

Method Assumption Inputs
Collateral dependent loans Collateral, market, income, enterprise, liquidation External appraised values, management assumptions regarding market trends or other relevant factors, selling costs generally ranging from 6% to 10%

The following section describes the valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities Available-for-Sale

Investment securities available-for-sale are recorded at fair value on a recurring basis.  Fair value measurement is based upon quoted market prices, if available.  If quoted market prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions, and other factors such as credit loss assumptions.  Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds.  Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities.  Securities classified as Level 3 include asset-backed securities in less liquid markets where valuations include significant unobservable assumptions.

Collateral Dependent Loans

The Company does not record loans at fair value on a recurring basis.  Loans that do not share similar risk characteristics are individually evaluated by management for potential impairment. Included in loans individually evaluated are collateral dependent loans. A loan is considered to be collateral dependent when repayment is expected to be provided substantially through the operation or sale of the collateral. Collateral dependent loans are considered to have unique risk characteristics and are individually evaluated. The ACL on collateral dependent loans is measured using the fair value of the underlying collateral, adjusted for costs to sell when applicable, less the amortized cost basis of the financial asset. If the value of underlying collateral is determined to be less than the recorded amount of the loan, a charge-off will be taken. Collateral dependent loans where a charge-off is recorded based on the fair value of collateral require classification in the fair value hierarchy.  When a loan is evaluated based on the fair value of the underlying collateral securing the loan, the Company records the collateral dependent loan as non-recurring Level 3 given the valuation includes significant unobservable assumptions.

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Disclosures about Fair Value of Financial Instruments

The estimated fair values of the Company’s financial instruments for the periods ended September 30, 2025 and December 31, 2024 were approximately as follows:

September 30, 2025 December 31, 2024
Carrying Fair Carrying Fair
Level amount value amount value
(in thousands)
Financial assets:
Cash and cash equivalents 1 $ 149,510 $ 149,510 $ 119,448 $ 119,448
Certificates of deposit 2 $ 12,890 12,972 16,074 16,129
Stock in Federal Home Loan Bank and other equity securities 3 10,871 10,871 10,518 10,518
Loans receivable:
Net loans 3 1,055,971 991,016 1,046,852 974,746
Interest receivable 2 7,486 7,486 7,660 7,660
Mortgage servicing rights 3 1,206 1,847 1,312 1,910
Financial liabilities:
Time deposits 3 142,303 142,260 149,970 149,752
Interest payable 2 646 646 1,215 1,215

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument and expected exit prices. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets or liabilities include deferred tax liabilities and premises and equipment.  In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in many of the estimates.

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7.         COMMITMENTS AND CONTINGENCIES

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit in the form of loans or through standby letters of credit.  These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the balance sheet.  The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Bank’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments.  The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Financial instruments, whose contract amounts represent credit risk at the indicated periods, were as follows:

(in thousands) September 30, 2025 December 31, 2024
Undisbursed loan commitments $ 128,776 $ 140,092
Standby letters of credit 234 922
$ 129,010 $ 141,014

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Bank evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation.  The types of collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Bank issues both financial and performance standby letters of credit.  The financial standby letters of credit are primarily to guarantee payment to third parties.  At September 30, 2025 and December 31, 2024, there were no financial standby letters of credit outstanding.  The performance standby letters of credit are typically issued to municipalities as specific performance bonds.  Performance standby letters of credit totaled $234,000 and $922,000 at September 30, 2025 and December 31, 2024, respectively.  The Bank had experienced no draws on outstanding letters of credit, resulting in no related liability included on its balance sheet; however, should a triggering event occur, the Bank either has collateral in excess of the letter of credit or embedded agreements of recourse from the customer. The Bank has set aside a reserve for unfunded commitments in the amount of $1,050,000 and $700,000 at September 30, 2025 and December 31, 2024, respectively, which is recorded in "interest payable and other liabilities" on the condensed consolidated balance sheets.

Commitments to extend credit and standby letters of credit bear similar credit risk characteristics as outstanding loans.  As of September 30, 2025 and December 31, 2024, the Company had no off-balance sheet derivatives requiring additional disclosure.

The Company may enter into interest rate lock commitments in connection with its mortgage banking activities to fund residential mortgage loans within specified times in the future. These commitments expose the Company to the risk that the price of the loan underlying the interest rate lock commitment might decline from the inception of the interest rate lock to the funding of the mortgage loan. To protect against this risk, the Company may enter into commitments to sell loans to economically hedge the risk of potential changes in the value of the loans that would result from the commitment. There were no commitments at September 30, 2025 and December 31, 2024. Mortgage loans sold to investors may be sold with servicing rights retained, for which the Company makes only standard legal representations and warranties as to meeting certain underwriting and collateral documentation standards. Management believes that any liabilities that may result from such recourse provisions are not significant.

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8.         STOCK PLANS

On January 23, 2025, the Board of Directors of the Company declared a 5% stock dividend payable as of March 25, 2025 to shareholders of record as of *February 28, 2025.*All stock options and restricted stock amounts outstanding have been adjusted to give retroactive effect to stock dividends.

The following table presents the activity related to stock options for the three months ended September 30, 2025.

Weighted
Weighted Average
Average Aggregate Remaining
Number of Exercise Intrinsic Contractual
Shares Price Value Term (in years)
Options outstanding at Beginning of Period 402,421 $ 8.19
Granted — —
Expired — —
Cancelled / Forfeited — —
Exercised — —
Options outstanding at End of Period 402,421 $ 8.19 $ 1,824,814 3.33
Exercisable (vested) at End of Period 389,985 $ 8.16 $ 1,776,811 3.23

The following table presents the activity related to stock options for the nine months ended September 30, 2025.

**** Weighted
**** Weighted Average
**** Average Aggregate Remaining
Number of Exercise Intrinsic Contractual
Shares Price Value Term (in years)
Options outstanding at Beginning of Period 513,190 $ 7.99
Granted — —
Expired — —
Cancelled / Forfeited — —
Exercised (110,769 ) 7.27
Options outstanding at End of Period 402,421 $ 8.19 $ 1,824,814 3.33
Exercisable (vested) at End of Period 389,985 $ 8.16 $ 1,776,811 3.23

The intrinsic value of options exercised was $268,000 and $90,000 during the nine months ended September 30, 2025 and September 30, 2024, respectively. The fair value of awards vested was $25,000 and $88,000 during the nine months ended September 30, 2025 and September 30, 2024, respectively. There were no options exercised during the three months ended September 30, 2025 and September 30, 2024. The fair value of awards vested was $0 during each of the three-month periods ended September 30, 2025 and September 30, 2024.

As of September 30, 2025, there was $13,000 of total unrecognized compensation cost related to non-vested stock options.  This cost is expected to be recognized over a weighted average period of approximately 0.50 years.

There was $6,000 of recognized compensation cost related to stock options granted for each of the three months ended September 30, 2025 and September 30, 2024. There was $18,000 and $30,000 of recognized compensation cost related to stock options granted for the nine months ended September 30, 2025 and September 30, 2024, respectively.

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The following table presents the activity related to non-vested restricted stock for the three months ended September 30, 2025.

Weighted
Weighted Average
Average Aggregate Remaining
Number of Grant Date Intrinsic Contractual
Shares Fair Value Value Term (in years)
Non-vested Restricted stock outstanding at Beginning of Period 266,413 $ 8.38
Granted — —
Cancelled / Forfeited — —
Exercised/Released/Vested — —
Non-vested restricted stock outstanding at End of Period 266,413 $ 8.38 $ 3,388,773 2.60

The following table presents the activity related to non-vested restricted stock for the nine months ended September 30, 2025.

**** Weighted
**** Weighted Average
**** Average Aggregate Remaining
Number of Grant Date Intrinsic Contractual
Shares Fair Value Value Term (in years)
Non-vested Restricted stock outstanding at Beginning of Period 272,719 $ 8.12
Granted 68,043 9.51
Cancelled / Forfeited — —
Exercised/Released/Vested (74,349 ) 8.46
Non-vested restricted stock outstanding at End of Period 266,413 $ 8.38 $ 3,388,773 2.60

The weighted average fair value of restricted stock granted during the nine months ended September 30, 2025 was $9.51 per share.

As of September 30, 2025, there was $1,016,000 of total unrecognized compensation cost related to non-vested restricted stock.  This cost is expected to be recognized over a weighted average period of approximately 2.60 years.

There was $238,000 and $149,000 of recognized compensation cost related to restricted stock awards for the three months ended September 30, 2025 and September 30, 2024, respectively.  There was $572,000 and $565,000 of recognized compensation cost related to restricted stock awards for the nine months ended September 30, 2025 and September 30, 2024, respectively.

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The Company has an Employee Stock Purchase Plan (“ESPP”).  There are 395,699 shares authorized for issuance under the ESPP. The total number of shares authorized has been adjusted to give retroactive effect to stock dividends and stock splits, including the 5% stock dividend declared on January 23, 2025, payable March 25, 2025to shareholders of record as of February 28, 2025. The ESPP will expire on March 16, 2026.

The ESPP is implemented by participation periods of not more than twenty-seven months each.  The Board of Directors determines the commencement date and duration of each participation period. The Board of Directors approved the current participation period of November 24, 2024 to *November 23, 2025.*An eligible employee is one who has been continually employed for at least 90 days prior to commencement of a participation period. Under the terms of the ESPP, employees can choose to have up to 10 percent of their compensation withheld to purchase the Company’s common stock each participation period.  The purchase price of the stock is 85 percent of the lower of the fair value on the last trading day before the date of participation or the fair value on the last trading day during the participation period.

As of September 30, 2025, there was $3,000 unrecognized compensation cost related to ESPP issuances.

There was $13,000 and $15,000 of recognized compensation cost related to ESPP issuances for the three months ended September 30, 2025 and September 30, 2024, respectively.  There was $31,000 of recognized compensation cost related to ESPP issuances for each of the nine months ended September 30, 2025 and September 30, 2024.

The weighted average fair value option at issuance date during the nine months ended September 30, 2025 was $2.19 per share.

A summary of the weighted average assumptions used in valuing ESPP issuances during the three and nine months ended September 30, 2025 is presented below.

Three Months Ended Nine Months Ended
September 30, 2025 September 30, 2025
Risk Free Interest Rate 4.37 % 4.37 %
Expected Dividend Yield 0.00 % 0.00 %
Expected Life in Years 1.00 1.00
Expected Price Volatility 16.20 % 16.20 %

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9.         ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table details activity in accumulated other comprehensive income (loss) for the three months ended September 30, 2025.

**** Accumulated
Unrealized Officers’ Directors’ other
losses on retirement retirement comprehensive
(in thousands) securities plan plan loss
Balance as of June 30, 2025 $ (22,947 ) $ 207 $ 99 $ (22,641 )
Current period other comprehensive income 4,734 — — 4,734
Balance as of September 30, 2025 $ (18,213 ) $ 207 $ 99 $ (17,907 )

The following table details activity in accumulated other comprehensive income (loss) for the nine months ended September 30, 2025.

**** Accumulated
Unrealized Officers’ Directors’ other
losses on retirement retirement comprehensive
(in thousands) securities plan plan loss
Balance as of December 31, 2024 $ (34,157 ) $ 207 $ 99 $ (33,851 )
Current period other comprehensive income 15,944 — — 15,944
Balance as of September 30, 2025 $ (18,213 ) $ 207 $ 99 $ (17,907 )

The following table details activity in accumulated other comprehensive income (loss) for the three months ended  September 30, 2024.

**** **** Accumulated
Unrealized Officers’ Directors’ other
losses on retirement retirement comprehensive
(in thousands) securities plan plan loss
Balance as of June 30, 2024 $ (35,205 ) $ (70 ) $ 121 $ (35,154 )
Current period other comprehensive income 12,167 — — 12,167
Balance as of September 30, 2024 $ (23,038 ) $ (70 ) $ 121 $ (22,987 )

The following table details activity in accumulated other comprehensive income (loss) for the nine months ended September 30, 2024.

**** **** Accumulated
Unrealized **** other
losses on Officers’ Directors’ comprehensive
(in thousands) securities retirement plan retirement plan loss
Balance as of December 31, 2023 $ (33,778 ) $ (70 ) $ 121 $ (33,727 )
Current period other comprehensive income 10,740 — — 10,740
Balance as of September 30, 2024 $ (23,038 ) $ (70 ) $ 121 $ (22,987 )

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10.       OUTSTANDING SHARES AND EARNINGS PER SHARE

On January 23, 2025, the Board of Directors of the Company declared a 5% stock dividend payable March 25, 2025to shareholders of record as of *February 28, 2025.*All income per share amounts have been adjusted to give retroactive effect to stock dividends.

Earnings Per Share (EPS)

Basic EPS includes no dilution and is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the respective period.  Diluted EPS is computed by dividing net income available to common shareholders by the weighted average number of shares outstanding plus dilutive shares for the quarter.  Diluted shares include all common stock equivalents (“in-the-money” stock options, unvested restricted stock, stock units, warrants and rights, convertible bonds and preferred stock), which reflects the potential dilution of securities that could share in the earnings of the Company.

The following table presents a reconciliation of basic and diluted EPS for the three and nine months ended September 30, 2025 and 2024:

Three months ended Nine months ended
September 30, September 30,
(in thousands, except share and per share amounts): 2025 2024 2025 2024
Basic earnings per share:
Net income $ 6,013 $ 5,488 $ 15,150 $ 14,188
Weighted average common shares outstanding 15,499,900 15,868,938 15,585,514 15,955,291
Basic EPS $ 0.39 $ 0.35 $ 0.97 $ 0.89
Diluted earnings per share:
Net income $ 6,013 $ 5,488 $ 15,150 $ 14,188
Weighted average common shares outstanding 15,499,900 15,868,938 15,585,514 15,955,291
Effect of dilutive shares 278,882 233,019 238,019 200,502
Adjusted weighted average common shares outstanding 15,778,782 16,101,957 15,823,533 16,155,793
Diluted EPS $ 0.38 $ 0.34 $ 0.96 $ 0.88

Stock options which were not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect amounted to 0 shares and 28,874 shares for the three months ended September 30, 2025 and 2024, respectively.  There were no unvested restricted stock which were not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect for the three months ended September 30, 2025 and 2024. Stock options which were not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect amounted to 9,310 shares and 321,426 shares for the nine months ended September 30, 2025 and 2024, respectively. Unvested restricted stock which were not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect amounted to 385 shares and 2,722 shares for the nine months ended September 30, 2025 and 2024, respectively.

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11.       LEASES

The Company leases ten branch and administrative locations under operating leases expiring on various dates through 2035. Leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expense is recognized on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of ASU 2016-02, Leases (Topic 842), the Company combines lease and nonlease components. The Company had no financing leases as of September 30, 2025.

Most leases include options to renew, with renewal terms that can extend the lease term from 3 to 10 years. The exercise of lease renewal options is at the Company’s sole discretion. Most leases are currently in the extension period. For the remaining leases with options to renew, the Company has not included the extended lease terms in the calculation of lease liabilities as the options are not reasonably certain of being exercised. Certain lease agreements include rental payments that are adjusted periodically for inflation. The Company's lease agreements do not contain any residual value guarantees or restrictive covenants.

The Company uses its FHLB advance fixed rates, which are its incremental borrowing rates for secured borrowings, as the discount rates to calculate lease liabilities.

The Company had right-of-use assets totaling $5,024,000 and $3,155,000 as of September 30, 2025 and December 31, 2024, respectively. Right-of-use assets are included in Interest receivable and other assets on the condensed consolidated balance sheets. The Company had lease liabilities totaling $5,442,000 and $3,645,000 as of September 30, 2025 and December 31, 2024, respectively. Lease liabilities are included in Interest payable and other liabilities on the condensed consolidated balance sheets. The Company recognized lease expense totaling $285,000 and $323,000 for the three-month periods ended September 30, 2025 and 2024, respectively, and $852,000 and $928,000 for the nine-month periods ended September 30, 2025 and 2024, respectively. Lease expense includes operating lease costs, short-term lease costs and variable lease costs. Lease expense is included in occupancy and equipment expense on the condensed consolidated statements of income.

The table below summarizes the maturity of remaining lease liabilities at September 30, 2025:

(in thousands) September 30, 2025
2025 (remaining 3 months) $ 309
2026 1,002
2027 948
2028 974
2029 923
2030 and thereafter 2,012
Total lease payments 6,168
Less: interest (726 )
Present value of lease liabilities $ 5,442

The following table presents supplemental cash flow information related to leases for the three and nine months ended September 30, 2025:

Three months ended Nine months ended
September 30, September 30,
(in thousands) 2025 2024 2025 2024
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases $ 293 $ 244 $ 816 $ 839
Right-of-use assets obtained in exchange for new operating lease liabilities $ 2,543 $ — $ 2,543 $ —

The following table presents the weighted average operating lease term and discount rate as of September 30, 2025 and December 31, 2024:

September 30, 2025 December 31, 2024
Weighted-average remaining lease term – operating leases, in years 6.56 4.87
Weighted-average discount rate – operating leases 3.41 % 2.36 %

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12.       SEGMENT DISCLOSURES

The Company evaluated its operating segments in accordance with ASC 280, Segment Reporting, and determined it has one reportable segment, banking operations. The Company is engaged in a single line of business, indicative of a traditional banking institution, gathering deposits and originating loans in its primary market areas.

The Company manages its operations, allocates resources and monitors and reports its financials as a single operating segment. The Company's Chief Executive Officer is considered the Chief Operating Decision Maker. The Chief Operating Decision Maker evaluates segment performance using consolidated net income.

Loans, interest bearing accounts, investment securities, deposits, and non-interest income provide the revenues in banking operations and are presented in the Company's consolidated balance sheets. Interest expense, provisions for credit losses, salaries and employee benefits, occupancy and equipment, and data processing provide significant expenses in banking operations and are presented in the Company's consolidated statements of income. Segment performance is evaluated using consolidated net income with the majority of the Company's net income derived from net interest income.

The accounting policies for the segment is consistent with those described in Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements in the Company’s 2024 Form 10-K.

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FIRST NORTHERN COMMUNITY BANCORP

ITEM 2. – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This report may include forward-looking statements, which may include forecasts of our financial results and condition, expectations for our operations and business, and our assumptions for those forecasts and expectations. Do not rely unduly on forward-looking statements. Actual results might differ significantly compared to our forecasts, if any, and expectations. See Part I, Item 1A. “Risk Factors,” and the other risks described in our 2024 Form 10-K and Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q and the other risks described in our Quarterly Reports on Form 10-Q, for factors to be considered when reading any forward-looking statements in this filing.

This report and other reports or statements which we may release may include forward-looking statements, which are subject to the “safe harbor” created by section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. We may make forward-looking statements in our Securities and Exchange Commission (SEC) filings, press releases, news articles and when we are speaking on behalf of the Company. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include the words “believe,” “expect,” “target,” “anticipate,” “intend,” “plan,” “seek,” “strive,” “estimate,” “potential,” “project,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” or “may.” These forward-looking statements are intended to provide investors with additional information with which they may assess our future potential. All of these forward-looking statements are based on assumptions about an uncertain future and are based on information available to us at the date of these statements. We do not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date any forward-looking statements are made, except as may be required by law.

In this document and in other SEC filings or other public statements, for example, we make forward-looking statements relating to the following topics, among others:

● Our business objectives, strategies and initiatives, our organizational structure, the growth of our business and our competitive position and prospects, and the effect of competition on our business and strategies
● Our assessment of significant factors and developments that have affected or may affect our results
--- ---
● Legal and regulatory actions, and future legislative and regulatory developments
--- ---
● Regulatory and compliance controls, processes and requirements and their impact on our business
--- ---
● The costs and effects of legal or regulatory actions
--- ---
● Expectations regarding draws on performance letters of credit and liabilities that may result from recourse provisions in standby letters of credit
--- ---
● Our intent to sell or hold, and the likelihood that we would be required to sell, various investment securities
--- ---
● Our regulatory capital requirements, including the capital rules established after the 2008 financial crisis by the U.S. federal banking agencies and our current intention not to elect to use the community bank leverage ratio framework
--- ---
● Expectations regarding our non-payment of a cash dividend on our common stock in the foreseeable future
--- ---
● Credit quality and provision for credit losses and management of asset quality and credit risk, expectations regarding collections and the timing thereof
--- ---
● Our allowances for credit losses, including the conditions we consider in determining the unallocated allowance and our portfolio credit quality, the adequacy of the allowance for credit losses, underwriting standards, and risk grading
--- ---
● Our assessment of economic conditions and trends and credit cycles and their impact on our business including the imposition of tariffs on imported goods to the U.S.
--- ---
● The seasonal nature of our business
--- ---

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● The impact of changes in interest rates and our strategy to manage our interest rate risk profile and the possible effect of changes in residential mortgage interest rates on new originations and refinancing of existing residential mortgage loans
● Loan portfolio composition and risk grade trends, expected charge-offs, portfolio credit quality, loan demand, our strategy regarding loan modifications, delinquency rates and our underwriting standards and our expectations regarding our recognition of interest income on loans that were provided payment deferrals upon completion of the payment forbearance period
--- ---
● Our deposit base including renewal of time deposits and the outlook for deposit balances
--- ---
● The impact on our net interest income and net interest margin of changes in interest rates
--- ---
● The effect of possible changes in the initiatives and policies of the federal and state bank regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, the Securities and Exchange Commission and other standard setters
--- ---
● Tax rates and the impact of changes in the U.S. tax laws
--- ---
● Our pension and retirement plan costs
--- ---
● Our liquidity strategies and beliefs concerning the adequacy of our liquidity, sources and amounts of funds and ability to satisfactorily manage our liquidity
--- ---
● Critical accounting policies and estimates, the impact or anticipated impact of recent accounting pronouncements or changes in accounting principles
--- ---
● Expected rates of return, maturities, loss exposure, growth rates, yields, and projected results
--- ---
● The possible impact of weather-related or other natural conditions, including drought, fire or flooding, seismic events, and related governmental responses, including related electrical power outages, on economic conditions, especially in the agricultural sector
--- ---
● Maintenance of insurance coverages appropriate for our operations
--- ---
● Threats to the banking sector and our business due to cybersecurity issues and attacks and regulatory expectations related to cybersecurity
--- ---
● The possible effects on community banks and our business from the failures of other banks
--- ---
● The possible adverse impacts on the banking industry and our business from a period of significant, prolonged inflation
--- ---
● Descriptions of assumptions underlying or relating to any of the foregoing

Readers of this document should not rely on any forward-looking statements, which reflect only our management’s belief as of the date of this report. There are numerous risks and uncertainties that could and will cause actual results to differ materially from those discussed in our forward-looking statements. Many of these factors are beyond our ability to control or predict and could have a material adverse effect on our financial condition and results of operations or prospects. Such risks and uncertainties include, but are not limited to those listed in Item 1A “Risk Factors” of Part II of this Form 10-Q, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part I of this Form 10-Q and "Risk Factors" and “Supervision and Regulation” in our 2024 Form 10-K, and in our other reports to the SEC.

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INTRODUCTION

This overview of Management’s Discussion and Analysis highlights selected information in this report and may not contain all of the information that is important to you.  For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources and critical accounting estimates, you should carefully read this entire report and our other reports to the SEC, together with our Consolidated Financial Statements and the Notes to Consolidated Financial Statements included in our 2024 Form 10-K.

Our subsidiary, First Northern Bank of Dixon (the “Bank”), is a California state-chartered bank that derives most of its revenues from lending and deposit taking in the Sacramento Valley region of Northern California. Interest rates, business conditions and customer confidence all affect our ability to generate revenues. In addition, the regulatory and compliance environment and competition can present challenges to our ability to generate those revenues.

Significant results and developments during the third quarter and year-to-date 2025 included:

● Net income of $15.2 million for the nine months ended September 30, 2025, up 6.8% from net income of $14.2 million earned for the same period last year. Net income of $6.0 million for the three months ended September 30, 2025, up 9.6% from net income of $5.5 million earned for the same period last year.
● Diluted income per share of $0.96 for the nine months ended September 30, 2025, up 9.0% from diluted income per share of $0.88 for the same period last year. Diluted income per share of $0.38 for the three months ended September 30, 2025, up 11.8% from diluted income per share of $0.34 for the same period last year.
--- ---
● Net interest income of $49.7 million for the nine months ended September 30, 2025, up 4.0% from net interest income of $47.8 million for the same period last year. Net interest income of $16.8 million for the three months ended September 30, 2025, up 2.1% from net interest income of $16.5 million for the same period last year.
--- ---
● Net interest margin of 3.75% for the nine months ended September 30, 2025, increased 15 basis points from net interest margin of 3.60% for the same period last year. Net interest margin of 3.75% for the three months ended September 30, 2025, increased 10 basis points from net interest margin of 3.65% for the same period last year.
--- ---
● Provision for credit losses of $0.9 million for the nine months ended September 30, 2025, up 325.0% from provision for credit losses of $0.2 million for the same period last year. No provision for credit losses for the three months ended September 30, 2025 compared to a reversal of provision for credit losses of $0.6 million for the same period last year.
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● Total assets of $1.91 billion as of September 30, 2025, up 0.9% from $1.89 billion as of December 31, 2024.
--- ---
● Total net loans (including loans held-for-sale) of $1.06 billion as of September 30, 2025, up 0.9% from $1.05 billion as of December 31, 2024.
--- ---
● Total investment securities of $601.5 million as of September 30, 2025, down 5.1% from $633.9 million as of December 31, 2024.
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● Total deposits of $1.69 billion as of September 30, 2025, down 0.8% from $1.70 billion as of December 31, 2024.
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SUMMARY FINANCIAL DATA

The Company recorded net income of $15,150,000 for the nine months ended September 30, 2025, representing an increase of $962,000, or 6.8%, from net income of $14,188,000 for the same period in 2024. The Company recorded net income of $6,013,000 for the three months ended September 30, 2025, representing an increase of $525,000, or 9.6%, from net income of $5,488,000 for the same period in 2024.

The following tables present a summary of the results for the three and nine months ended September 30, 2025 and 2024, and a summary of financial condition at September 30, 2025 and December 31, 2024.

Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024
(in thousands, except per share amounts and ratios)
For the Period:
Net Income $ 6,013 $ 5,488 $ 15,150 $ 14,188
Basic Earnings Per Common Share $ 0.39 $ 0.35 $ 0.97 $ 0.89
Diluted Earnings Per Common Share $ 0.38 $ 0.34 $ 0.96 $ 0.88
Return on Average Assets (annualized) 1.27 % 1.15 % 1.08 % 1.01 %
Return on Average Equity (annualized) 12.15 % 12.73 % 10.80 % 11.50 %
Average Equity to Average Assets 10.43 % 9.02 % 10.02 % 8.77 %
September 30, 2025 December 31, 2024
--- --- --- --- --- --- ---
(in thousands, except ratios)
At Period End:
Total Assets $ 1,908,208 $ 1,891,722
Total Investment Securities, at fair value $ 601,502 $ 633,853
Total Loans, Net (including loans held-for-sale) $ 1,055,971 $ 1,046,852
Total Deposits $ 1,686,416 $ 1,700,089
Loan-To-Deposit Ratio 62.6 % 61.6 %

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FIRST NORTHERN COMMUNITY BANCORP

Distribution of Average Statements of Condition and Analysis of Net Interest Income

Three months ended
September 30, 2024
Yield/ Average Yield/
(in thousands, except percentages) Balance Interest Rate (4) Balance Interest Rate (4)
Assets **** ****
Interest-earning assets:
Loans (1) 1,055,924 $ 14,589 5.48 % $ 1,048,639 $ 14,315 5.43 %
Certificate of deposits 14,332 152 4.21 % 18,052 188 4.14 %
Interest bearing due from banks 105,545 1,071 4.03 % 126,903 1,632 5.12 %
Investment securities, taxable 545,004 4,068 2.96 % 550,360 3,586 2.59 %
Investment securities, non-taxable (2) 52,042 419 3.19 % 42,736 312 2.90 %
Other interest earning assets 10,870 245 8.94 % 10,518 261 9.87 %
Total average interest-earning assets 1,783,717 20,544 4.57 % 1,797,208 20,294 4.49 %
Non-interest-earning assets:
Cash and due from banks 32,326 40,401
Premises and equipment, net 8,133 9,470
Interest receivable and other assets 59,211 55,357
Total average assets 1,883,387 $ 1,902,436
Liabilities and Stockholders’ Equity: **** ****
Interest-bearing liabilities:
Interest-bearing transaction deposits 390,689 767 0.78 % 381,356 718 0.75 %
Savings and MMDA’s 459,869 1,723 1.49 % 431,446 1,443 1.33 %
Time, 250,000 or less 84,002 758 3.58 % 117,985 1,341 4.52 %
Time, over 250,000 51,446 449 3.46 % 38,453 296 3.06 %
Total average interest-bearing liabilities 986,006 3,697 1.49 % 969,240 3,798 1.56 %
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits 685,713 745,700
Interest payable and other liabilities 15,265 15,924
Total liabilities 1,686,984 1,730,864
Total average stockholders’ equity 196,403 171,572
Total average liabilities and stockholders’ equity 1,883,387 $ 1,902,436
Net interest income and net interest margin (3) $ 16,847 3.75 % $ 16,496 3.65 %

All values are in US Dollars.

(1) Average balances for loans include loans held-for-sale and non-accrual loans and are net of the allowance for credit losses, but non-accrued interest thereon is generally excluded. Loan interest income includes loan fees, net of deferred costs of approximately $50 and $4 for the three months ended September 30, 2025 and 2024, respectively.
(2) Interest income and yields on tax-exempt securities are not presented on a taxable-equivalent basis.
--- ---
(3) Net interest margin is computed by dividing net interest income by total average interest-earning assets.
--- ---
(4) For disclosure purposes, yield /rates are annualized by dividing the number of days in the reported period by 365.
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FIRST NORTHERN COMMUNITY BANCORP

Distribution of Average Statements of Condition and Analysis of Net Interest Income

Nine months ended
September 30, 2024
Yield/ Average Yield/
(in thousands, except percentages) Balance Interest Rate (4) Balance Interest Rate (4)
Assets **** ****
Interest-earning assets:
Loans (1) 1,047,737 $ 42,820 5.46 % $ 1,045,710 $ 41,620 5.32 %
Certificate of deposits 15,098 470 4.16 % 17,935 542 4.04 %
Interest bearing due from banks 87,409 2,808 4.30 % 127,030 5,077 5.34 %
Investment securities, taxable 563,964 12,553 2.98 % 531,871 9,519 2.39 %
Investment securities, non-taxable (2) 50,653 1,203 3.18 % 39,600 825 2.78 %
Other interest earning assets 10,734 767 9.55 % 10,518 784 9.96 %
Total average interest-earning assets 1,775,595 60,621 4.56 % 1,772,664 58,367 4.40 %
Non-interest-earning assets:
Cash and due from banks 32,473 38,716
Premises and equipment, net 8,378 9,654
Interest receivable and other assets 55,197 57,104
Total average assets 1,871,643 $ 1,878,138
Liabilities and Stockholders’ Equity: **** ****
Interest-bearing liabilities:
Interest-bearing transaction deposits 386,818 2,151 0.74 % 375,090 1,851 0.66 %
Savings and MMDA’s 452,813 4,875 1.44 % 429,227 3,910 1.22 %
Time, 250,000 or less 86,588 2,620 4.05 % 114,847 3,908 4.55 %
Time, over 250,000 53,031 1,157 2.92 % 37,430 862 3.08 %
FHLB advances 2,198 75 4.56 % — — 0.00 %
Total average interest-bearing liabilities 981,448 10,878 1.48 % 956,594 10,531 1.47 %
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits 688,446 740,261
Interest payable and other liabilities 14,235 16,523
Total liabilities 1,684,129 1,713,378
Total average stockholders’ equity 187,514 164,760
Total average liabilities and stockholders’ equity 1,871,643 $ 1,878,138
Net interest income and net interest margin (3) $ 49,743 3.75 % $ 47,836 3.60 %

All values are in US Dollars.

(1) Average balances for loans include loans held-for-sale and non-accrual loans and are net of the allowance for credit losses, but non-accrued interest thereon is generally excluded. Loan interest income includes loan fees, net of deferred costs of approximately $75 and $(448) for the nine months ended September 30, 2025 and 2024, respectively.
(2) Interest income and yields on tax-exempt securities are not presented on a taxable-equivalent basis.
--- ---
(3) Net interest margin is computed by dividing net interest income by total average interest-earning assets.
--- ---
(4) For disclosure purposes, yield /rates are annualized by dividing the number of days in the reported period by 365.
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FIRST NORTHERN COMMUNITY BANCORP

Distribution of Average Statements of Condition and Analysis of Net Interest Income

Three months ended
June 30, 2025
Yield/ Average Yield/
(in thousands, except percentages) Balance Interest Rate Balance Interest Rate (4)
Assets **** ****
Interest-earning assets:
Loans (1) 1,055,924 $ 14,589 5.48 % $ 1,044,581 $ 14,629 5.62 %
Certificates of deposit 14,332 152 4.21 % 15,112 157 4.17 %
Interest bearing due from banks 105,545 1,071 4.03 % 85,828 1,010 4.72 %
Investment securities, taxable 545,004 4,068 2.96 % 560,021 4,137 2.96 %
Investment securities, non-taxable (2) 52,042 419 3.19 % 49,497 391 3.17 %
Other interest earning assets 10,870 245 8.94 % 10,808 250 9.28 %
Total average interest-earning assets 1,783,717 20,544 4.57 % 1,765,847 20,574 4.67 %
Non-interest-earning assets:
Cash and due from banks 32,326 30,777
Premises and equipment, net 8,133 7,866
Interest receivable and other assets 59,211 53,556
Total average assets 1,883,387 $ 1,858,046
Liabilities and Stockholders’ Equity: **** ****
Interest-bearing liabilities:
Interest-bearing transaction deposits 390,689 767 0.78 % 383,761 693 0.72 %
Savings and MMDA’s 459,869 1,723 1.49 % 447,276 1,602 1.44 %
Time, 250,000 and under 84,002 758 3.58 % 88,024 889 4.05 %
Time, over 250,000 51,446 449 3.46 % 51,942 362 2.80 %
FHLB advances — — 0.00 % 6,593 75 4.56 %
Total average interest-bearing liabilities 986,006 3,697 1.49 % 977,596 3,621 1.49 %
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits 685,713 679,144
Interest payable and other liabilities 15,265 13,505
Total liabilities 1,686,984 1,670,245
Total average stockholders’ equity 196,403 187,801
Total average liabilities and stockholders’ equity 1,883,387 $ 1,858,046
Net interest income and net interest margin (3) $ 16,847 3.75 % $ 16,953 3.85 %

All values are in US Dollars.

(1) Average balances for loans include loans held-for-sale and non-accrual loans and are net of the allowance for credit losses, but non-accrued interest is generally excluded. Loan interest income includes loan fees, net of deferred costs of approximately $50 and $33 for the three months ended September 30, 2025 and June 30, 2025, respectively.
(2) Interest income and yields on tax-exempt securities are not presented on a taxable equivalent basis.
--- ---
(3) Net interest margin is computed by dividing net interest income by total average interest-earning assets.
--- ---
(4) For disclosure purposes, yield/rates are annualized by dividing the number of days in the reported period by 365.
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Analysis of Changes

in Interest Income and Interest Expense

Following is an analysis of changes in interest income and expense (dollars in thousands) for the three months ended September 30, 2025 over the three months ended September 30, 2024, the nine months ended September 30, 2025 over the nine months ended September 30, 2024, and the three months ended September 30, 2025 over the three months ended June 30, 2025.  Changes not solely due to interest rate or volume have been allocated proportionately to interest rate and volume.

Three Months Ended Nine Months Ended Three Months Ended
September 30, 2025 September 30, 2025 September 30, 2025
Over Over Over
Three Months Ended Nine Months Ended Three Months Ended
September 30, 2024 September 30, 2024 June 30, 2025
Interest Interest Interest
Volume Rate Change Volume Rate Change Volume Rate Change
(in thousands)
Increase (Decrease) in Interest Income:
Loans 118 $ 156 $ 274 $ 82 $ 1,118 $ 1,200 $ 210 $ (250 ) $ (40 )
Certificates of Deposit (39 ) 3 (36 ) (89 ) 17 (72 ) (7 ) 2 (5 )
Due From Banks (248 ) (313 ) (561 ) (1,397 ) (872 ) (2,269 ) 218 (157 ) 61
Investment Securities - Taxable (34 ) 516 482 596 2,438 3,034 (69 ) — (69 )
Investment Securities - Non-taxable 73 34 107 250 128 378 24 4 28
Other Assets 9 (25 ) (16 ) 16 (33 ) (17 ) 2 (7 ) (5 )
(121 ) $ 371 $ 250 $ (542 ) $ 2,796 $ 2,254 $ 378 $ (408 ) $ (30 )
Increase (Decrease) in Interest Expense:
Deposits:
Interest-Bearing Transaction Deposits $ 19 $ 30 $ 49 $ 61 $ 239 $ 300 $ 14 $ 60 $ 74
Savings & MMDAs 100 180 280 226 739 965 54 67 121
Time Certificates (281 ) (149 ) (430 ) (486 ) (507 ) (993 ) (96 ) 52 (44 )
FHLB advances — — — 75 — 75 (75 ) — (75 )
$ (162 ) $ 61 $ (101 ) $ (124 ) $ 471 $ 347 $ (103 ) $ 179 $ 76
Increase (Decrease) in Net Interest Income: $ 41 $ 310 $ 351 $ (418 ) $ 2,325 $ 1,907 $ 481 $ (587 ) $ (106 )

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CHANGES IN FINANCIAL CONDITION

The assets of the Company set forth in the Unaudited Condensed Consolidated Balance Sheets reflect a $30,062,000, or 25.2%, increase in cash and cash equivalents, a $3,184,000, or 19.8%, decrease in certificates of deposit, a $32,351,000, or 5.1%, decrease in investment securities available-for-sale, a $9,119,000, or 0.9%, increase in net loans held-for-investment, and a $12,521,000, or 23.9%, increase in interest receivable and other assets from December 31, 2024 to September 30, 2025. The increase in cash and cash equivalents was primarily due to a decrease in investment securities due to net proceeds from calls, maturities, and sales of available-for-sale securities and principal repayments on available-for-sale securities, which was partially offset by an increase in loans due to net loan originations coupled with a decrease in deposit balances. The decrease in certificates of deposits was due to net maturities and repayments of certificates of deposit. The increase in loans held-for-investment was primarily due to net originations of commercial loans, which was partially offset by net payoffs of commercial real estate and residential mortgage loans. The increase in interest receivable and other assets was primarily due to an increase in current tax receivable associated with the purchase of investment tax credits during the third quarter of 2025.

The liabilities of the Company set forth in the Unaudited Condensed Consolidated Balance Sheets reflect a decrease in total deposits of $13,673,000, or 0.8%, from December 31, 2024 to September 30, 2025. The overall decrease in total deposits was primarily due to seasonal fluctuations due to changes in market conditions and monetary policy coupled with the payoff of brokered CDs.

CHANGES IN RESULTS OF OPERATIONS

Interest Income

The Federal Open Market Committee decreased the Federal Reserve's benchmark rate by 25 basis points to a range of 4.00% to 4.25% during the nine months ended September 30, 2025.

Interest income on loans for the nine months ended September 30, 2025 was up 2.9% from the same period in 2024, increasing from $41,620,000 to $42,820,000 and was up 1.9% for the three months ended September 30, 2025 over the same period in 2024, increasing from $14,315,000 to $14,589,000. The increase in interest income on loans for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 14 basis point increase in yield on loans coupled with an increase in average balance of loans. The increase in interest income on loans for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 5 basis point increase in yield on loans coupled with an increase in average balance of loans.

Interest income on certificates of deposit for the nine months ended September 30, 2025 was down 13.3% from the same period in 2024, decreasing from $542,000 to $470,000, and was down 19.1% for the three months ended September 30, 2025 over the same period in 2024, decreasing from $188,000 to $152,000. The decrease in interest income on certificates of deposit for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a decrease in average balances of certificates of deposit, which was partially offset by a 12 basis point increase in yield on certificates of deposit. The decrease in interest income on certificates of deposit for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to a decrease in average balances of certificates of deposit, which was partially offset by a 7 basis point increase in yield on certificates of deposit.

Interest income on interest-bearing due from banks for the nine months ended September 30, 2025 was down 44.7% from the same period in 2024, decreasing from $5,077,000 to $2,808,000, and was down 34.4% for the three months ended September 30, 2025 over the same period in 2024, decreasing from $1,632,000 to $1,071,000. The decrease in interest income on interest-bearing due from banks for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a decrease in average balances of interest-bearing due from banks, coupled with a 104 basis point decrease in yield on interest-bearing due from banks. The decrease in interest income on interest-bearing due from banks for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to a decrease in average balances of interest-bearing due from banks, coupled with a 109 basis point decrease in yield on interest-bearing due from banks.

Interest income on investment securities available-for-sale for the nine months ended September 30, 2025 was up 33.0% from the same period in 2024, increasing from $10,344,000 to $13,756,000, and was up 15.1% for the three months ended September 30, 2025 over the same period in 2024, increasing from $3,898,000 to $4,487,000. The increase in interest income on investment securities for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to an increase in average investment securities, coupled with a 57 basis point increase in investment yields. The increase in interest income on investment securities for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to an increase in average investment securities, coupled with a 37 basis point increase in investment yields.

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Interest income on other earning assets for the nine months ended September 30, 2025 was down 2.2% from the same period in 2024, decreasing from $784,000 to $767,000, and was down 6.1% for the three months ended September 30, 2025 over the same period in 2024, decreasing from $261,000 to $245,000. This income is primarily derived from dividends received from the Federal Home Loan Bank. The decrease in interest income on other earning assets for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 41 basis point decrease in yield on other earning assets, which was partially offset by an increase in average balances of other earning assets. The decrease in interest income on other earning assets for the three months ended September 30, 2025 as compared to the same period a year ago was due to a 93 basis point decrease in yield on other earning assets, which was partially offset by an increase in average balances of other earning assets.

The Company had no Federal Funds sold balances during the three and nine months ended September 30, 2025 and September 30, 2024.

Interest Expense

Interest expense on interest-bearing liabilities for the nine months ended September 30, 2025 was up 3.3% from the same period in 2024, increasing from $10,531,000 to $10,878,000, and was down 2.7% for the three months ended September 30, 2025 over the same period in 2024, decreasing from $3,798,000 to $3,697,000. The increase in interest expense for the nine months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 1 basis point increase in average interest-bearing liabilities yield, coupled with an increase in average balance of interest-bearing liabilities. The decrease in interest expense for the three months ended September 30, 2025 as compared to the same period a year ago was primarily due to a 7 basis point decrease in average interest-bearing deposit yield, which was partially offset by an increase in average balance of interest-bearing liabilities.

Provision for Credit Losses

Provision for credit losses for the nine months ended September 30, 2025 was up 325.0% from the same period in 2024, increasing from $200,000 to $850,000. There was no provision for credit losses for the three months ended September 30, 2025, compared to a reversal of provision of $550,000 for the same period last year. Negative trends in forecast factors coupled with an increase in loans receivable contributed to an increase in reserves for collectively evaluated loans during the quarter ended September 30, 2025. This was offset by a decrease in specific reserves due to a decrease in nonaccrual loans requiring specific reserves. Specific reserves recorded during the quarter ended June 30, 2025 were released during the quarter ended September 30, 2025 primarily due to charge-offs of nonaccrual loans and paydowns on a nonaccrual loan relationship. The provision recorded for the nine months ended September 30, 2025 was primarily due to increases in loans receivable and unfunded commitments coupled with the negative trends in forecast factors.

Non-Interest Income

Non-interest income was up 2.6% for the nine months ended September 30, 2025 from the same period in 2024, increasing from $4,529,000 to $4,648,000. The increase was primarily driven by increases in other income, primarily merchant fees and bank owned life insurance income, which was partially offset by decreases in service charges on deposit accounts, mortgage brokerage income and debit card income.

Non-interest income was up 7.8% for the three months ended September 30, 2025 from the same period in 2024, increasing from $1,538,000 to $1,658,000. The increase was primarily due to increases in other income, primarily merchant fees and bank owned life insurance income, which was partially offset by decreases in gains on sales of loans held-for-sale and debit card income.

Non-Interest Expenses

Total non-interest expenses were up 6.0% for the nine months ended September 30, 2025 from the same period in 2024, increasing from $32,460,000 to $34,406,000. The increase was primarily due to increases in salaries and employee benefits, occupancy and equipment, data processing and other expenses. The increase in salaries and employee benefits is primarily due to an increase in full-time equivalent employees. The increase in occupancy and equipment was primarily due to an increase in service contracts related to maintaining facilities. The increase in data processing was primarily due to an increase in costs of service contracts. The increase in other expenses is primarily due to increases in contributions, legal and consulting fees.

Total non-interest expenses were up 9.0% for the three months ended September 30, 2025 from the same period in 2024, increasing from $10,934,000 to $11,923,000. The increase was primarily due to increases in salaries and employee benefits, occupancy and equipment, data processing and other expenses. The increase in salaries and employee benefits is primarily due to an increase in full-time equivalent employees. The increase in occupancy and equipment was primarily due to an increase in service contracts related to maintaining facilities. The increase in data processing was primarily due to an increase in costs of service contracts. The increase in other expenses was primarily due to increases in contributions and loan origination expense.

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The following table sets forth other non-interest expenses by category for the three and nine months ended September 30, 2025 and 2024.

Three months ended Three months ended Nine months ended Nine months ended
(in thousands) September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024
Other non-interest expenses
FDIC assessments $ 220 $ 210 $ 644 $ 633
Contributions 264 76 468 242
Legal fees 82 59 443 238
Accounting and audit fees 181 151 519 472
Consulting fees 331 313 1,019 768
Postage expense 20 36 88 114
Telephone expense 45 35 137 108
Public relations 92 42 225 222
Training expense 39 43 122 127
Loan origination expense (recovery) 135 (39 ) 126 89
Sundry losses 142 167 352 421
Loan collection expense 60 102 98 132
Debit card expense 315 323 854 949
Other non-interest expense 545 460 1,795 1,524
Total other non-interest expenses $ 2,471 $ 1,978 $ 6,890 $ 6,039

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Income Taxes

The Company’s tax rate, the Company’s income before taxes and the amount of tax relief provided by non-taxable earnings affect the Company’s provision for income taxes. Provision for income taxes decreased 27.8% for the nine months ended September 30, 2025 from the same period in 2024, decreasing from $5,517,000 to $3,985,000, and decreased 73.7% for the three months ended September 30, 2025 from the same period in 2024, decreasing from $2,162,000 to $569,000. The effective tax rate was 20.8% and 28.0% for the nine months ended September 30, 2025 and September 30, 2024, respectively. The effective tax rate was 8.6% and 28.3% for the three months ended September 30, 2025 and September 30, 2024, respectively.  The reduction in provision for income taxes and effective tax rate for the three and nine months ended September 30, 2025 as compared to the same periods a year ago was due to the execution of a tax planning strategy that involved purchasing investment tax credits tied to alternative energy projects.  The investment tax credits were acquired at a discount and recognized as a reduction to income tax expense in the quarter ended September 30, 2025.

Off-Balance Sheet Commitments

The following table shows the distribution of the Company’s undisbursed loan commitments at the dates indicated.

(in thousands) September 30, 2025 December 31, 2024
Undisbursed loan commitments $ 128,776 $ 140,092
Standby letters of credit 234 922
$ 129,010 $ 141,014

The reserve for unfunded lending commitments amounted to $1,050,000 and $700,000 as of September 30, 2025 and December 31, 2024, respectively. The reserve for unfunded lending commitments is included in other liabilities on the Condensed Consolidated Balance Sheets. See Note 7 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q, "Commitments and Contingencies," for additional information.

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Asset Quality

The Company manages asset quality and credit risk by maintaining diversification in its loan portfolio and through review processes that include analysis of credit requests and ongoing examination of outstanding loans and delinquencies, with particular attention to portfolio dynamics and loan mix. The Company strives to identify loans experiencing difficulty early enough to correct the problems, to record charge-offs promptly based on realistic assessments of collectability and current collateral values and to maintain an adequate allowance for credit losses at all times.  Asset quality reviews of loans and other non-performing assets are administered using credit risk-rating standards and criteria similar to those employed by state and federal banking regulatory agencies. The federal bank regulatory agencies utilize the following definitions for assets adversely classified for supervisory purposes:

● Substandard Assets – A substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
● Doubtful Assets – An asset classified doubtful has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable or improbable.
--- ---

Other Real Estate Owned and loans rated Substandard and Doubtful are deemed "classified assets". This category, which includes both performing and non-performing assets, receives an elevated level of attention regarding collection.

The following table summarizes the Company’s non-accrual loans net of guarantees of the State of California and U.S. Government by loan category at September 30, 2025 and December 31, 2024:

At September 30, 2025 At December 31, 2024
Gross Guaranteed Net Gross Guaranteed Net
(in thousands)
Commercial $ 401 $ 401 $ — $ 139 $ 139 $ —
Commercial real estate 672 — 672 7,993 — 7,993
Agriculture 4,942 825 4,117 2,236 — 2,236
Residential mortgage 180 — 180 202 — 202
Residential construction — — — — — —
Consumer 608 — 608 642 — 642
Total non-accrual loans $ 6,803 $ 1,226 $ 5,577 $ 11,212 $ 139 $ 11,073

It is generally the Company’s policy to discontinue interest accruals once a loan is past due for a period of 90 days as to interest or principal payments unless the loan is well secured and in process of collection.  When a loan is placed on non-accrual, interest accruals cease and uncollected accrued interest is reversed and charged against current income.  Payments received on non-accrual loans are applied against principal.  A loan may only be restored to an accruing basis when it again becomes well secured and in the process of collection or all past due amounts have been collected or there is an extended period of positive performance and a high probability that the loan will continue to pay according to original terms.

Non-accrual loans amounted to $6,803,000 at September 30, 2025 and were comprised of two commercial loans totaling $401,000, one commercial real estate loan totaling $672,000, four agriculture loans totaling $4,942,000, three residential mortgage loans totaling $180,000 and four consumer loans totaling $608,000. Non-accrual loans amounted to $11,212,000 at December 31, 2024 and were comprised of one commercial loan totaling $139,000, one commercial real estate loan totaling $7,993,000, two agriculture loans totaling $2,336,000, three residential mortgage loans totaling $202,000 and four consumer loans totaling $642,000.

A loan is considered to be collateral dependent when repayment is expected to be provided substantially through the operation or sale of the collateral. The ACL on collateral dependent loans is measured using the fair value of the underlying collateral, adjusted for costs to sell when applicable, less the amortized cost basis of the financial asset. It is generally the Company’s policy that if the value of the underlying collateral is determined to be less than the recorded amount of the loan, a charge-off will be taken.

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As the following table illustrates, total non-performing assets, net of guarantees of the State of California and U.S. Government, including its agencies and its government-sponsored agencies, decreased $4,255,000, or 38.4%, to $6,818,000 during the first nine months of 2025. Non-performing assets, net of guarantees, represented 0.4% of total assets at September 30, 2025.

At September 30, 2025 At December 31, 2024
Gross Guaranteed Net Gross Guaranteed Net
(dollars in thousands)
Non-accrual loans $ 6,803 $ 1,226 $ 5,577 $ 11,212 $ 139 $ 11,073
Loans 90 days past due and still accruing — — — — — —
Total non-performing loans 6,803 1,226 $ 5,577 11,212 139 $ 11,073
Other real estate owned 1,241 — 1,241 — — —
Total non-performing assets $ 8,044 $ 1,226 $ 6,818 $ 11,212 $ 139 $ 11,073
Non-performing loans (net of guarantees) to total loans 0.5 % 1.0 %
Non-performing assets (net of guarantees) to total assets 0.4 % 0.6 %
Allowance for credit losses to non-performing loans (net of guarantees) 281.5 % 143.5 %

The Company had no loans that were 90 days or more past due and still accruing as of September 30, 2025 and December 31, 2024.

Excluding non-performing loans, loans totaling $18,533,000 and $11,643,000 were classified as substandard or doubtful loans, representing potential problem loans at September 30, 2025 and December 31, 2024, respectively. Management believes that the allowance for credit losses at September 30, 2025 and December 31, 2024 appropriately reflected expected credit losses in the loan portfolio at that date.  The ratio of the allowance for credit losses to total loans was 1.47% at each of the periods ended September 30, 2025 and December 31, 2024.

Other real estate owned (“OREO”) consists of property that the Company has acquired by deed in lieu of foreclosure or through foreclosure proceedings, and property that the Company does not hold title to but is in actual control of, known as in-substance foreclosure. OREO also consists of property held by the Company that is no longer intended for future development. The estimated fair value of the property is determined prior to transferring the balance to OREO. The balance transferred to OREO during the nine months ended September 30, 2025 was transferred at the lower of the carrying amount of the property as compared to the fair value less costs to sell. The Company had OREO totaling $1,241,000 and $0 as of September 30, 2025 and December 31, 2024, respectively. OREO as of September 30, 2025 represented land, transferred from premises and equipment, that the Company determined is no longer intended for future development and is currently under contract for a sales price in excess of carrying value and is expected to close in 2026.

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Allowance for Credit Losses (ACL)

The Company's ACL is maintained at a level believed by management to appropriately reflect expected credit losses inherent in the loan portfolio.  The ACL is increased by provisions charged to operating expense and reduced by net charge-offs.  The Company contracts with vendors for credit reviews of the loan portfolio and utilizes historical loss trends and the remaining contractual lives of the loan portfolios to determine estimated credit losses through a reasonable and supportable forecast period. The ACL is based on estimates, and actual losses may vary from current estimates.

The following table summarizes the ACL of the Company during the nine months ended September 30, 2025 and 2024, and for the year ended December 31, 2024:

Analysis of the Allowance for Credit Losses

Nine months ended Year ended
September 30, December 31,
2025 2024 2024
(in thousands, except ratios)
Balance at beginning of period $ 15,885 $ 16,596 $ 16,596
Provision for credit losses 500 400 200
Loans charged-off:
Commercial (456 ) (606 ) (956 )
Commercial Real Estate (26 ) — —
Agriculture (474 ) — —
Residential Mortgage (5 ) — —
Residential Construction — — —
Consumer (19 ) (19 ) (28 )
Total charged-off (980 ) (625 ) (984 )
Recoveries:
Commercial 267 47 60
Commercial Real Estate — — —
Agriculture — — —
Residential Mortgage — — —
Residential Construction — — —
Consumer 27 4 13
Total recoveries 294 51 73
Net charge-offs (686 ) (574 ) (911 )
Balance at end of period $ 15,699 $ 16,422 $ 15,885
Ratio of net charge-offs to average loans outstanding during the period (annualized) (0.09 )% (0.07 )% (0.09 )%
Allowance for credit losses to total loans 1.47 % 1.55 % 1.49 %
Nonaccrual loans to total loans 0.63 % 0.38 % 1.06 %
Allowance for credit losses to nonaccrual loans 230.8 % 409.0 % 141.7 %

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Deposits

Deposits are one of the Company’s primary sources of funds.  At September 30, 2025 and December 31, 2024, the Company had the following deposit mix:

September 30, 2025 December 31, 2024
Non-interest bearing transaction 41.5 % 42.1 %
Interest-bearing transaction 22.8 % 22.1 %
Savings and MMDA 27.3 % 27.0 %
Time 8.4 % 8.8 %

The Company obtains deposits primarily from the communities it serves. The Company believes that no material portion of its deposits has been obtained from or is dependent on any one person or industry. The Company accepts deposits in excess of $250,000 from customers.  These deposits are priced to remain competitive.

Maturities of time certificates of deposit of over $250,000 outstanding at September 30, 2025 and December 31, 2024 are summarized as follows:

(in thousands) September 30, 2025 December 31, 2024
Three months or less $ 23,917 $ 11,741
Over three to six months 13,093 14,051
Over six to twelve months 13,084 13,180
Over twelve months 3,956 2,400
Total $ 54,050 $ 41,372

Approximately 42% and 40% of our deposits were uninsured as of September 30, 2025 and December 31, 2024, respectively.

Liquidity and Capital Resources

In order to serve our market area and comply with banking regulations, the Company must maintain adequate liquidity and adequate capital. Liquidity refers to the Company’s ability to provide funds at an acceptable cost to meet loan demand and deposit withdrawals, as well as contingency plans to meet unanticipated funding needs or loss of funding sources. These objectives can be met from either the asset or liability side of the balance sheet.

Asset liquidity sources consist of the repayments and maturities of loans, selling of loans, short-term money market investments, maturities of securities and sales of securities from the available-for-sale portfolio. These activities are generally summarized as investing activities in the Condensed Consolidated Statements of Cash Flows. For the nine months ended September 30, 2025, net liquidity provided by investing activities totaled $47,693,000.

The Company’s available-for-sale investment securities plus cash and cash equivalents in excess of reserve requirements and certificates of deposit totaled $763,902,000 on September 30, 2025, which was 40.0% of assets at that date. This was a decrease of $5,473,000 from $769,375,000 and 40.7% of assets as of December 31, 2024. The Company’s investment securities are generally shorter term in nature to provide ongoing cash flows for liquidity needs and/or reinvestment for interest rate risk management. On September 30, 2025, the effective duration of our investment securities was 3.10 with projected principal cashflow of $46,442,000 for the remainder of 2025 available for reinvestment or liquidity needs. The Company had no held-to-maturity securities as of September 30, 2025 and December 31, 2024.

Liquidity may also be impacted from liabilities through changes in deposits and borrowings outstanding. These activities are included under financing activities in the Condensed Consolidated Statements of Cash Flows. As of September 30, 2025, the Company had $0 in borrowings outstanding. For the nine months ended September 30, 2025, net liquidity used in financing activities totaled $16,951,000, primarily due to a net decrease in deposits and repurchases of common stock. While these sources of funds are expected to continue to provide significant amounts of funds in the future, their mix, as well as the possible use of other sources, will depend on future economic and market conditions.

Liquidity is also provided or used through the results of operating activities. For the nine months ended September 30, 2025, net cash used in operating activities totaled $680,000, primarily as a result of an increase in other assets due to the increase in current tax receivable associated with the tax planning strategy implemented in the third quarter of 2025.

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Liquidity is measured by various ratios, in management’s opinion, the most common being the ratio of net loans to deposits (including loans held-for-sale).  This ratio was 62.6% and 61.6% as of September 30, 2025 and December 31, 2024, respectively.

Loan demand during the remainder of 2025 will depend in part on economic and competitive conditions. The Company emphasizes the solicitation of non-interest-bearing demand deposits and money market checking accounts, which are the least sensitive to interest rates. The outlook for deposit balances during the remainder of 2025 is subject to actions by the Federal Reserve and heightened competition.

To meet unanticipated funding requirements, the Company maintains short-term unsecured lines of credit with other banks which totaled $130,000,000 at September 30, 2025.  Additionally, the Company has a line of credit with the FHLB, with a remaining borrowing capacity at September 30, 2025 of $393,040,000; credit availability is subject to certain collateral requirements.

The Company’s primary source of liquidity on a stand-alone basis is dividends from the Bank.  Dividends from the Bank are subject to regulatory restrictions.

In July 2013, the Federal Reserve and the other U.S. federal banking agencies adopted final rules making significant changes to the U.S. regulatory capital framework for U.S. banking organizations and to conform this framework to the guidelines published by the Basel Committee known as the Basel III Global Regulatory Framework for Capital and Liquidity.  The Basel Committee is a committee of banking supervisory authorities from major countries in the global financial system which formulates broad supervisory standards and guidelines relating to financial institutions for implementation on a country-by-country basis.   These rules adopted by the Federal Reserve and the other federal banking agencies (the U.S. Basel III Capital Rules) replaced the federal banking agencies’ general risk-based capital rules, advanced approaches rule, market risk rule, and leverage rules, in accordance with certain transition provisions.

Banks, such as First Northern, became subject to the final rules on January 1, 2015.  The final rules implemented higher minimum capital requirements, included a new common equity Tier 1 capital requirement, and established criteria that instruments must meet in order to be considered common equity Tier 1 capital, additional Tier 1 capital, or Tier 2 capital.  The final rules provide for increased minimum capital ratios as follows: (a) a common equity Tier 1 capital ratio of 4.5%; (b) a Tier 1 capital ratio of 6%; (c) a total capital ratio of 8%; and (d) a Tier 1 leverage ratio to average consolidated assets of 4%.  Under these rules, in order to avoid certain limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold a capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements (equal to 2.5% of total risk-weighted assets).  The capital conservation buffer is designed to absorb losses during periods of economic stress.

Pursuant to the Economic Growth, Regulatory Relief and Consumer Protection Act ("EGRRCPA"), the FRB adopted a final rule, effective August 31, 2018, amending the Small Bank Holding Company and Savings and Loan Holding Company Policy Statement (the “policy statement”) to increase the consolidated assets threshold to qualify to utilize the provisions of the policy statement from $1 billion to $3 billion. Bank holding companies, such as the Company, are subject to capital adequacy requirements of the FRB; however, bank holding companies which are subject to the policy statement are not subject to compliance with the regulatory capital requirements until they hold $3 billion or more in consolidated total assets. As a consequence, as of December 31, 2018, the Company was not required to comply with the FRB’s regulatory capital requirements until such time that its consolidated total assets equal $3 billion or more or if the FRB determines that the Company is no longer deemed to be a small bank holding company. However, if the Company had been subject to these regulatory capital requirements, it would have exceeded all regulatory requirements.

In August of 2020, the Federal banking agencies adopted the final version of the community bank leverage ratio framework rule (the “CBLR”), implementing two interim final rules adopted in April of 2020.  The rule provides an optional, simplified measure of capital adequacy.  Under the optional CBLR framework, the CBLR was 8.5% through calendar year 2021 and is 9% thereafter.  The rule is applicable to all non-advanced approaches FDIC-supervised institutions with less than $10 billion in total consolidated assets.  Banks not electing the CBLR framework will continue to be subject to the generally applicable risk-based capital rule.  At the present time, the Company and the Bank do not intend to elect to use the CBLR framework.

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As of September 30, 2025, the Bank’s capital ratios exceeded applicable regulatory requirements. The following table presents the capital ratios for the Bank, compared to the regulatory standards for well-capitalized depository institutions, as of September 30, 2025.

Actual Well Capitalized
**** Ratio
(in thousands except ratios) Capital Ratio Requirement
Leverage $ 218,233 11.47 % 5.0 %
Common Equity Tier 1 $ 218,233 17.35 % 6.5 %
Tier 1 Risk-Based $ 218,233 17.35 % 8.0 %
Total Risk-Based $ 233,965 18.60 % 10.0 %

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ITEM 3. –QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company believes that there have been no material changes in the quantitative and qualitative disclosures about market risk as of September 30, 2025, from those presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which are incorporated by reference herein.

ITEM 4. –CONTROLS AND PROCEDURES

(a)  We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have concluded that the design and operation of our disclosure controls and procedures are effective as of September 30, 2025.  This conclusion is based on an evaluation conducted under the supervision and with the participation of management.

(b)  During the quarter ended September 30, 2025, there were no changes in our internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. – LEGAL PROCEEDINGS

Neither the Company nor the Bank is a party to any material pending legal proceeding, nor is any of their property the subject of any material pending legal proceeding, except ordinary routine litigation arising in the ordinary course of the Bank’s business and incidental to its business, none of which is expected to have a material adverse impact upon the Company’s or the Bank’s business, financial position or results of operations.

ITEM 1A. – RISK FACTORS

We are subject to various risks and uncertainties, which could materially affect our business, results of operations, financial condition, future results, and the trading price of our common stock. You should read carefully the following information together with the information appearing in Part I, Item 1A, “Risk Factors” in our 2024 Form 10-K. The following information supplements and, to the extent inconsistent, supersedes some of the information appearing in the “Risk Factors” section of our 2024 Form 10‑K. These risk factors, as well as our condensed consolidated financial statements and notes thereto and the other information appearing in this Report, should be reviewed carefully for important information regarding risks that affect us.

Changes in U.S. and Foreign Government Policies, Including the Imposition of or Further Increases in Tariffs and Changes to Existing Trade Agreements, Could Have a Material Adverse Effect on the Bank’s Customers, Which, in Turn, Could Adversely Affect Our Business, Financial Condition and Results of Operations

In February 2025, the new Trump Administration announced that it would be imposing increases in tariffs on goods imported to the U.S. from Canada, Mexico, and China, and, in April 2025, the Administration announced the imposition of increased tariffs on goods imported to the U.S. from other countries. As a consequence, other countries, in retaliation to the U.S.’s tariff measures, announced the imposition of increased levels of tariffs on goods exported to such countries by companies in the U.S.  The Administration subsequently announced a delay of 90 days in the implementation of those increased tariffs for most other countries, leaving in place, however, a 10% baseline tariff that went into effect on April 5 and that applies to nearly all imports from all countries. The 90-day pause on the implementation of nearly all of the country-specific tariffs was initially set to expire on July 8, 2025, but was extended to August 1, 2025, to provide additional time to negotiate and finalize bilateral trade agreements with key countries. On July 31, 2025, the Trump Administration issued an Executive Order further adjusting the tariff rates to be applied against nearly 70 countries, effective August 7, 2025.  The Trump Administration has announced agreements in principle regarding tariffs with certain significant trading partners of the United States, including (among others) the European Union, the United Kingdom, Japan and South Korea.  It remains uncertain whether such agreements in principle will lead to definitive agreements with such trading partners and, if so, on what terms and whether agreements with other trading partners will eventually be consummated. More recently, the U.S. government has introduced new tariffs and tariff-related measures and has indicated that other potential tariff measures and modifications to existing tariffs continue to be under consideration. The tariff environment continues to remain highly dynamic, and the specific tariffs applicable to goods imported into the U.S. continue to evolve, as do import tariffs charged by other countries. These tariffs could be of particular concern to U.S. companies operating in the agricultural sector who export agricultural goods to other countries. The Company’s customers include a number of agricultural businesses, which could be negatively affected.

As a result of these changes to U.S. and foreign government trade policies, there may be changes to existing trade agreements, greater restrictions on free trade generally, the imposition of or significant further increases in tariffs on goods imported into the U.S., and adverse responses by foreign governments to U.S. trade policies, among other possible changes. The extent and duration of any tariffs, and the resulting impact on economic conditions generally and on our customers’ businesses in particular are uncertain and depend on various factors, such as negotiations between the U.S. and other countries, the responses of such countries, and exemptions or exclusions that may be granted. A significant trade disruption or the establishment or further increase of any tariffs, trade protection measures or restrictions could result in lost sales, adversely impacting our banking customers and their businesses, including our agricultural business customers. In addition, international trade disputes, including those related to tariffs, could result in inflationary pressures and/or adversely impact global supply chains, which could increase the costs of doing business for our banking customers.  Changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the countries where our banking customers currently sell products, including agricultural products, and any resulting negative sentiments towards the U.S. and U.S. businesses as a result of such changes, could also have a material adverse effect on our banking customers’ business, financial condition, results of operations and cash flows.  If these events negatively affect our banking clients, or general economic conditions nationally, in California, or in the markets we serve, our business, financial condition and results of operations could be adversely affected.

Negative Developments in the Banking Industry, and any Legislative and/or Bank Regulatory Actions that may Result, Could Adversely Affect our Business Operations, Results of Operations and Financial Condition.

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The high-profile bank failures of Silicon Valley Bank, Signature Bank and First Republic Bank in 2023, and related negative media attention, generated significant market trading volatility among publicly-traded bank holding companies and, in particular, regional and community banks, such as the Company. These developments negatively impacted customer confidence in the safety and soundness of regional and community banks. Defaults by, or even rumors or questions about, one or more financial institutions or the financial services industry generally, may lead to market-wide liquidity problems and losses of client, creditor and counterparty confidence and could lead to losses or defaults by us or by other financial institutions.

While we currently do not anticipate liquidity constraints of the kind that caused these other financial services institutions to fail or require external support, constraints on our liquidity could occur as a result of customers choosing to maintain their deposits with larger financial institutions or to invest in higher yielding short-term fixed income securities, which could materially adversely impact our liquidity, cost of funding, loan funding capacity, net interest margin, capital and results of operations. If we were required to sell a portion of our securities portfolio to address liquidity needs, we may incur losses, including as a result of the negative impact of rising interest rates on the value of our securities portfolio, which could negatively affect our earnings and our capital. While the Company has taken actions which aim to maintain adequate and diversified sources of funding and management believes that its liquidity measures are reasonable in light of the nature of the Bank’s customer base, there can be no assurance that such actions will be sufficient in the event of a sudden liquidity crisis.

These bank failures may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies, enhanced regulatory supervision and examination policies and priorities, and/or the imposition of restrictions through regulatory supervisory or enforcement activities, including higher capital requirements and/or an increase in the Bank’s deposit insurance assessments. The FDIC has proposed that Congress consider, and legislation has been introduced in Congress proposing, various changes in the FDIC insurance program, including possible increases in the deposit insurance limit for certain types of accounts, such as business payment accounts. Although these legislative and regulatory actions cannot be predicted with certainty, any of these potential legislative or regulatory actions could, among other things, subject us to additional costs, limit the types of financial services and products we may offer, and reduce our profitability, any of which could materially and adversely affect our business, results of operations or financial condition.

Economic Conditions in the U.S. May Soften or Become Recessionary with Resultant Adverse Consequences for the U.S. Financial Services Industry and for the Bank

Following the financial crisis of 2008, adverse financial and economic developments impacted U.S. and global economies and financial markets and presented challenges for the banking and financial services industry and for us. These developments included a general recession both globally and in the U.S. accompanied by substantial volatility in the financial markets. In response, various significant economic and monetary stimulus measures were implemented by the U.S. government. The FRB also pursued a highly accommodative monetary policy aimed at keeping interest rates at historically low levels,  In January 2022, due to elevated levels of inflation and corresponding pressure to raise interest rates, the FRB began slowing the pace of its bond purchasing and increasing the target range for the federal funds rate over time, before beginning to reduce interest rates in 2024, which reductions have continued in 2025.  Monetary policy has contributed to and may continue to result in elevated market interest rates and a flat and/or inverted yield curve. Changes to monetary policy may adversely impact U.S. economic activity and have adverse consequences on our customers’ and our earnings and operations. A prolonged federal government shutdown, as well as broader issues surrounding the federal budgeting process and governance, may also contribute to market volatility and disruptions and recessionary risk.

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As noted previously, the Trump Administration recently imposed increased tariffs on goods imported to the U.S. from other countries. As a consequence, other countries, in retaliation to the U.S.’s tariff measures, announced the imposition of increased levels of tariffs on goods exported to such countries by companies in the U.S. More recently, the U.S. government has introduced agreements in principle regarding tariffs with certain trading partners of the United States, new tariffs and tariff-related measures and has indicated that other potential tariff measures and modifications to existing tariffs continue to be under consideration. The tariff environment continues to remain highly dynamic, and the specific tariffs applicable to goods imported into the U.S. continue to evolve, as do import tariffs charged by other countries. See “Changes in U.S. and Foreign Government Policies, Including the Imposition of or Further Increases in Tariffs and Changes to Existing Trade Agreements, Could Have a Material Adverse Effect on the Bank’s Customers, Which, in Turn, Could Adversely Affect Our Business, Financial Condition and Results of Operations,” above in these “Risk Factors” in this Quarterly Report on Form 10-Q. International trade disputes, including those related to tariffs, could result in inflationary pressures and/or adversely impact global supply chains, which could increase the costs of doing business for our banking customers. Political tensions as a result of trade policies could reduce trade volume, investment, technological exchange, and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets, which could have resulting material adverse effects on general economic conditions nationally, in California, or in our local markets. Some economists have predicted that the Administration’s steep new tariffs could curtail growth and result in price increases for American consumers, ultimately increasing the likelihood of a U.S. recession. Any of these developments could adversely affect our business, financial condition and results of operations.

We, and other financial services companies, are impacted to a significant degree by current economic conditions. If the U.S. economy weakens, our growth and profitability from our lending, deposit and investment operations could be constrained and our asset quality, deposit levels, loan demand and results of operations may be adversely affected.

The U.S. government continues to face significant fiscal and budgetary challenges which, if not resolved, could result in renewed adverse U.S. economic conditions. These challenges may be intensified over time if federal budget deficits were to increase and Congress and the Administration cannot effectively work to address them. The overall level of the federal government's debt, the extensive political disagreements regarding the government's statutory debt limit and the continuing substantial federal budget deficits led to a downgrade from “AAA” to “AA+” of the long-term sovereign credit rating of United States debt by one credit rating agency in 2023. In May 2025, Moody’s lowered the U.S. government’s long-term issuer and senior unsecured ratings from “Aaa” to “Aa1”.  This downgrade means that all three major credit rating agencies have downgraded the U.S. credit rating below their top rating.  This risk could be exacerbated over time.

If substantial federal budget deficits were to continue or increase in the years ahead, further downgrades by the credit rating agencies with respect to the obligations of the U.S. federal government could occur. A prolonged federal government shutdown, as well as broader issues surrounding the federal budgeting process and governance, may further contribute to the possibility of a downgrade of the U.S. sovereign credit rating.  Any such further downgrades could increase over time the U.S. federal government’s cost of borrowing, which may worsen its fiscal challenges, as well as generate further upward pressure on interest rates generally in the U.S. which could, in turn, have adverse consequences for borrowers and the level of business activity. The long-term impact of this situation, including the impact on the Bank's investment securities portfolio and other assets, cannot be predicted.

Adverse Economic Factors Affecting Certain Industries the Bank Serves Could Adversely Affect Our Business

The Bank is subject to certain industry-specific economic factors. For example, a portion of the Bank’s total loan portfolio is related to residential and commercial real estate, especially in California. Increases in residential mortgage loan interest rates could have an adverse effect on the Bank’s operations by depressing new mortgage loan originations, which in turn could negatively impact the Bank’s title and escrow deposit levels. Additionally, a downturn in the residential real estate and housing industries in California could have an adverse effect on the Bank’s operations and the quality of its real estate and construction loan portfolio. Although the Bank does not engage in subprime or negative amortization lending, we are not immune to volatility in the real estate market. Real estate valuations are influenced by demand, and demand is driven by economic factors such as employment rates and interest rates. These factors could adversely impact the quality of the Bank’s residential construction, residential mortgage and construction related commercial portfolios in various ways, including by decreasing the value of the collateral for our loans, and thereby negatively affecting the Bank’s overall loan portfolio.

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The Bank provides financing to, and receives deposits from, businesses in a number of other industries that may be particularly vulnerable to industry-specific economic factors, including the home building, commercial real estate, retail, agricultural, industrial, and commercial industries. Following the financial crisis of 2008, the home building industry in California was especially adversely impacted by the deterioration in residential real estate markets, which lead the Bank to take additional provisions and charge-offs against credit losses in this portfolio. The recessionary economic and market conditions resulting from the COVID-19 pandemic also significantly affected the commercial and residential real estate markets in the U.S. generally, and in California in particular, decreasing property values, increasing the risk of defaults and reducing the value of real estate collateral. Continued volatility in fuel prices and energy costs and return of drought conditions in California could also adversely affect businesses in several of these industries.

As noted previously, the Trump Administration recently imposed increased tariffs on goods imported to the U.S. from other countries. As a consequence, other countries, in retaliation to the U.S.’s tariff measures, announced the imposition of increased levels of tariffs on goods exported to such countries by companies in the U.S. More recently, the U.S. government has introduced agreements in principle regarding tariffs with certain trading partners of the United States, new tariffs and tariff-related measures and has indicated that other potential tariff measures and modifications to existing tariffs continue to be under consideration. The tariff environment continues to remain highly dynamic, and the specific tariffs applicable to goods imported into the U.S. continue to evolve, as do import tariffs charged by other countries. Such tariffs could be of particular concern to U.S. companies operating in the agricultural sector who export agricultural goods to other countries. The Company’s customers include a number of agricultural businesses, which could be negatively affected. See “Changes in U.S. and Foreign Government Policies, Including the Imposition of or Further Increases in Tariffs and Changes to Existing Trade Agreements, Could Have a Material Adverse Effect on the Bank’s Customers, Which, in Turn, Could Adversely Affect Our Business, Financial Condition and Results of Operations,” above in these “Risk Factors” in this Quarterly Report on Form 10-Q.

Industry specific risks are beyond the Bank’s control and could adversely affect the Bank’s portfolio of loans, potentially resulting in an increase in non-performing loans or charge-offs and a slowing of growth or reduction in our loan portfolio.

In recent years, wildfires across California and in our market areas resulted in significant damage and destruction of property and equipment. The fire damage resulted in adverse economic impacts to those affected markets and beyond and on the Bank's customers. In addition, the major electric utility company in our region has adopted programs of electrical power shut-offs, often for multiple days, in wide areas of Northern California during periods of high winds and high fire danger. Shut-offs of power by this utility have adversely impacted the business of some of our customers and also have resulted in some of our branches being temporarily closed. It can be expected that these events will continue to occur from time to time in the areas served by the Bank, and that the consequences of these natural disasters, including programs of public utility public safety power outages when weather conditions and fire danger warrant, may adversely affect the Bank’s business and that of its customers. It is also possible that climate change may be increasing the severity or frequency of adverse weather conditions, thus increasing the impact of these types of natural disasters on our business and that of our customers. For additional information, see "Our Operations, Business and Customers Could be Materially Adversely Affected by the Physical Effects of Climate Change, as well as Governmental and Societal Responses to Climate Change," in "Risk Factors" in our 2024 Form 10-K.

The long-term impact of these developments on the markets we serve cannot be predicted at this time.

The Bank is Subject to Interest Rate Risk

The income of the Bank depends to a great extent on “interest rate differentials” and the resulting net interest margins (i.e., the difference between the interest rates earned on the Bank’s interest-earning assets such as loans and investment securities, and the interest rates paid on the Bank’s interest-bearing liabilities such as deposits and borrowings). Changes in the relationship between short-term and long-term market interest rates or between different interest rate indices can impact our interest rate differential, possibly resulting in a decrease in our interest income relative to interest expense. Interest rates are highly sensitive to many factors, which are beyond the Bank’s control, including, but not limited to, general economic conditions and the policies of various governmental and regulatory agencies, in particular, the FRB. Changes in monetary policy, including changes in interest rates, influence the origination of loans, the purchase of investments and the generation of deposits and affect the rates received on loans and investment securities and paid on deposits. In addition, an increase in interest rates could adversely affect clients’ ability to pay the principal or interest on existing loans or reduce their borrowings. This may lead to an increase in our non-performing assets, a decrease in loan originations, or a reduction in the value of and income from our loans, any of which could have a material and negative effect on our operations.

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Fluctuations in market rates and other market disruptions are neither predictable nor controllable and may adversely affect our financial condition and earnings. Since 2022, inflationary pressures have affected many aspects of the U.S. economy, including gasoline and fuel prices, and global and domestic supply-chain issues have also had a disruptive effect on many industries, including the agricultural industry. In January 2022, due to elevated levels of inflation and corresponding pressure to raise interest rates, the FRB announced after several periods of historically low federal funds rates and yields on Treasury notes that it would be slowing the pace of its bond purchasing and increasing the target range for the federal funds rate over time. The FOMC increased the target range 525 basis points from March 2022 through July 2023. The target range remained unchanged through much of 2024 until the FOMC decreased the rate 100 basis points, to a target range of 4.25% to 4.50%, during the last four months of the year. The FOMC further decreased the Federal Reserve's benchmark rate by 25 basis points to a range of 4.00% to 4.25% during the nine months ended September 30, 2025, and, on October 29, 2025, the FOMC announced a further 25 basis point decrease in the benchmark rate.  It remains uncertain whether the FOMC will further decrease the target range for the federal funds rate to attain a monetary policy sufficiently restrictive to return inflation to more normalized levels, begin to increase the federal funds rate or leave the rate at its current elevated level for a lengthy period of time. Factors such as inflation, productivity, oil prices, unemployment rates, and global demand play a role in the FOMC's consideration of future rate adjustments.  As noted previously, the Trump Administration recently imposed increased tariffs on goods imported to the U.S. from other countries. As a consequence, other countries, in retaliation to the U.S.’s tariff measures, announced the imposition of increased levels of tariffs on goods exported to such countries by companies in the U.S. More recently, the U.S. government has introduced agreements in principle regarding tariffs with certain trading partners of the United States, new tariffs and tariff-related measures and has indicated that other potential tariff measures and modifications to existing tariffs continue to be under consideration. The tariff environment continues to remain highly dynamic, and the specific tariffs applicable to goods imported into the U.S. continue to evolve, as do import tariffs charged by other countries. Such tariffs could result in increased inflationary pressures on the U.S. economy. These developments could adversely affect our banking customers’ businesses, which, in turn, could adversely affect our business, financial condition and results of operations. See “Economic Conditions in the U.S. May Soften or Become Recessionary with Resultant Adverse Consequences for the U.S. Financial Services Industry and for the Bank,” above in these “Risk Factors” in this Quarterly Report on Form 10-Q.

Beginning in 2021, the U.S. Economy Began to Reflect Relatively Rapid Rates of Increase in the Consumer Price Index and Other Economic Indices; a Prolonged Elevated Rate of Inflation Could Present Risks for the U.S. Banking Industry and Our Business.

Beginning in 2021, the U.S. economy exhibited relatively rapid rates of increase in the consumer price index and other economic indices. If the U.S. economy encounters a significant, prolonged rate of inflation, this could pose higher relative risks to the banking industry and our business. Such inflationary periods have historically corresponded with relatively weaker earnings and higher credit losses for banks. In the past, inflationary environments have caused financing conditions to tighten and have increased borrowing costs for some marginal borrowers which, in turn, has impacted bank credit quality and loan growth. Additionally, a sustained period of inflation well above the FRB’s long-term target could prompt broad-based selling of longer-duration, fixed-rate debt, which could have negative implications for equity and real estate markets. Lower interest rates enable less credit-worthy borrowers to more readily meet their debt obligations. Small businesses and leveraged loan borrowers can be challenged in a materially higher-rate environment. Higher interest rates can also present challenges for commercial real estate projects, pressuring valuations and loan-to-value ratios. The FRB initiated a series of significant interest rate increases in response to the recent economic developments. For additional information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Net Interest Income" in our 2024 Form 10-K and "-Interest Income" in this Quarterly Report on Form 10-Q.

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In addition, the war between Russia and Ukraine and global reactions thereto have increased U.S. domestic and global energy prices.  Oil supply disruptions related to the Russia-Ukraine conflict, and sanctions and other measures taken by the U.S. or its allies, could lead to higher costs for gas, food and goods in the U.S. and exacerbate the inflationary pressures on the economy. As noted previously, the Trump Administration recently imposed increased tariffs on goods imported to the U.S. from other countries. As a consequence, other countries, in retaliation to the U.S.’s tariff measures, announced the imposition of increased levels of tariffs on goods exported to such countries by companies in the U.S. More recently, the U.S. government has introduced agreements in principle regarding tariffs with certain trading partners of the United States, new tariffs and tariff-related measures and has indicated that other potential tariff measures and modifications to existing tariffs continue to be under consideration. The tariff environment continues to remain highly dynamic, and the specific tariffs applicable to goods imported into the U.S. continue to evolve, as do import tariffs charged by other countries. Such tariffs could result in increased inflationary pressures on the U.S. economy. These developments could adversely affect our banking customers’ businesses, which, in turn, could adversely affect our business, financial condition and results of operations. See “Economic Conditions in the U.S. May Soften or Become Recessionary with Resultant Adverse Consequences for the U.S. Financial Services Industry and for the Bank,” above in these “Risk Factors” in this Quarterly Report on Form 10-Q.

Changes in the U.S. Tax Laws Have Impacted, and May Impact, Our Business and Results of Operations in a Variety of Ways, Some of Which Are Positive, and Others Which May Be Negative

The Tax Cuts and Jobs Act (“TCJA”), signed into law on December 22, 2017, enacted sweeping changes to the U.S. federal tax laws generally effective January 1, 2018.  These changes have impacted our business and results of operations in a variety of ways, some of which are positive and others which are negative.  The TCJA reduced the corporate tax rate to 21% from 35%, which resulted in a net reduction in our annual income tax expense and which has also benefited many of our corporate and other small business borrowers.  However, our ability to utilize tax credits, such as those arising from low-income housing and alternative energy investments, is constrained by the lower tax rate.  Increases in the U.S. corporate tax rate could adversely impact our profitability and that of our business and commercial customers. On July 4, 2025, the One Big Beautiful Bill Act was enacted into law, which included certain modifications to U.S. tax law. The Company is currently evaluating the provisions of this Act but does not expect it to have a material impact on our consolidated financial statements.

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ITEM 2. – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The Company made the following purchases of its common stock during the three months ended September 30, 2025:

(a) (b) (c) (d)
Period Total number of shares purchased Average price paid per share Number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet be purchased under the plans or programs(1)
July 1 - July 31, 2025 — — — 348,931
August 1 - August 31, 2025 80,954 $ 11.37 80,954 267,977
September 1 - September 30, 2025 16,590 $ 12.04 16,590 251,387
Total 97,544 97,544
(1) On March 27, 2024, the Company approved a stock repurchase program effective May 1, 2024. The stock repurchase program, which remains in effect until April 30, 2026 unless terminated sooner, allows repurchases by the Company in an aggregate amount of no more than 6% of the Company’s 15,550,731 outstanding shares of common stock as of March 21, 2024. This represented total shares of 979,695 eligible for repurchase at May 1, 2024. The total number of shares eligible for repurchase has been adjusted to give retroactive effect to stock dividends and stock splits, including the 5% stock dividend declared on January 23, 2025, paid on March 25, 2025 to shareholders of record as of February 28, 2025.
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ITEM 3. – DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. – MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. – OTHER INFORMATION

During the three months ended September 30, 2025, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as each term is defined in Item 408(a) of Regulation S-K.

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ITEM 6. – EXHIBITS

Exhibit<br> <br>Number Description of Document
3.1 Amended and Restated Bylaws of First Northern Community Bancorp, as amended September 17, 2025 - incorporated herein by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K dated September 17, 2025.
10.45 Executive Retirement/Retention Participation Agreement for Brett Hamilton, Executive Vice President and Chief Credit Officer, between First Northern Bank and Mr. Hamilton dated as of April 1, 2024 - provided herewith*
31.1 Rule 13a — 14(a) Certification of Chief Executive Officer
31.2 Rule 13a — 14(a) Certification of Chief Financial Officer
32.1** Statement of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
32.2** Statement of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income/Loss, (iv) the Condensed Consolidated Statement of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements. The XBRL instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

* Management contract or compensatory plan, contract or arrangement.

** In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.

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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.

FIRST NORTHERN COMMUNITY BANCORP
Date: November 7, 2025 By: /s/  Kevin Spink
Kevin Spink, Executive Vice President / Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)

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EXHIBIT 10.45

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FIRST NORTHERN BANK

EXECUTIVE RETIREMENT/RETENTION PARTICIPATION AGREEMENT

FOR Brett Hamilton

This Executive Retirement/Retention Participation Agreement (the “Agreement”) is entered into as of this 1st day of April 2024, by and between First Northern Bank of Dixon, a California-chartered, FDIC-insured bank with its main office in Dixon, California (“Company”) and Brett Hamilton (the “Executive”).

Whereas, the Executive has contributed substantially to the success of the Company and its parent corporation, First Northern Community Bancorp, and the Company desires that the Executive continue employment,

Whereas, the Compensation Committee has reviewed and approved of this Agreement and the Executive’s participation herein, and approves of the Executive’s participation in the First Northern Bank Executive Deferral Plan (“Plan”) for any bonus amounts awarded to the Executive under the terms of this Agreement,

Whereas, the Executive wishes to accept participation in this Agreement subject to all terms herein,

Whereas, the Company and the Executive acknowledge that this Agreement is not a guarantee of employment and may be terminated as specified in 3.2 below,

Now, Therefore, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1

PURPOSE

The purpose of this Agreement is to provide a supplementary Executive Retirement/Retention Award to the Executive that vests and becomes payable upon continued employment of the Executive to age 58, as described below.  The Executive Retirement/Retention Award shall be awardable to the Executive only upon achievement of goals specified by the Compensation Committee.  Once awarded, the Executive agrees to voluntarily defer 100% of the award into Plan, such deferral subject to all the terms of the Plan in addition to those specified in this Agreement.  Any capitalized term not defined herein shall have the meaning assigned to such term in the Plan.

Amendments that may be made to the Plan from time to time shall apply to any Executive Retirement/Retention Awards granted and deferred under this Agreement.

SECTION 2

DEFINITIONS

2.01 Board.  “Board” means the Board of Directors of the Company.

2.02 Code.  “Code” means the Internal Revenue Code of 1986, as amended from time to time.

2.03 Compensation Committee.  “Compensation Committee” means the Compensation Committee of the Board.

2.04 Disability. “Disability” means that the Executive is (a) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months; or (b) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering the Company’s employees.  The Company may, in its discretion, rely on a determination by the Social Security Administration or an insurance carrier (if the definition of “disability” applied by the carrier is consistent with this section) in determining whether the Executive has a Disability, and may require the Executive to submit proof of such determination.  The term “Disability” shall be interpreted consistently with Code section 409A.

2.06 ERISA.  “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

2.07 Executive Retirement/Retention Award.  “Executive Retirement/Retention Award” means the bonus paid to the Executive, and immediately deferred, based on the extent to which the Performance Goal approved by the Compensation Committee was achieved.  The Compensation Committee shall determine and communicate to the Executive the Executive Retirement/Retention Award in advance of each year, except the initial Executive Retirement/Retention Award shall be communicated upon the execution of this Agreement.  The Executive agrees to immediately defer any and all Executive Retirement/Retention Awards into the Bank’s Executive Deferral Plan subject to all the terms of the Plan and those additional terms specified in this Agreement.

2.08 Performance Goal.  “Performance Goal” means goals determined by the Compensation Committee the achievement of which shall result in the payment, and immediate deferral, of an Executive Retirement/Retention Award under this Agreement.  The Compensation Committee shall determine and communicate to the Executive the Performance Goal(s) in advance of each year, except the initial Performance Goal(s) shall be communicated upon the execution of this Agreement.

2.09 Service.  “Service” means the period during which an Employee is employed by the Company commencing with the Employee’s first day of employment and continuing through the termination of such employment.

SECTION 3

VESTING OF EXECUTIVE RETIREMENT/RETENTION AWARDS

3.1 Vesting.  Executive Retirement/Retention Awards granted to the Executive shall be payable to the Executive according to the terms of the Plan and the additional terms of this Section 3.1.  Unless otherwise provided in this section, the Executive shall become fully vested in his Executive Retirement/Retention Award balance as of his 58^h^ birthday, in each case provided he remains in continuous Service through such date.

a. Voluntary Termination – If the Executive voluntarily terminates employment without Good Reason, then the Executive shall forfeit any unvested deferral balances derived from the deferral of Executive Retirement/Retention Awards granted under the terms of this Agreement.
b. Involuntary Termination without Cause or Voluntary Termination for Good Reason– If the Executive’s employment is involuntarily terminated without Cause (as described in Section 3.3 of this Agreement), or voluntarily terminated for Good Reason, the Executive shall vest 100% in all deferral balances derived from Executive Retirement/Retention Awards granted under this Agreement.  The payment of such amounts shall be determined by the terms of the Plan.
--- ---
c. Involuntary Termination With Cause – If the Executive’s employment is involuntarily terminated with Cause (as described in Section 3.3 of this Agreement), the Executive shall forfeit any and all deferral balances derived from the deferral of Executive Retirement/Retention Awards granted under the terms of this Agreement.
--- ---
d. Termination Due to Death, Disability, or Change in Control -- If the Executive’s employment is terminated due to the Executive’s death, Disability, or within 24 months of a Change in Control, then the Executive shall vest 100% in all deferral balances derived by Executive Retirement/Retention Awards granted under this Agreement.  The payment of such amounts shall be determined by the terms of the Plan.
--- ---

3.2 Change in Employment Status.  If the Compensation Committee determines that the Executive’s performance is no longer at a level which deserves reward through participation in this Agreement, but does not terminate the Executive’s employment, participation herein and eligibility to receive additional Executive Retirement/Retention Awards shall cease.  The amount payable to the Executive under the terms of this Agreement shall be determined based on Executive Retirement/Retention Awards granted prior to a change in employment status subject to the provisions of 3.1 above.

3.3 Discharge for Cause.  Notwithstanding any other provisions of this Agreement, no benefit shall be paid under the terms of this Agreement if the Executive’s employment with the Company has been terminated for “Cause.” Cause shall mean that the Executive has:

a. Willfully and intentionally violated any state or federal banking or securities laws or the bylaws, rules, policies or resolutions of the Company or the rules or regulations of the Federal Deposit Insurance Corporation, Federal Reserve Board or other regulatory agency or governmental authority having jurisdiction over the Company; or
b. Been convicted of any felony or a crime involving moral turpitude, or willfully and intentionally committed a fraudulent or dishonest act; or
--- ---
c. Willfully and intentionally disclosed, without authority, any secret or confidential information concerning the Company or any customer of the Company or taken any action which the Board determines, in its sole discretion and subject to good faith, fair dealing and reasonableness, constitutes unfair competition with or induces any customer to breach any contract with the Company.
--- ---

SECTION 4

BENEFITS PAYABLE

Benefits payable to the Executive, or to the Executive’s Beneficiaries shall be determined based on the terms of the Plan and the terms of this Agreement.  Any benefit payable is subject to the vesting provisions of Section 3 of this Agreement.

4.1 Income Tax Withholding. The Company shall withhold from any amount paid under this Agreement any and all federal, state and local income taxes and any other taxes that are required to be withheld from such payment under applicable law.

4.2 FICA Tax Withholding. The Company shall withhold from the Executive’s other compensation and/or from the first payments to be made under this Agreement, the Executive’s share of FICA and other employment taxes imposed on the value of the benefits payable from this Agreement when such taxes, in the sole judgment of the Company, are required to be withheld under applicable law.  If any law provides the Company discretion as to the timing of tax withholding, the Company shall have the sole right to determine when taxes shall be withheld.

4.3 Unfunded Status and Source of Benefit Payments. This Agreement is intended to be unfunded for purposes of both ERISA and the Code. This Agreement does not require any segregated or separate assets. The benefits provided under this Agreement shall be paid solely from the general assets of the Company.

SECTION 5

BENEFICIARY DESIGNATION AND ADMINISTRATION

All beneficiary designation and Executive elections shall be governed by the terms of the Plan. Except for the communication of Performance Goals and Executive Retirement/Retention Awards, and the additional vesting requirement of Section 3 of this Agreement, the administration of the deferral balances generated by this Agreement shall be governed by the terms of the Plan.

IN WITNESS WHEREOF, the Company and Executive have caused this Agreement to be duly executed for and on behalf of the Company by its duly authorized officers, and on behalf of the Executive and the Executive’s beneficiaries, on this the 1st day of April, 2024.

FIRST NORTHERN BANK
By: /s/ Jeremiah Z. Smith <br>* * *
Title: President/CEO<br><br> <br>* * *
EXECUTIVE - Mr. Brett Hamilton
--- ---
By: /s/ Brett Hamilton <br>* * *
Title: Executive Vice President / Chief Credit Officer

ex_860599.htm

EXHIBIT 31.1

Rule 13(a) - 14(a) / 15(d) - 14(a) Certification

I, Jeremiah Z. Smith, certify that:

  1. I have reviewed this report on Form 10-Q of First Northern Community 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 quarterly report;

  3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

  4. The registrant’s other certifying officers 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 we 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 quarterly 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 quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly 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 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

  1. 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 registrant’s board of directors (or persons performing the equivalent function):

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: November 7, 2025
/s/ Jeremiah Z. Smith
Jeremiah Z. Smith, President and Chief Executive Officer

(Principal Executive Officer)

ex_860600.htm

EXHIBIT 31.2

Rule 13(a) - 14(a) / 15(d) - 14(a) Certification

I, Kevin Spink, certify that:

  1. I have reviewed this report on Form 10-Q of First Northern Community 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 quarterly report;

  3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

  4. The registrant’s other certifying officers 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 we 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 quarterly 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 quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly 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 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

  1. 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 registrant’s board of directors (or persons performing the equivalent function):

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: November 7, 2025
/s/ Kevin Spink
Kevin Spink, Executive Vice President / Chief Financial Officer<br><br> <br>(Principal Financial Officer and Principal Accounting Officer)

ex_860601.htm

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350

In connection with the filing of the Quarterly Report of First Northern Community Bancorp (the “Company”) on Form 10-Q for the period ended September 30, 2025 (the “Report”), I, Jeremiah Z. Smith, the Chief Executive Officer of the Company, certify pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge,

(i)        the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, 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: November 7, 2025 /s/  Jeremiah Z. Smith
Jeremiah Z. Smith, President and Chief Executive Officer<br><br> <br>(Principal Executive Officer)

ex_860602.htm

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350

In connection with the filing of the Quarterly Report of First Northern Community Bancorp (the “Company”) on Form 10-Q for the period ended September 30, 2025 (the “Report”), I, Kevin Spink, the Chief Financial Officer of the Company, certify pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge,

(i)        the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, 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: November 7, 2025 /s/  Kevin Spink
Kevin Spink, Executive Vice President / Chief Financial Officer<br><br> <br>(Principal Financial Officer and Principal Accounting Officer)

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