ubfo-20250331

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025


☐			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: 000-32897

UNITED SECURITY BANCSHARES

(Exact name of registrant as specified in its charter)


CALIFORNIA						91-2112732
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2126 Inyo Street, Fresno, California						93721
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code (559) 248-4930

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, no par value

UBFO

Nasdaq

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small 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 Act). Yes ☐ No ☒

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

Common Stock, no par value

(Title of Class)

Shares outstanding as of April 30, 2025: 17,475,927

Table of Contents

TABLE OF CONTENTS


PART I. Financial Information
	Item 1. Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets	3
		Condensed Consolidated Statements of Income	4
		Condensed Consolidated Statements of Comprehensive Income	5
		Condensed Consolidated Statements of Changes in Shareholders’ Equity	6
		Condensed Consolidated Statements of Cash Flows	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		34
		Overview	34
		Results of Operations	36
		Financial Condition	41
		Liquidity and Capital Resources	49
	Item 3. Quantitative and Qualitative Disclosures about Market Risk		51
	Item 4. Controls and Procedures		51
PART II. Other Information
	Item 1.	Legal Proceedings	53
	Item 1A.	R isk Factors	53
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
	Item 3.	Defaults Upon Senior Securities	53
	Item 4.	Mine Safety Disclosures	53
	Item 5.	Other Information	53
	Item 6.	Exhibits	53
Signatures			56

Table of Contents

PART I. Financial Information

Item 1 - Financial Statements (Unaudited)

United Security Bancshares and Subsidiaries

Condensed Consolidated Balance Sheets – (unaudited)


(In thousands except shares)	March 31, 2025		December 31, 2024
Assets


Cash and cash equivalents	$	37,894	$	56,211

Investment securities (at fair value)
Available-for-sale (AFS) securities net of allowance for credit losses of $0 (amortized cost of $176,938 and $179,753)	157,155		157,382
Marketable equity securities	3,379		3,326
Total investment securities	160,534		160,708
Loans	922,640		930,244
Unearned fees and unamortized loan origination costs - net	(1,987)		(1,782)
Allowance for credit losses - loans	(15,356)		(16,046)
Net loans	905,297		912,416
Premises and equipment - net	8,413		8,668
Accrued interest receivable	8,520		8,104
Other real estate owned	7,852		4,582
Goodwill	4,488		4,488
Investment in limited partnerships	4,275		4,275
Deferred tax assets - net	13,824		14,419
Cash surrender value of life insurance - net	20,824		20,692
Operating lease right-of-use assets	2,908		3,069
Other assets	16,962		14,086
Total assets	$	1,191,791	$	1,211,718

Liabilities & Shareholders’ Equity
Liabilities
Deposits
Non-interest-bearing	$	359,135	$	360,152
Interest-bearing	667,078		697,470
Total deposits	1,026,213		1,057,622
Short-term borrowings	8,000		—
Operating lease liabilities	2,999		3,161
Other liabilities	10,286		9,001
Junior subordinated debentures (at fair value)	11,417		11,572
Total liabilities	1,058,915		1,081,356
Commitments and contingent liabilities (Note 1 8)
Shareholders’ Equity
Common stock, no par value; 20,000,000 shares authorized; issued and outstanding: 17,475,927 at March 31, 2025 and 17,364,894 at December 31, 2024	61,467		61,267
Retained earnings	84,032		83,447
Accumulated other comprehensive loss, net of tax	(12,623)		(14,352)
Total shareholders’ equity	132,876		130,362
Total liabilities and shareholders’ equity	$	1,191,791	$	1,211,718

See accompanying notes to condensed consolidated financial statements.

Table of Contents

United Security Bancshares and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)


	Three Months Ended March 31,
(In thousands, except shares and EPS)	2025		2024
Interest Income:
Interest and fees on loans	$	13,943	$	13,481
Interest on investment securities	1,206		1,354
Interest on deposits at other banks	134		44
Total interest income	15,283		14,879
Interest Expense:
Interest on deposits	2,780		1,723
Interest on other borrowed funds	207		1,442
Total interest expense	2,987		3,165
Net Interest Income	12,296		11,714
Provision for credit losses	2,300		173
Net Interest Income after Provision for Credit Losses	9,996		11,541
Noninterest Income:
Customer service fees	638		706
Increase in cash surrender value of bank-owned life insurance	132		137


Gain (loss) on fair value of junior subordinated debentures	270		(294)

Gain on sale of assets	—		11
Other	320		493
Total noninterest income	1,360		1,053
Noninterest Expense:
Salaries and employee benefits	3,926		3,498
Occupancy expense	966		858
Data processing	407		111
Technology	651		764
Professional fees	646		243
Loan-related expenses	17		215
Regulatory assessments	173		173
Director fees	102		128

Other	716		748
Total noninterest expense	7,604		6,738
Income before provision for taxes	3,752		5,856
Provision for income taxes	1,070		1,695
Net income	$	2,682	$	4,161
Net Income per common share
Basic	$	0.16	$	0.24
Diluted	$	0.16	$	0.24
Weighted average common shares outstanding
Basic	17,229,743		17,170,907
Diluted	17,261,452		17,171,642

See accompanying notes to condensed consolidated financial statements.

Table of Contents

United Security Bancshares and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)



	Three Months Ended March 31,
(In thousands)	2025		2024
Net Income	$	2,682	$	4,161
Unrealized gain (loss) on available-for-sale securities	2,588		(1,069)
Unrealized gain on unrecognized post-retirement costs	8		10
Unrealized (loss) gain on junior subordinated debentures	(142)		155
Other comprehensive income (loss), before tax	2,454		(904)
Tax (expense) benefit related to available-for-sale securities	(765)		315
Tax expense related to unrecognized post-retirement costs	(2)		(3)
Tax benefit (expense) related to junior subordinated debentures	42		(45)
Total other comprehensive income (loss)	1,729		(637)
Comprehensive income	$	4,411	$	3,524

See accompanying notes to condensed consolidated financial statements.

Table of Contents

United Security Bancshares and Subsidiaries

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

For the Three Months Ended March 31, 2025, and 2024


	Common Stock			Retained Earnings		Accumulated Other Comprehensive (Loss) Income
(Dollars in thousands)	Number of Shares	Amount						Total
Balance December 31, 2024	17,364,894	$	61,267	$	83,447	$	(14,352)	$	130,362
Other comprehensive income	—	—		—		1,729		1,729
Dividends payable ($0.12 per share)	—	—		(2,097)		—		(2,097)
Restricted stock units released	1,654	—		—		—		—

Restricted stock awards granted	109,379	—		—		—		—

Stock-based compensation expense	—	200		—		—		200
Net income	—	—		2,682		—		2,682
Balance March 31, 2025	17,475,927	$	61,467	$	84,032	$	(12,623)	$	132,876

Balance December 31, 2023	17,167,895	$	60,585	$	76,995	$	(15,038)	$	122,542
Other comprehensive loss	—	—		—		(637)		(637)
Dividends payable ($0.12 per share)	—	—		(2,089)		—		(2,089)
Restricted stock units released	23,506	—		—		—		—

Restricted stock awards granted	123,794	—		—		—		—

Stock-based compensation expense	—	207		—		—		207
Net income	—	—		4,161		—		4,161
Balance March 31, 2024	17,315,195	$	60,792	$	79,067	$	(15,675)	$	124,184

See accompanying notes to condensed consolidated financial statements.

Table of Contents

United Security Bancshares and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)


	Three months ended March 31,
(In thousands)	2025		2024
Cash Flows From Operating Activities:
Net Income	$	2,682	$	4,161
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	2,300		173
Depreciation and amortization	376		349
Noncash lease expense	199		177
Amortization of premium/discount on investment securities, net	102		113
Operating lease payments	(200)		(182)
Increase in accrued interest receivable	(416)		(506)
(Decrease) increase in accrued interest payable	(5)		19
Increase in accounts payable and accrued liabilities	1,026		1,166
Increase in unearned fees and unamortized loan origination costs, net	206		215
Decrease in income taxes receivable	128		1,400
Gain on marketable equity securities	(53)		(43)
Stock-based compensation expense	200		207
Benefit for deferred income taxes	(210)		—





Increase in cash surrender value of bank-owned life insurance	(132)		(137)
(Gain) loss on fair value option of junior subordinated debentures	(270)		294





Net (increase) decrease in other assets	(2,915)		42
Net cash provided by operating activities	3,018		7,448
Cash Flows From Investing Activities:


Purchase of correspondent bank stock	(7)		(2)

Maturities of available-for-sale securities	—		13,500
Principal payments of available-for-sale securities	2,713		1,418


Net decrease (increase) in loans	1,574		(9,875)


Investment in limited partnerships	—		(200)




Capital expenditures of premises and equipment	(121)		(455)
Net cash provided by investing activities	4,159		4,386
Cash Flows From Financing Activities:
Net decrease in demand deposits and savings accounts	(27,617)		(49,498)
Net (decrease) increase in time deposits	(3,793)		955


Net increase in short-term borrowings	8,000		41,000
Dividends on common stock	(2,084)		(2,071)
Net cash used in financing activities	(25,494)		(9,614)
Net change in cash and cash equivalents	(18,317)		2,220
Cash and cash equivalents at beginning of period	56,211		40,784
Cash and cash equivalents at end of period	$	37,894	$	43,004

See accompanying notes to condensed consolidated financial statements.

Table of Contents

United Security Bancshares and Subsidiaries - Notes to Condensed Consolidated Financial Statements - (Unaudited)

1.Organization and Summary of Significant Accounting and Reporting Policies

The consolidated financial statements include the accounts of United Security Bancshares (“Company” or “USB”) and its wholly-owned subsidiary, United Security Bank (“Bank”). Intercompany accounts and transactions have been eliminated in consolidation.

These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information on a basis consistent with the accounting policies reflected in the audited consolidated financial statements of the Company included in its 2024 Annual Report on Form 10-K. These interim consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments consisting of a normal, recurring nature and considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for any other interim period or for the year as a whole.

Reclassifications:

Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior period net income or shareholders’ equity.

2.Investment Securities

Following is a comparison of the amortized cost and fair value of securities available-for-sale as of March 31, 2025, and December 31, 2024:


	March 31, 2025
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value (Carrying Amount)
Securities available-for-sale:
U.S. Government agencies	$	2,194	$	—	$	(17)	$	2,177
U.S. Government-sponsored entities and agencies collateralized by mortgage obligations	89,810		6		(11,808)		78,008

Municipal bonds	50,032		—		(6,842)		43,190
Corporate bonds	34,902		48		(1,170)		33,780
Total securities available-for-sale	$	176,938	$	54	$	(19,837)	$	157,155


	December 31, 2024
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value (Carrying Amount)
Securities available-for-sale:
U.S. Government agencies	$	2,666	$	—	$	(22)	$	2,644
U.S. Government-sponsored entities and agencies collateralized by mortgage obligations	92,121		4		(13,244)		78,881


Municipal bonds	50,082		—		(7,715)		42,367
Corporate bonds	34,884		34		(1,428)		33,490
Total securities available-for-sale	$	179,753	$	38	$	(22,409)	$	157,382

No proceeds or gross realized gains or losses from sales of available-for-sale debt securities were recorded for the quarters ended March 31, 2025, and 2024.

The amortized cost and fair value of securities available for sale at March 31, 2025, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers have the right to call or prepay obligations with or

Table of Contents

without call or prepayment penalties. Contractual maturities on collateralized mortgage obligations cannot be anticipated due to allowed paydowns.


	March 31, 2025
(In thousands)	Amortized Cost		Fair Value (Carrying Amount)
Due in one year or less	$	5,417	$	5,379
Due after one year through five years	31,950		30,487
Due after five years through ten years	49,761		43,281

Collateralized mortgage obligations	89,810		78,008
	$	176,938	$	157,155

There were no proceeds or realized gains or losses from the sale or call of available-for-sale securities for the quarters ended March 31, 2025, or March 31, 2024.

As market interest rates or risks associated with a security’s issuer continue to change and impact the actual or perceived values of investment securities, the Company may determine that selling these securities and using the proceeds to purchase securities that better fit with the Company’s current risk profile is appropriate and beneficial to the Company. There were no losses recorded due to credit-related factors for the quarters ended March 31, 2025, or March 31, 2024.

At March 31, 2025, available-for-sale securities with an amortized cost of approximately $95.7 million and a fair value of $83.0 million were pledged as collateral for short-term borrowings, securitized deposits, and public funds balances. At December 31, 2024, available-for-sale securities with an amortized cost of approximately $90.7 million and a fair value of $77.8 million were pledged as collateral for short-term borrowings, securitized deposits, and public funds balances.

The following summarizes available-for-sale securities in an unrealized loss position for which a credit loss has not been recorded:


	Less than 12 Months				12 Months or More				Total
(In thousands)	Fair Value (Carrying Amount)		Unrealized Losses		Fair Value (Carrying Amount)		Unrealized Losses		Fair Value (Carrying Amount)		Unrealized Losses
March 31, 2025
U.S. Government agencies	$	—	$	—	$	1,725	$	(17)	$	1,725	$	(17)
U.S. Government sponsored entities and agencies collateralized by mortgage obligations	1,610		(5)		75,862		(11,803)		77,472		(11,808)

Municipal bonds	1,679		(339)		41,512		(6,503)		43,191		(6,842)
Corporate bonds	2,798		(19)		24,960		(1,151)		27,758		(1,170)

Total available-for-sale	$	6,087	$	(363)	$	144,059	$	(19,474)	$	150,146	$	(19,837)

December 31, 2024
U.S. Government agencies	$	—	$	—	$	2,644	$	(22)	$	2,644	$	(22)
U.S. Government sponsored entities and agencies collateralized by mortgage obligations	1,640		(6)		76,686		(13,238)		78,326		(13,244)

Municipal bonds	2,509		(501)		39,858		(7,214)		42,367		(7,715)
Corporate bonds	2,791		(28)		24,696		(1,400)		27,487		(1,428)

Total available-for-sale	$	6,940	$	(535)	$	143,884	$	(21,874)	$	150,824	$	(22,409)

Management has evaluated each available-for-sale investment security in an unrealized loss position to determine if it would be required to sell the security before the fair value increases to amortized cost and whether any unrealized losses are due to credit losses or noncredit factors such as current market rates, which would not require the establishment of an allowance for credit

Table of Contents

losses. At March 31, 2025, the decline in fair value of the available-for-sale securities is attributed to changes in interest rates and not credit quality. While the interest rate increases of 2022 and 2023 led to large decreases in bond prices, reductions in interest rates during 2024 led to some price increases but not a return to previous values. During the first quarter of 2025, bond prices held relatively steady, but the recent market turmoil related to tariff implementations has led to bond sell-offs and resulted in more price decreases. Because the Company does not intend to sell these securities, and because it is more likely than not that it will not be required to sell these securities before their anticipated recovery, the Company did not consider it necessary to provide an allowance for credit losses for any available-for-sale security at March 31, 2025, or December 31, 2024.

During the quarter ended March 31, 2025 and 2024, the Company recognized unrealized gains of $53,000 and $43,000, respectively, related to one mutual fund included in marketable equity securities.

The Company had no held-to-maturity or trading securities at March 31, 2025, or December 31, 2024.

3.Loans

Loans, net of unearned fees and unamortized loan origination costs, are comprised of the following:


(In thousands)	March 31, 2025				December 31, 2024
Commercial and industrial:
Commercial and business loans	$	60,619	6.6	%	$	63,653	6.9	%
Government program loans	59		<0.01	%	62		<0.01	%
Total commercial and industrial	60,678		6.6	%	63,715		6.9	%
Real estate mortgage:
Commercial real estate	417,940		45.4	%	419,422		45.2	%
Residential mortgages	244,089		26.5	%	247,248		26.6	%
Home improvement and home equity loans	21		<0.01	%	24		<0.01	%
Total real estate mortgage	662,050		71.9	%	666,694		71.8	%
Real estate construction and development	105,875		11.5	%	111,145		12.0	%
Agricultural	57,940		6.3	%	49,462		5.3	%
Installment and student loans	34,110		3.7	%	37,446		4.0	%
Total loans	$	920,653	100.0	%	$	928,462	100.0	%

The Company’s loans are predominantly in the San Joaquin Valley and the greater Oakhurst/East Madera County area, as well as the Campbell area of Santa Clara County. The Company’s participation loans with other financial institutions are primarily within the state of California.

Commercial and industrial loans are generally made to support the ongoing operations of small- and medium-sized commercial businesses. Commercial and industrial loans have a high degree of industry diversification and provide working capital, financing for the purchase of manufacturing plants and equipment, and funding for growth and general business expansion. A substantial portion of commercial and industrial loans are secured by accounts receivable, inventory, leases, or other collateral, including real estate. While the remainder are unsecured, those extensions of credit are predicated upon the financial capacity of the borrower. Repayment of commercial and industrial loans generally comes from the cash flow of the borrower.

Real estate mortgage loans are secured by trust deeds on primarily commercial property and by trust deeds on single-family residences. Repayment of real estate mortgage loans is generally from the cash flow of the borrower.

•Commercial real estate mortgage loans comprise the largest segment of this loan category and are available on income-producing and commercial properties, including: office buildings and shopping centers, apartments and motels, owner-occupied buildings, manufacturing facilities, and other properties. Commercial real estate mortgage loans can also be used to refinance existing debt. Repayment of commercial real estate loans is typically from the borrower’s business operations, rental income associated with the real property, or personal assets.

Table of Contents

•Residential mortgage loans are provided to individuals to finance or refinance single-family residences. Residential mortgages are not a primary business line offered by the Company. The majority of loans in this category are conventional mortgages that were purchased as a pool.

•Home improvement and home equity loans comprise a relatively small portion of total real estate mortgage loans. Home equity loans are generally secured by junior trust deeds, but may also be secured by 1st trust deeds.

Real estate construction and development loans consist of loans for residential and commercial construction projects, as well as land acquisition and development, and land held for future development. Loans in this category are secured by real estate including improved and unimproved land, as well as single-family residential, multi-family residential, and commercial properties in various stages of completion. All real estate loans have established equity requirements. Repayment on construction loans generally comes from long-term mortgages with other lending institutions obtained at the completion of the project or from the sale of the constructed homes to individuals.

Agricultural loans are generally secured by land, equipment, inventory, and receivables. Repayment is from the cash flow of the borrower.

Installment loans consist primarily of student loans as well as loans to individuals for household, family, and other personal expenditures such as automobiles and other consumer items. See “Note 4 - Student Loans” for specific information on the student loan portfolio.

Off-Balance Sheet Instruments

In the normal course of business, the Company is party to financial instruments with off-balance sheet risk to meet the financing needs of its customers. At March 31, 2025, and December 31, 2024, these financial instruments included commitments to extend credit of $226.4 million and $204.0 million, respectively, and standby letters of credit of $28.6 million and $29.2 million for the same period ends, respectively. These instruments involve elements of credit risk in excess of the amount recognized on the consolidated balance sheet. The contract amounts of these instruments reflect the extent of the involvement the Company has in off-balance sheet financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amounts of those instruments. The Company applies the same credit policies as it does for on-balance sheet instruments.

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. Substantially all of these commitments are at floating interest rates based on the prime rate. Commitments generally have fixed expiration dates. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if necessary, is based on management’s credit evaluation. Collateral held varies but includes accounts receivable, inventory, leases, property, plant and equipment, residential real estate, and income-producing properties.

Table of Contents

Past Due Loans

The following is a summary of the amortized cost of delinquent loans, net of unearned fees and costs, at March 31, 2025:


(In thousands)	Loans 30-60 Days Past Due		Loans 61-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
Commercial and business loans	$	—	$	—	$	—	$	—	$	60,619	$	60,619	$	—
Government program loans	—		—		—		—		59		59		—
Total commercial and industrial	—		—		—		—		60,678		60,678		—
Commercial real estate loans	—		—		—		—		417,940		417,940		—
Residential mortgages	97		—		—		97		243,992		244,089		—
Home improvement and home equity loans	—		—		—		—		21		21		—
Total real estate mortgage	97		—		—		97		661,953		662,050		—
Real estate construction and development loans	—		—		5,685		5,685		100,190		105,875		—
Agricultural loans	—		—		—		—		57,940		57,940		—
Installment and student loans	1,342		513		653		2,508		31,602		34,110		653
Total loans	$	1,439	$	513	$	6,338	$	8,290	$	912,363	$	920,653	$	653

The following is a summary of the amortized cost of delinquent loans, net of unearned fees and costs, at December 31, 2024:


(In thousands)	Loans 30-60 Days Past Due		Loans 61-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
Commercial and business loans	$	—	$	—	$	—	$	—	$	63,653	$	63,653	$	—
Government program loans	—		—		—		—		62		62		—
Total commercial and industrial	—		—		—		—		63,715		63,715		—

Commercial real estate loans	—		—		—		—		419,422		419,422		—
Residential mortgages	214		—		—		214		247,034		247,248		—
Home improvement and home equity loans	—		—		—		—		24		24		—
Total real estate mortgage	214		—		—		214		666,480		666,694		—
Real estate construction and development loans	—		—		12,185		12,185		98,960		111,145		—
Agricultural loans	—		—		—		—		49,462		49,462		—
Installment and student loans	1,625		1,373		421		3,419		34,027		37,446		421
Total loans	$	1,839	$	1,373	$	12,606	$	15,818	$	912,644	$	928,462	$	421

Table of Contents

Nonaccrual Loans

The following table presents the amortized cost basis of loans on nonaccrual status and accruing loans more than 90 days past due:


	March 31, 2025						December 31, 2024
(In thousands)	Nonaccrual Loans With No Allowance For Credit Losses		Total Nonaccrual Loans		Accruing Loans 90 or More Days Past Due		Nonaccrual Loans With No Allowance For Credit Losses		Total Nonaccrual Loans		Accruing Loans 90 or More Days Past Due








Real estate construction and development loans	$	5,698	$	5,698	$	—	$	12,198	$	12,198	$	—

Installment and student loans	—		—		653		—		—		421
Total	$	5,698	$	5,698	$	653	$	12,198	$	12,198	$	421

There were no remaining undisbursed commitments to extend credit on nonaccrual loans at March 31, 2025, or December 31, 2024.

Credit Quality Indicators

As part of its credit monitoring program, the Company utilizes a risk rating system to quantify the risk the Company estimates it has assumed during the life of a loan. This system rates the strength of the borrower and the facility or transaction, and is designed to provide a program for risk management and early detection of problems.

For each new credit approval, credit extension, renewal, or modification of existing credit facilities, the Company assigns risk ratings utilizing the rating scale identified in this policy. In addition, on an ongoing basis, loans and credit facilities are reviewed for internal and external influences impacting the credit facility that would warrant a change in the risk rating. Each credit facility is given a risk rating that takes into account factors that materially affect credit quality.

When assigning risk ratings, the Company evaluates two risk-rating approaches; a facility rating and a borrower rating.

Facility Rating:

The facility rating is determined by the analysis of positive and negative factors that may indicate that the quality of a particular loan or credit arrangement requires a different risk rating than that assigned to the borrower. The Company assesses the risk impact of these factors:

Collateral - The rating may be affected by the type and quality of the collateral, the degree of coverage, the economic life of the collateral, the liquidation value, and the Company's ability to dispose of the collateral.

Guarantees - The value of third-party support arrangements varies widely. Unconditional guarantees from persons with demonstrable ability to perform are more substantial than that of persons closely-related to the borrower who offer only modest support.

Unusual Terms - Credit may be extended on terms that subject the Company to a higher level of risk than indicated in the rating of the borrower.

Borrower Rating:

The borrower rating is a measure of loss possibility based on the historical, current, and anticipated financial characteristics of the borrower in the current risk environment. To determine the rating, the Company considers the following factors:

- Quality of management

- Liquidity

- Leverage/capitalization

- Profit margins/earnings trend

- Adequacy of financial records

- Alternative funding sources

Table of Contents

- Geographic risk

- Industry risk

- Cash flow risk

- Accounting practices

- Asset protection

- Extraordinary risks

The Company assigns risk ratings to loans other than consumer loans and other homogeneous loan pools based on the following scale. The risk ratings are used when determining borrower ratings as well as facility ratings. When the borrower rating and the facility ratings differ, the lowest rating applied is:

Pass Ratings:

- Grades 1 and 2 – These grades include loans which are given to high-quality borrowers with high credit quality and sound financial strength. Key financial ratios are generally above industry averages and the borrower’s strong earnings history or net worth. These may be secured by deposit accounts or high-grade investment securities.

- Grade 3 – This grade includes loans to borrowers with solid credit quality with minimal risk. The borrower’s balance sheet and financial ratios are generally in line with industry averages, and the borrower has historically demonstrated the ability to manage economic adversity. Real estate and asset-based loans assigned this risk rating must have characteristics which place them well above the minimum underwriting requirements for those departments. Asset-based borrowers assigned this rating must exhibit extremely favorable leverage and cash flow characteristics, and consistently demonstrate a high level of unused borrowing capacity.

- Grades 4 and 5 – These include “pass” grade loans to borrowers of acceptable credit quality and risk. The borrower’s balance sheet and financial ratios may be below industry averages, but above the lowest industry quartile. Leverage is above and liquidity is below industry averages. Inadequacies evident in financial performance and/or management sufficiency are offset by readily available features of support, such as adequate collateral, or good guarantors having the liquid assets and/or cash flow capacity to repay the debt. While the borrower may have recognized a loss over three or four years, recent earnings trends, while perhaps somewhat cyclical, are improving and cash flows are adequate to cover debt service and fixed obligations. Real estate and asset-borrowers who fully comply with all underwriting standards and perform according to projections would be assigned this rating. These also include grade 5 loans which are “leveraged” or on management’s “watch list.” While still considered pass loans (loans given a grade 5), the borrower’s financial condition, cash flow, or operations evidence more than average risk and short term weaknesses. These loans warrant a higher than average level of monitoring, supervision, and attention from the Company, but do not reflect credit weakness trends that weaken or inadequately protect the Company’s credit position. Loans with a grade rating of 5 are not normally acceptable as new credits unless they are adequately secured or carry substantial endorsers/guarantors.

- Grade 6 – This grade includes “special mention” loans which are loans that are currently protected but are potentially weak. This generally is an interim grade classification and these loans will usually be upgraded to an “acceptable” rating or downgraded to a “substandard” rating within a reasonable time period. Weaknesses in special mention loans may, if not checked or corrected, weaken the asset or inadequately protect the Company’s credit position at some future date. Special mention loans are often loans which exhibit weaknesses inherent in the loan origination and loan servicing, and may have some technical deficiencies. The main theme in special mention credits is the distinct probability that the classification will deteriorate to a more adverse class if the noted deficiencies are not addressed by the loan officer or loan management.

- Grade 7 – This grade includes “substandard” loans which are inadequately supported by the current sound net worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that may impair the regular liquidation of the debt. When a loan has been downgraded to “substandard,” there exists a distinct possibility that the Company will sustain a loss if the deficiencies are not corrected.

- Grade 8 – This grade includes “doubtful” loans which exhibit the same characteristics as the “substandard” loans. Additionally, loan weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the loan, its classification as an estimated loss is deferred until its more exact status can be determined. Pending factors include a

Table of Contents

proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans.

- Grade 9 – This grade includes loans classified “loss” which are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off the asset even though partial recovery may be achieved in the future.

Table of Contents

The following table presents loans by class, at amortized cost (net of unearned fees and costs), by risk rating, and period indicated as of or for the quarter ended March 31, 2025:


	Term Loans Amortized Cost Basis by Origination Year - As of March 31, 2025												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans
(In thousands)	2025		2024		2023		2022		2021		Prior						Total
Commercial and business
Pass	$	938	$	2,329	$	3,848	$	2,000	$	325	$	1,035	$	24,741	$	—	$	35,216
Special Mention	—		—		—		—		—		—		2,199		—		2,199
Substandard	—		—		1,000		62		—		6,492		15,650		—		23,204

Total	$	938	$	2,329	$	4,848	$	2,062	$	325	$	7,527	$	42,590	$	—	$	60,619
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Government program
Pass	$	—	$	—	$	—	$	—	$	—	$	59	$	—	$	—	$	59
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—

Total	$	—	$	—	$	—	$	—	$	—	$	59	$	—	$	—	$	59
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial real estate
Pass	$	—	$	78,608	$	34,509	$	79,663	$	30,921	$	187,081	$	992	$	—	$	411,774
Special Mention	—		—		—		—		—		5,619		—		—		5,619
Substandard	—		—		—		—		547		—		—		—		547

Total	$	—	$	78,608	$	34,509	$	79,663	$	31,468	$	192,700	$	992	$	—	$	417,940
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential mortgages
Not graded	$	—	$	—	$	—	$	23,520	$	193,752	$	8,558	$	—	$	—	$	225,830
Pass	—		4,824		3,968		1,926		4,321		3,220		—		—		18,259
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—

Total	$	—	$	4,824	$	3,968	$	25,446	$	198,073	$	11,778	$	—	$	—	$	244,089
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Home improvement and home equity
Not graded	$	—	$	—	$	—	$	—	$	—	$	21	$	—	$	—	$	21
Pass	—		—		—		—		—		—		—		—		—
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—

Total	$	—	$	—	$	—	$	—	$	—	$	21	$	—	$	—	$	21
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Real estate construction and development
Pass	$	703	$	20,734	$	9,905	$	—	$	—	$	33,822	$	35,013	$	—	$	100,177
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		5,698		—		—		5,698

Total	$	703	$	20,734	$	9,905	$	—	$	—	$	39,520	$	35,013	$	—	$	105,875
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Table of Contents


	Term Loans Amortized Cost Basis by Origination Year - As of March 31, 2025												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans
(In thousands)	2025		2024		2023		2022		2021		Prior						Total
Agricultural
Pass	$	—	$	3,092	$	2,107	$	3,994	$	435	$	14,114	$	31,730	$	—	$	55,472
Special Mention	—		—		—		1,353		—		725		—		—		2,078
Substandard	—		—		—		—		—		—		390		—		390

Total	$	—	$	3,092	$	2,107	$	5,347	$	435	$	14,839	$	32,120	$	—	$	57,940
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Installment and student loans
Not graded	$	230	$	399	$	1,559	$	94	$	80	$	30,595	$	500	$	—	$	33,457
Pass	—		—		—		—		—		—		—		—		—
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		653		—		—		653

Total	$	230	$	399	$	1,559	$	94	$	80	$	31,248	$	500	$	—	$	34,110
Current period gross charge-offs			$	—	$	—	$	—	$	—	$	2,829	$	—	$	—	$	2,829

Total loans outstanding (risk rating):
Not graded	$	230	$	399	$	1,559	$	23,614	$	193,832	$	39,174	$	500	$	—	$	259,308
Pass	1,641		109,587		54,337		87,583		36,002		239,331		92,476		—		620,957
Special Mention	—		—		—		1,353		—		6,344		2,199		—		9,896
Substandard	—		—		1,000		62		547		12,843		16,040		—		30,492

Grand total loans	$	1,871	$	109,986	$	56,896	$	112,612	$	230,381	$	297,692	$	111,215	$	—	$	920,653
Total current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	2,829	$	—	$	—	$	2,829

Table of Contents

The following table presents loans by class, at amortized cost (net of unearned fees and costs), by risk rating, and period indicated as of or for the year ended December 31, 2024:


	Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2024												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans
(In thousands)	2024		2023		2022		2021		2020		Prior						Total
Commercial and business
Pass	$	2,374	$	3,640	$	2,076	$	341	$	408	$	764	$	29,349	$	—	$	38,952
Special Mention	—		2,000		—		—		—		—		—		—		2,000
Substandard	—		—		68		—		6,989		—		15,644		—		22,701

Total	$	2,374	$	5,640	$	2,144	$	341	$	7,397	$	764	$	44,993	$	—	$	63,653
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Government program
Pass	$	—	$	—	$	—	$	—	$	2	$	60	$	—	$	—	$	62
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—

Total	$	—	$	—	$	—	$	—	$	2	$	60	$	—	$	—	$	62
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial real estate
Pass	$	78,889	$	32,794	$	80,121	$	31,376	$	37,480	$	151,066	$	1,491	$	—	$	413,217
Special Mention	—		—		—		—		5,653		—		—		—		5,653
Substandard	—		—		—		552		—		—		—		—		552

Total	$	78,889	$	32,794	$	80,121	$	31,928	$	43,133	$	151,066	$	1,491	$	—	$	419,422
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential mortgages
Not graded	$	—	$	—	$	23,929	$	196,340	$	2,480	$	6,226	$	—	$	—	$	228,975
Pass	4,824		3,969		1,926		4,320		1,580		1,654		—		—		18,273
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—

Total	$	4,824	$	3,969	$	25,855	$	200,660	$	4,060	$	7,880	$	—	$	—	$	247,248
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Home improvement and home equity
Not graded	$	—	$	—	$	—	$	—	$	—	$	24	$	—	$	—	$	24
Pass	—		—		—		—		—		—		—		—		—
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—

Total	$	—	$	—	$	—	$	—	$	—	$	24	$	—	$	—	$	24
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Table of Contents


	Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2024												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans
(In thousands)	2024		2023		2022		2021		2020		Prior						Total
Real estate construction and development
Pass	$	13,761	$	15,743	$	8,004	$	—	$	32,389	$	2,473	$	26,577	$	—	$	98,947
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		3,524		8,674		—		—		12,198

Total	$	13,761	$	15,743	$	8,004	$	—	$	35,913	$	11,147	$	26,577	$	—	$	111,145
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Agricultural
Pass	$	3,097	$	2,115	$	3,990	$	490	$	2,861	$	11,586	$	22,705	$	—	$	46,844
Special Mention	—		—		1,503		—		440		285		—		—		2,228
Substandard	—		—		—		—		—		—		390		—		390

Total	$	3,097	$	2,115	$	5,493	$	490	$	3,301	$	11,871	$	23,095	$	—	$	49,462
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Installment and student loans
Not graded	$	440	$	1,607	$	103	$	99	$	8	$	34,162	$	606	$	—	$	37,025
Pass	—		—		—		—		—		—		—		—		—
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		421		—		—		421

Total	$	440	$	1,607	$	103	$	99	$	8	$	34,583	$	606	$	—	$	37,446
Current period gross charge-offs	$	—	$	20	$	—	$	—	$	—	$	2,842	$	—	$	—	$	2,862

Total loans outstanding (risk rating):
Not graded	$	440	$	1,607	$	24,032	$	196,439	$	2,488	$	40,412	$	606	$	—	$	266,024
Pass	102,945		58,261		96,117		36,527		74,720		167,603		80,122		—		616,295
Special Mention	—		2,000		1,503		—		6,093		285		—		—		9,881
Substandard	—		—		68		552		10,513		9,095		16,034		—		36,262

Grand total loans	$	103,385	$	61,868	$	121,720	$	233,518	$	93,814	$	217,395	$	96,762	$	—	$	928,462
Total current period gross charge-offs	$	—	$	20	$	—	$	—	$	—	$	2,842	$	—	$	—	$	2,862

Allowance for Credit Losses on Loans

The following summarizes the activity in the allowance for credit losses by loan category:


	Three Months Ended March 31, 2025
(In thousands)	Commercial and Industrial		Real Estate Mortgage		Real Estate Construction Development		Agricultural		Installment and Student Loans		Total
Beginning balance	$	2,839	$	2,634	$	2,504	$	1,028	$	7,041	$	16,046
Provision (reversal) for credit losses (1)	(168)		(972)		(208)		315		3,101		2,068
Charge-offs	—		—		—		—		(2,829)		(2,829)
Recoveries	—		—		—		—		71		71
Ending balance	$	2,671	$	1,662	$	2,296	$	1,343	$	7,384	$	15,356

(1) Not included in the above table is an unfunded loan commitment provision of $232,000.

Table of Contents


	Three Months Ended March 31, 2024
(In thousands)	Commercial and Industrial		Real Estate Mortgage		Real Estate Construction Development		Agricultural		Installment and Student Loans		Total
Beginning balance	$	1,903	$	2,524	$	3,614	$	1,250	$	6,367	$	15,658

Provision (reversal) for credit losses (1)	78		204		(606)		(153)		559		82
Charge-offs	—		—		—		—		(415)		(415)
Recoveries	—		4		—		—		122		126
Ending balance	$	1,981	$	2,732	$	3,008	$	1,097	$	6,633	$	15,451

(1) Not included in the above table is an unfunded loan commitment provision of $91,000.

Collateral-Dependent Loans

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.

The following table presents the recorded investment in collateral-dependent loans by type of loan:


	March 31, 2025			December 31, 2024
(Dollars in thousands)	Amount		Number of Collateral-Dependent Loans		Amount		Number of Collateral-Dependent Loans







Real estate construction and development loans	$	5,686	1		$	12,185	3
Agricultural loans	390		1		390		1

Total	$	6,076	2		$	12,575	4

Reserve for Unfunded Commitments

The allowance for off-balance sheet credit exposure relates to commitments to extend credit, letters of credit, and undisbursed funds on lines of credit. The Company evaluates credit risk associated with the off-balance sheet loan commitments in the same manner as it evaluates credit risk within the loan portfolio. There was a provision of $232,000 for unfunded loan commitments made during the quarter ended March 31, 2025, increasing the balance to $1.01 million. For the quarter ended March 31, 2024, there was a provision of $91,000 made for unfunded loan commitments increasing the balance to $927,000. The reserve for the unfunded loan commitments is a liability on the Company’s consolidated financial statements and is included in other liabilities.

Loan Modifications

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, and other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged off against the allowance for credit losses. There was one loan in a modified status at quarter-end March 31, 2025. There were no loans in a modified status at quarter-end March 31, 2024.

The following table present loan modifications made to borrowers experiencing financial difficulties for the periods indicated:


	Three Months Ended March 31, 2025
(In thousands)	Principal Forgiveness		Term Extension		Interest Rate Reduction		Payment Delay		Total % of Loans Outstanding
Commercial and business loans	$	—	$	6,492	$	—	$	—	0.71%

Table of Contents

The following table presents the financial effects of loan modifications made to borrowers experiencing financial difficulties:


	March 31, 2025
(In thousands)		12 month term extension
Commercial and business loans		$	6,492

4.Student Loans

Included in the installment loan portfolio are $30.6 million and $33.9 million in student loans at March 31, 2025, and December 31, 2024, respectively, made to medical and pharmacy school students. Upon graduation, the loan is automatically placed in a grace period of six months. This may be extended up to 48 months for graduates enrolling in internships, medical residency, or fellowship programs. As approved, the student may receive additional deferment for hardship or administrative reasons in the form of forbearance for a maximum of 36 months throughout the life of the loan. Student loans have not been originated or purchased since 2019.

As of March 31, 2025 and December 31, 2024, reserves against the student loan portfolio totaled $7.3 million and $7.0 million, respectively. At March 31, 2025, the substandard category included $653,000 in student loans. At December 31, 2024, $421,000 in student loans were included in the substandard category.

The following tables summarize the credit quality indicators for outstanding student loans:


	March 31, 2025					December 31, 2024
(Dollars in thousands)	Number of Loans	Principal Amount		Accrued Interest		Number of Loans	Principal Amount		Accrued Interest
School	30	$	827	$	630	26	$	692	$	512
Grace	—	—		—		3	100		63
Repayment	336	15,569		252		406	19,647		324
Deferment	225	10,000		2,804		219	9,954		2,593
Forbearance	70	4,162		206		65	3,496		133
Total	661	$	30,558	$	3,892	719	$	33,889	$	3,625

School - The time in which the borrower is still actively in school at least half-time. No payments are expected during this stage, though the borrower may make payments during this time.

Grace - A six-month period of time granted upon graduation, or end of active-student status, during which payment is not required but interest continues to accrue. Upon completion of the six-month grace period, the loan is transferred to repayment status. This status may also represent an in-school borrower activated to military duty. The borrower must return to at least half-time status within six months of their active-duty end date to return to in-school status.

Repayment - The time in which the borrower is no longer attending school at least half-time, and has not received an approved grace, deferment, or forbearance. Regular payment is expected from these borrowers under an allotted payment plan.

Deferment - May be granted for up to 48 months for borrowers who have begun the repayment period on their loans but are either actively enrolled in an eligible school at least half-time or actively enrolled in an approved and verifiable medical residency, internship, or fellowship program.

Forbearance - The period of time during which the borrower may postpone making principal and interest payments due to either hardship or administrative reasons. Interest will continue to accrue on loans during periods of authorized forbearance and will be capitalized at the end of the forbearance period. If the borrower is delinquent at the time the forbearance is granted, unpaid interest and interest accrued during the delinquency will also be capitalized. Loan terms will not change as a result of forbearance and payment amounts may be increased to allow the loan to pay off in the required time frame. A forbearance that results in an insignificant delay in payment, is not considered a concessionary change in terms, provided the borrower affirms the obligation. Forbearance is not an uncommon status designation and is considered standard industry practice, consistent with the succession of students migrating from school to career. However, additional risk is associated with this designation.

Table of Contents

Student Loan Aging

Student loans are generally charged off at the end of the quarter during which the account becomes 120 days contractually past due. Accrued but unpaid interest related to charged-off student loans is reversed and charged against interest income. For the quarter ended March 31, 2025, $182,000 in accrued interest receivable was reversed, due to charge-offs of $2.8 million. For the quarter ended March 31, 2024, $28,000 in accrued interest receivable was reversed, due to charge-offs of $395,000.

The following table summarizes the student loan aging for loans in repayment and forbearance:


	March 31, 2025			December 31, 2024
(Dollars in thousands)	Number of Borrowers	Amount		Number of Borrowers	Amount
Current or less than 31 days	167	$	17,235	185	$	19,737
31 - 60 days	9	1,342		9	1,625
61 - 90 days	3	501		7	1,360
91 - 120 days	3	653		2	421

Total	182	$	19,731	203	$	23,143

5.Deposits

Deposits include the following:


(In thousands)	March 31, 2025		December 31, 2024
Noninterest-bearing deposits	$	359,135	$	360,152
Interest-bearing deposits:
NOW and money market accounts	478,050		504,466
Savings accounts	114,463		114,648
Time deposits:
Under $250,000	44,740		45,141
$250,000 and over	29,825		33,215
Total interest-bearing deposits	667,078		697,470
Total deposits	$	1,026,213	$	1,057,622

Deposit balances representing overdrafts reclassified as loan balances totaled $202,000 and $232,000 as of March 31, 2025, and 2024, respectively.

Included in total deposits at March 31, 2025 and December 31, 2024 are $100.3 million in interest-bearing, brokered demand deposit accounts.

Table of Contents

6.Short-term Borrowings/Other Borrowings

The following table sets forth the Company’s credit lines, balances outstanding, and pledged collateral:


(In thousands)	March 31, 2025		December 31, 2024
Unsecured credit lines:
Credit limit	$	90,000	$	90,000
Balance outstanding	8,000		—
Federal Home Loan Bank:
Credit limit	133,063		135,634
Balance outstanding	—		—
Collateral pledged	228,299		230,001
Federal Reserve Bank:
Credit limit	500,906		499,069
Balance outstanding	—		—
Collateral pledged	615,379		617,860

At March 31, 2025, the Company’s available lines of credit totaled $724.0 million. All lines of credit are on an “as available” basis and can be revoked by the grantor at any time. These lines of credit have interest rates that are generally tied to the Federal Funds rate or are indexed to short-term U.S. Treasury rates or SOFR. At March 31, 2025, pledged collateral at the Federal Home Loan Bank consisted of $1.9 million in available-for-sale investment securities and $226.4 million in loan balances. Pledged collateral at the Federal Reserve Bank consisted of $3.6 million in available-for-sale investment securities and $611.8 million in loan balances. At December 31, 2024, $228.1 million in loans and $1.9 million in available-for-sale investment securities were pledged as collateral for FHLB advances. Additionally, $614.2 million in loans and $3.7 million in available-for-sale investment securities were pledged as collateral for advances at the Federal Reserve Bank.

7.Leases

The Company leases land and premises for its branch banking offices, administration facility, and ITMs. The initial terms of these leases expire at various dates through 2044. Under the provisions of most of these leases, the Company has the option to extend the leases beyond their original terms at rental rates adjusted to certain economic indices or market conditions. Lease terms may also include options for termination. Under guidance from ASC Topic 842, the discount rate applied to the lease liability is calculated by determining the Bank’s incremental borrowing rate. Current rates for fully-secured loans with amounts and terms similar to the lease amount and term at inception are used to calculate the incremental borrowing rate. The liability is reduced at each reporting period based on the discounted present value of remaining payments. As of March 31, 2025, the Company had 14 operating leases and no financing leases.

Operating lease expenses for the quarters ended March 31, 2025 and March 31, 2024, totaled $199,000 and $177,000, respectively.

Supplemental information related to leases is as follows:


	Three Months Ended
(Dollars in thousands)	March 31, 2025			March 31, 2024




Operating cash flows from operating leases	$	200		$	182



Weighted-average remaining lease term in years for operating leases	8.68			4.29
Weighted-average discount rate for operating leases	5.06		%	5.04		%

Table of Contents

Maturities of lease liabilities are as follows:


(In thousands)	March 31, 2025
2026	$	651
2027	475
2028	426
2029	419
2030	314
Thereafter	1,481
Total undiscounted cash flows	3,766
Less: present value discount	(767)
Present value of net future minimum lease payments	$	2,999

8.Supplemental Cash Flow Disclosures


	Three Months Ended
(In thousands)	March 31, 2025		March 31, 2024
Cash paid during the period for:
Interest	$	2,993	$	3,147
Income taxes	—		—
Noncash investing activities:
Loans transferred to other real estate owned	3,270		—


Unrealized gain on unrecognized post-retirement costs, net of tax	6		10
Unrealized gain (loss) on available-for-sale securities, net of tax	1,823		(1,069)
Unrealized (loss) gain on junior subordinated debentures, net of tax	(100)		155
Cash dividend declared	2,097		2,089

9.Dividends on and Repurchase of Common Stock

On March 25, 2025, the Company’s Board of Directors declared a cash dividend of $0.12 per share on the Company’s common stock. The dividend was payable on April 22, 2025, to shareholders of record as of April 7, 2025. Approximately $2.1 million was transferred from retained earnings to dividends payable as of March 31, 2025, to allow for distribution of the dividend to shareholders.

The Company has a program to repurchase up to $3.0 million of its outstanding common stock. The timing of the purchases will depend on certain factors including, but not limited to, market conditions and prices, available funds, and alternative uses of capital. The stock repurchase program may be carried out through open-market purchases, block trades, or negotiated private transactions. During the three-month periods ended March 31, 2025, and March 31, 2024, no shares were repurchased.

Table of Contents

10.Net Income per Common Share

The following table provides a reconciliation of the numerator and the denominator of the basic EPS computation with the numerator and the denominator of the diluted EPS computation:


	Three Months Ended
	March 31, 2025		March 31, 2024
Net income (in thousands)	$	2,682	$	4,161
Weighted average shares issued and outstanding	17,229,743		17,170,907
Add: dilutive effect of stock options and unvested restricted stock	31,709		735
Weighted average shares outstanding adjusted for potential dilution	17,261,452		17,171,642
Basic earnings per share	$	0.16	$	0.24
Diluted earnings per share	$	0.16	$	0.24
Weighted average anti-dilutive shares excluded from earnings per share calculation	309,000		167,000

11.Taxes on Income

The Company periodically reviews its tax positions under the accounting standards related to uncertainty in income taxes, which defines the criteria that an individual tax position would have to meet for some or all of the income tax benefit to be recognized in a taxable entity’s financial statements. Under the guidelines, an entity should recognize the financial statement benefit of a tax position if it determines that it is more likely than not that the position will be sustained on examination. The term “more likely than not” means a likelihood of more than 50 percent. In assessing whether the more-likely-than-not criterion is met, the entity should assume that the tax position will be reviewed by the applicable taxing authority and all available information is known to the taxing authority.

The Company periodically evaluates its deferred tax assets to determine whether a valuation allowance is required based upon a determination that some or all of the deferred assets may not be ultimately realized. At March 31, 2025, and December 31, 2024, the Company had no recorded valuation allowance. The Company is no longer subject to examinations by taxing authorities for years before 2020 and 2019 for Federal and California jurisdictions, respectively.

The Company’s policy is to recognize any interest or penalties related to uncertain tax positions in income tax expense. There were no interest or penalties recognized on uncertain tax positions during the periods ended March 31, 2025, and 2024.

The Company reported a provision for income taxes of $1.1 million for the quarter ended March 31, 2025, compared to $1.7 million for the quarter ended March 31, 2024. The effective tax rate was 28.52% for the quarter ended March 31, 2025, compared to 28.94% for the comparable period of 2024.

12.Junior Subordinated Debt/Trust Preferred Securities

The contractual principal balance of the Company’s debentures relating to its trust preferred securities is $12.0 million as of March 31, 2025, and December 31, 2024. The Company may redeem the junior subordinated debentures at any time at par.

The Company accounts for its TruPS issued under USB Capital Trust II at fair value. The Company believes the election of fair value accounting for the TruPS better reflects the true economic value of the debt instrument on the consolidated balance sheet. As of March 31, 2025, the rate paid on TruPS issued under USB Capital Trust II is 3-month SOFR plus 129 basis points, and is adjusted quarterly.

At March 31, 2025, the Company performed a fair value measurement analysis on TruPS using a cash flow model approach to determine the present value of those cash flows. The cash flow model utilizes the forward 3-month SOFR curve to estimate future quarterly interest payments due over the remaining life of the debt instrument. These cash flows are discounted at a rate which incorporates a current market rate for similar-term debt instruments, adjusted for additional credit and liquidity risks associated with TruPS. The 6.26% discount rate used represents what a market participant would consider under the circumstances based on current market assumptions. At March 31, 2025, and March 31, 2024, the total cumulative gain recorded on the debt was $1.2 million and $1.3 million, respectively.

Table of Contents

The following table provides detail on the Company’s junior subordinated debt/trust preferred securities:


	Three Months Ended
(In thousands)	March 31, 2025			March 31, 2024
Fair value calculation gain (loss)	$	128		$	(139)
Other comprehensive income (loss) gain	(142)			155
Recognized gain (loss) on fair value	270			(294)
Cumulative gain recorded	1,221			1,322
Discount rate	6.26		%	6.31		%

The fair value calculation performed as of March 31, 2025, resulted in a net pretax gain adjustment of $128,000 for the quarter ended March 31, 2025, compared to a net pretax loss adjustment of $139,000 for the quarter ended March 31, 2024.

For the quarter ended March 31, 2025, the net $155,000 fair value gain adjustment, inclusive of a change in accrued interest of $27,000, was separately presented as a $270,000 gain, ($190,000 net of tax) recognized on the consolidated statements of income, and a $142,000 loss, ($100,000 net of tax) associated with the instrument-specific credit risk recognized in other comprehensive income. For the quarter ended March 31, 2024, the net $135,000 fair value loss adjustment, inclusive of a change in accrued interest of $4,000, was separately presented as a $294,000 loss, ($207,000 net of tax) recognized on the consolidated statements of income, and a $155,000 gain, ($109,000 net of tax) associated with the instrument-specific credit risk recognized in other comprehensive income. The Company calculated the change in the discounted cash flows based on updated market credit spreads for the periods indicated.

13.Fair Value Measurements and Disclosure

The following summary disclosures are made in accordance with the guidance provided by ASC Topic 825 “Fair Value Measurements and Disclosures” which requires the disclosure of fair value information for both on- and off-balance sheet financial instruments where it is practicable to estimate that value.

GAAP guidance clarifies the definition of fair value, describes methods used to appropriately measure fair value in accordance with generally accepted accounting principles, and expands fair value disclosure requirements. This guidance applies whenever other accounting pronouncements require or permit fair value measurements.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:

•Level 1 inputs are unadjusted quoted prices in active markets (as defined) for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

•Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

•Level 3 inputs are unobservable inputs for the asset or liability and reflect the reporting entity’s assumptions regarding the pricing of an asset or liability by a market participant (including assumptions about risk).

Table of Contents

The table below is a summary of fair value estimates for financial instruments and the level of the fair value hierarchy within which the fair value measurements are categorized at the periods indicated:


	March 31, 2025
(In thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices In Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Financial Assets:


Investment securities	$	157,155	$	157,155	$	—	$	157,155	$	—
Marketable equity securities	3,379		3,379		3,379		—		—
Loans, net	905,297		872,258		—		—		872,258
Financial Liabilities:
Time deposits	74,565		74,364		—		—		74,364
Short-term borrowings	8,000		8,000		8,000		—		—
Junior subordinated debt	11,417		11,417		—		—		11,417


	December 31, 2024
(In thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices In Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Financial Assets:


Investment securities	$	157,382	$	157,382	$	—	$	157,382	$	—
Marketable equity securities	3,326		3,326		3,326		—		—
Loans, net	912,416		874,105		—		—		874,105
Financial Liabilities:
Time deposits	78,356		77,981		—		—		77,981
Short-term borrowings	—		—		—		—		—
Junior subordinated debt	11,572		11,572		—		—		11,572

The Company performs fair value measurements on certain assets and liabilities as the result of the application of current accounting guidelines. Some fair value measurements, such as those on investment securities and junior subordinated debt, are performed on a recurring basis, while others, such as evaluations of loans, other real estate owned, goodwill, and other intangibles, are performed on a nonrecurring basis.

•Level 1 financial assets consist of money market funds and highly liquid mutual funds for which fair values are based on quoted market prices.

•Level 2 financial assets include highly liquid debt instruments of U.S. government agencies, collateralized mortgage obligations, and debt obligations of states and political subdivisions, whose fair values are obtained from readily-available pricing sources for the identical or similar underlying security that may or may not be actively traded.

•Level 3 financial assets include certain instruments where the assumptions may be made by the Company or third parties about assumptions that market participants would use in pricing the asset or liability.

The Company recognizes transfers between Levels 1, 2, and 3 when a change in circumstances warrants a transfer. There were no transfers between fair value measurement classifications during the quarter ended March 31, 2025, or the quarter ended March 31, 2024.

The following methods and assumptions were used in estimating the fair values of financial instruments measured at fair value on a recurring and non-recurring basis:

Investment Securities - Available-for-sale and marketable equity security values are based on open-market price quotes obtained from reputable third-party brokers. Market pricing is based upon specific CUSIP identification for each individual

Table of Contents

security. To the extent there are observable prices in the market, the mid-point of the bid/ask price is used to determine the fair value of individual securities. If that data is not available for the last 30 days, a Level 2-type matrix pricing-approach, based on comparable securities in the market, is utilized. Level 2 pricing may include the use of a forward spread from the last observable trade or may use a proxy bond, such as a TBA mortgage, to determine the price for the security being valued. Changes in fair market value are recorded through other-accumulated-comprehensive-income as an unrecognized gain or loss on fair value.

Loans – Fair values of loans are estimated as follows: Fixed and variable loans are valued using discounted cash flow analysis, which takes into account various factors, including the type of loan, expected credit losses, and prepayment expectations. The cash flows from the loans are discounted to their present value by using a combination of current market rates, liquidity spreads, and the underlying index rates and margins on variable-rate loans. This process results in a Level 3 classification for the valuations.

Individually-Evaluated Loans - Fair value measurements for individually-evaluated loans are performed pursuant to authoritative accounting guidance and are based upon either collateral values supported by third-party appraisals or observed market prices. Collateral-dependent loans are measured for impairment using the fair value of the collateral. There were no individually-evaluated loans measured at fair value as of March 31, 2025 or December 31, 2024.

Other Real Estate Owned - Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned (OREO) are measured at the lower of carrying amount or fair value, less costs to sell. Fair values are generally based on third-party appraisals of the property, resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized. No OREO properties were measured at fair value as of March 31, 2025, or December 31, 2024.

Time Deposits - The fair value is calculated by applying the current SOFR/SWAP curve rate to the discounted value of contractual cash flows.

Short-Term Borrowings - The fair value is calculated by applying rates currently available for debt with similar terms and remaining maturities to the existing debt.

Junior Subordinated Debt - The fair value of junior subordinated debentures (TruPS) is based on a discounted cash flow model utilizing observable market rates and credit characteristics for similar debt instruments. In its analysis, the Company uses characteristics that market participants would generally use, and considers factors specific to the liability and the principal, or most advantageous, market for the liability. Cash flows are discounted at a rate which incorporates a current market rate for similar-term debt instruments, adjusted for credit and liquidity risks associated with similar debt and circumstances unique to the Company. The Company believes that the subjective nature of these inputs, credit concerns in the capital markets, and inactivity in the trust preferred markets, limit the observability of market spreads, requiring TruPS to be classified at a Level 3 fair value.

Table of Contents

The following tables summarize the Company’s assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2025:


(In thousands)	March 31, 2025		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
AFS Securities:
U.S. Government agencies	$	2,177	$	—	$	2,177	$	—
U.S. Government collateralized mortgage obligations	78,008		—		78,008		—

Municipal bonds	43,190		—		43,190		—

Corporate bond	33,780		—		33,780		—
Total AFS securities	157,155		—		157,155		—
Marketable equity securities	3,379		3,379		—		—
Total	$	160,534	$	3,379	$	157,155	$	—


Liabilities:
Junior subordinated debt	$	11,417	$	—	$	—	$	11,417
Total	$	11,417	$	—	$	—	$	11,417

The following tables summarize the Company’s assets and liabilities that were measured at fair value on a recurring basis as of December 31, 2024:


(In thousands)	December 31, 2024		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
AFS Securities:
U.S. Government agencies	$	2,644	$	—	$	2,644	$	—
U.S. Government collateralized mortgage obligations	78,881		—		78,881		—

Municipal bonds	42,367		—		42,367		—

Corporate bonds	33,490		—		33,490		—
Total AFS securities	157,382		—		157,382		—
Marketable equity securities	3,326		3,326		—		—
Total	$	160,708	$	3,326	$	157,382	$	—


Liabilities:
Junior subordinated debt	$	11,572	$	—	$	—	$	11,572
Total	$	11,572	$	—	$	—	$	11,572

There were no non-recurring fair value adjustments at March 31, 2025, or December 31, 2024.

Table of Contents

The following table provides a description of the valuation technique, unobservable inputs, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring basis at March 31, 2025, and December 31, 2024:

March 31, 2025

December 31, 2024

Financial Instrument

Valuation Technique

Unobservable Input

Weighted Average

Financial Instrument

Valuation Technique

Unobservable Input

Weighted Average

Junior Subordinated Debt

Discounted cash flow

Market credit risk-adjusted spreads

6.26%

Junior Subordinated Debt

Discounted cash flow

Market credit risk-adjusted spreads

6.40%

Management believes that the credit risk-adjusted spread utilized in the fair value measurement of the junior subordinated debentures is indicative of the nonperformance risk premium a willing market participant would require under current, inactive market conditions. Management attributes the change in fair value of the junior subordinated debentures to market changes in the nonperformance expectations and pricing of this type of debt. Generally, an increase in the credit risk-adjusted spread and/or a decrease in the forward three-month SOFR curve will result in a positive fair value adjustment and a decrease in the fair value measurement. Conversely, a decrease in the credit risk adjusted spread and/or an increase in the forward three-month SOFR curve will result in a negative fair value adjustment and an increase in the fair value measurement. The decrease in discount rate between the periods ended March 31, 2025, and December 31, 2024, is primarily due to decreases in rates for similar debt instruments.

The following table provides a reconciliation of liabilities at fair value using Level 3 significant, unobservable inputs on a recurring basis:


	Three Months Ended
(In thousands)	March 31, 2025		March 31, 2024
Junior Subordinated Debt:
Beginning balance	$	11,572	$	11,213
Gross (gain) loss included in earnings	(270)		294
Gross loss (gain) related to changes in instrument-specific credit risk	142		(155)
Increase in accrued interest	(27)		$	(4)
Ending balance	$	11,417	$	11,348
Amount of total (gain) loss for the period included in earnings attributable to the change in unrealized gains or losses relating to liabilities held at the reporting date	$	(270)	$	294

14.Goodwill and Intangible Assets

At March 31, 2025, the Company held goodwill of $4.5 million in connection with various business combinations and purchases. This amount was unchanged from the balance of $4.5 million at December 31, 2024. The Company conducts impairment analysis on goodwill both annually and in the event of triggering events, if any. The Company performed an analysis of goodwill impairment and concluded goodwill was not impaired as of December 31, 2024, with no triggering events occurring through the period ended March 31, 2025.

Table of Contents

15.Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income included in shareholders’ equity are as follows:


	March 31, 2025						December 31, 2024
(In thousands)	Net unrealized gain (loss) on available-for-sale securities		Unfunded status of the supplemental retirement plans		Net unrealized gain (loss) on junior subordinated debentures		Net unrealized gain (loss) on available-for-sale securities		Unfunded status of the supplemental retirement plans		Net unrealized gain (loss) on junior subordinated debentures
Beginning balance	$	(15,760)	$	(147)	$	1,555	$	(16,290)	$	(130)	$	1,382
Current period comprehensive income (loss), net of tax	1,823		6		(100)		530		(17)		173
Ending balance	$	(13,937)	$	(141)	$	1,455	$	(15,760)	$	(147)	$	1,555
Accumulated other comprehensive loss					$	(12,623)					$	(14,352)

16. Segment Information

The Company’s reportable segment is determined by the Chief Executive Officer, who is the designated chief operating decision maker, based upon information provided about the Company’s products and services offered, primarily banking operations. The segment is also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business, such as branches, which are then aggregated if operating performance, product and services, and customers are similar. The chief operating decision maker will evaluate the financial performance of the Company’s business components by evaluating revenue streams, significant expenses, and budget to actual results in assessing the Company’s segment and in the determination of resource allocations. The chief operating decision maker uses revenue streams to evaluate product pricing and uses significant expenses to assess performance and evaluate return on assets. The chief operating decision maker uses consolidated net income to benchmark the Company against its competitors. The benchmarking analysis coupled with monitoring of budget to actual results are used in assessment performance and in establishing compensation. Loans, investments, and deposits provide the revenues in the banking operation. Interest expense, provisions for credit losses, and payroll provide the significant expenses in the banking operation. All operations are domestic.

Table of Contents

Detailed information related to the Company’s banking segment is as follows:


	Banking Segment
(In thousands)	March 31, 2025		March 31, 2024
Interest income	$	15,283	$	14,879
Noninterest income	1,360		1,053
Total revenue	16,643		15,932

Less:
Interest expense	2,987		3,165

Less:
Provision for credit losses	2,300		173
Salaries and employee benefits	3,926		3,498
Provision for income taxes	1,070		1,695
Occupancy Expense	966		858
Technology	651		764
Depreciation and amortization, premises and equipment	376		349
Other amortization expense (1)	507		505
Other expenses (2)	1,178		764
Banking segment net income	$	2,682	$	4,161

Reconciliation of assets:
Banking segment assets	$	1,191,791	$	1,211,718

Total consolidated assets	$	1,191,791	$	1,211,718

(1) Includes amortization of investment securities, lease assets, and loan costs and fees.

(2) Other segment items include professional fees, loan-related expenses, regulatory assessments, director fees and data processing fees.

17. Investment in York Monterey Properties

The Bank wholly owns the subsidiary, York Monterey Properties, Inc. (“Properties”), which is organized as a California corporation. The Bank capitalized the subsidiary through the transfer of eight unimproved lots at a historical cost of $5.3 million comprised of approximately 186.97 acres in the York Highlands subdivision of the Monterra Ranch residential development in Monterey County, California, together with cash contributions. The Bank transferred the properties to York Monterey Properties, Inc., to maintain ownership beyond the ten-year regulatory holding period applicable to a state bank. The Bank acquired five of the lots through a non-judicial foreclosure on or about May 29, 2009. In addition, the Bank purchased three of the lots from another bank. The Bank has continuously held the Properties from the date of foreclosure and acquisition until the time of transfer. At the time of transfer, the Properties had reached the end of the ten-year regulatory holding period limit. Additionally, on January 14, 2025, the Bank foreclosed on nonaccrual loans related to the York Monterey Properties subdivision totaling $3.3 million and transferred the amount to OREO.

At March 31, 2025 and December 31, 2024, the Bank’s investment in York Monterey Properties, Inc., totaled $8.2 million and $5.0 million, respectively. York Monterey Properties, Inc., is included within the consolidated financial statements of the Company, with $7.9 million of the total investment recognized within the balance of other real estate owned on the consolidated balance sheets at March 31, 2025. At December 31, 2024, $4.6 million of the total investment was recognized within the balance of other real estate owned.

18. Commitments and Contingent Liabilities

Financial Instruments with Off-Balance Sheet Risk: The Company is party to financial instruments with off-balance sheet risks which arise in the normal course of business. These instruments, which may contain elements of credit risk, interest rate risk, and liquidity risk, include commitments to extend credit and standby letters of credit. The credit risks associated with these

Table of Contents

instruments are essentially the same as those involved in extending credit to customers and are represented by the contractual amount indicated in the table below:


(In thousands)	March 31, 2025		December 31, 2024
Commitments to extend credit	$	226,373	$	204,033
Standby letters of credit	$	28,574	$	29,174

Commitments to extend credit are agreements to lend to a customer, as long as conditions established in the contract have not been violated. These commitments are floating-rate instruments based on the current prime rate, and, in most cases, have fixed expiration dates. The Company evaluates each customer’s creditworthiness on a case-by-case basis, and the amount of collateral obtained is based on management’s credit evaluation. Collateral held varies but includes accounts receivable, inventory, leases, property, plant and equipment, residential real estate, and income-producing properties. As many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent the future cash requirements of the Company.

Standby letters of credit are generally unsecured and are issued by the Company 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 loans to customers. The Company’s letters of credit are short-term guarantees and generally have terms from one month to three years. At March 31, 2025, the maximum potential amount of future undiscounted payments the Company could be required to make under outstanding standby letters of credit totaled $28.6 million.

Contingent Liabilities. The remaining unfunded commitments for the investment in limited partnerships totaled $2.2 million at March 31, 2025, and December 31, 2024.

In the ordinary course of business, the Company may become involved in litigation arising out of its normal business activities. Management, after consultation with legal counsel, believes that the ultimate liability, if any, resulting from the disposition of such claims would not be material to the financial position of the Company.

Table of Contents

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Certain matters discussed, or incorporated by reference in this Quarterly Report of Form 10-Q, contain forward-looking statements about the Company that are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995 and are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, but are not limited to, the following factors:

•adverse developments with respect to U.S. or global economic conditions and other uncertainties, including the impact of supply chain disruptions, inflationary pressures, labor shortages, and global conflict and unrest;

•geopolitical and domestic political developments that can increase levels of political and economic unpredictability, contribute to rising energy and commodity prices, and increase the volatility of financial markets;

•the current administration’s rapid-fire policy pronouncements, executive orders and imposition of tariffs (and the threat thereof) create an unpredictable regulatory landscape and have increased market volatility and disruptions that could affect the availability and cost of capital, the valuation of our assets, the stability of our funding sources, and the financial health and operations of our borrowers, particularly our borrowers connected to agriculture and construction;

•the impact of natural disasters, droughts, earthquakes, floods, wildfires, terrorist attacks, health epidemics, and threats of war or actual war, including current military actions involving the Russian Federation and Ukraine and the conflict in the Middle East, which may impact the local economy and/or the condition of real estate collateral;

•changes in general economic and financial market conditions, either nationally or locally;

•fiscal policies of the U.S. government, including interest rate policies of the Board of Governors of the Federal Reserve System and the resulting impact on the Company’s interest-rate sensitive assets and liabilities;

•changes in banking laws or regulations and government policies that could lead to a tightening of credit and/or a requirement that the Company raise additional capital;

•increased competition in the Company’s markets, impacting the ability to execute its business plans;

•continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to different regulations than the Company is, and the Company’s response to competitive pressure;

•loss of, or inability to attract, key personnel;

•unanticipated deterioration in the loan portfolio, credit losses, and the sufficiency of the allowance for credit losses;

•the ability to grow the loan portfolio due to constraints on concentrations of credit;

•challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services;

•the impact of technological changes and the ability to develop and maintain secure and reliable electronic communication systems, including failures in or breaches of the Company’s operational and/or security systems or infrastructure, and the Company’s ability to identify and address cyber-security risks such as data security breaches, “denial of service” attacks, “hacking” and identity theft, and other attacks on the Company’s information technology systems or on the third-party vendors who perform functions for the Company;

•the failure to maintain effective controls over financial reporting;

•risks related to the sufficiency of liquidity, including the quality and quantity of the Company’s deposits and the ability to attract and retain deposits and other sources of funding and liquidity;

•adverse developments in the financial services industry generally, such as the bank failures in 2023 and 2024 and any related impact on depositor behavior or investor sentiment;

•the possibility that the recorded goodwill could become impaired which may have an adverse impact on earnings and capital;

•asset/liability matching risks; and

•changes in accounting policies or procedures.

The information set forth herein should be carefully considered when evaluating the business prospects of the Company. For additional information concerning risks and uncertainties related to the Company and its operations, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

The Company

United Security Bancshares, a California corporation, is a bank holding company registered under the Bank Holding Company Act (BHCA) with corporate headquarters located in Fresno, California. The principal business of United Security Bancshares is to serve as the holding company for its wholly-owned subsidiary, United Security Bank. References to the “Bank” refer to United Security Bank together with its wholly-owned subsidiary, York Monterey Properties, Inc. References to the “Company”

Table of Contents

refer to United Security Bancshares together with its subsidiaries on a consolidated basis. References to the “Holding Company” refer to United Security Bancshares, the parent company, on a stand-alone basis. The Bank currently maintains 13 banking branches, which provide banking services in Fresno, Madera, Kern, and Santa Clara counties, in the state of California. In addition to full-service branches, the Bank has several stand-alone interactive teller machines (ITMs) within its geographic footprint.

Executive Summary

During 2025, the Company has worked closely with long-term, core customers to provide deposit and lending solutions that meet their business and individual needs. The Company has also focused on maintaining adequate liquidity, managing credit risk, and responsibly managing growth on the balance sheet.

First Quarter 2025 Highlights (as of, or for, the quarter ended March 31, 2025, except where noted):

▪Net interest margin increased to 4.58% for the quarter ended March 31, 2025, compared to 4.35% for the quarter ended March 31, 2024.

▪Annualized average cost of deposits was 1.09% for the quarter ended March 31, 2025, compared to 0.72% for the quarter ended March 31, 2024.

▪Net income for the quarter decreased 35.54% to $2.7 million, compared to the $4.2 million reported for the quarter ended March 31, 2024.

▪Interest and fees on loans increased 3.43% to $13.9 million, as a result of an $890,000 interest payment related to a nonaccrual loan payoff, compared to $13.5 million for the first quarter of 2024.

▪Interest expense decreased 5.6% to $3.0 million, as a result of decreases in short-term borrowing costs offset by increases in deposit interest expense, compared to $3.2 million for the first quarter of 2024.

▪The total fair value of the junior subordinated debentures (TRUPs), inclusive of a change in accrued interest of $27,000, changed by $155,000 during the quarter ended March 31, 2025. A gain of $270,000 was recorded through the income statement and a loss of $142,000 was recorded through accumulated other comprehensive income. For the quarter ended March 31, 2024, the total fair value of TRUPs, inclusive of a change in accrued interest of $4,000, changed by $135,000. A loss of $294,000 was recorded through the income statement and a $155,000 gain was recorded through accumulated other comprehensive income.

▪The Company recorded a provision for credit losses of $2.3 million for the quarter ended March 31, 2025, compared to $173,000 for the quarter ended March 31, 2024. The increase was primarily related to charge-offs of $2.8 million within the student loan portfolio.

▪Noninterest expense increased 12.85% to $7.6 million, compared to $6.7 million for the quarter ended March 31, 2024. The increase was related to increases in salaries and employee benefits and consulting expenses.

▪Annualized return on average assets (ROAA) decreased to 0.91%, compared to 1.40% for the quarter ended March 31, 2024.

▪Annualized return on average equity (ROAE) decreased to 8.19%, compared to 13.51% for the quarter ended March 31, 2024.

▪Total loans, net of unearned fees, decreased 0.84% to $920.7 million, compared to $928.5 million at December 31, 2024.

▪Total deposits decreased 2.97% to $1.03 billion, compared to $1.06 billion at December 31, 2024.

▪OREO balances increased from $4.6 million at December 31, 2024 to $7.9 million at March 31, 2025 due to the transfer through foreclosure of nonaccrual loans totaling $3.3 million to OREO.

Trends Affecting Results of Operations and Financial Position

The Company’s operations are influenced by various factors, including interest rates, margin spreads, and the composition of the consolidated balance sheet. A primary strategic goal is to maintain a mix of assets that generate a reasonable return without undue risk, financed by low-cost, stable funds. Liquidity and capital resources are also considered to mitigate risk and support growth.

The Bank’s operations and cash flows are subject to economic changes in California’s Central Valley. Business results depend largely on local business activity, population, income levels, deposits, and real estate activity. Economic declines can adversely affect the Bank. The Central Valley’s dependence on agriculture means downturns in this sector can indirectly impact the Company. Declines in agricultural prices and yields can reduce farm cash flows and land values, increasing default risks and reducing collateral values. Weaker prices may stress farming operations, reducing demand for agricultural lending. Recent declines in farm income and farmland prices reflect this trend. While most borrowers are not directly involved in agriculture, many local jobs are related to agricultural production, processing, marketing, and sales.

Table of Contents

Despite recent normal precipitation, California has experienced severe droughts, leading to water-allocation reductions for Central Valley farmers. The impact of water issues on local businesses and consumers is unpredictable. The Sustainable Groundwater Management Act, passed in 2014, aims for sustainable groundwater management by 2042, with effects yet to be determined.

Recent tariffs and trade wars may negatively impact the Central Valley’s agricultural and construction industries. Increased prices for imported agricultural goods and decreased exports, especially to China, could significantly affect the local economy.

The Company’s earnings are influenced by U.S. government monetary and fiscal policies. The Federal Reserve Bank (FRB) significantly impacts depository institutions by implementing national monetary policy to curb inflation or combat recession. The FRB controls bank loans, investments, and deposits through the issuance of government securities, regulation of the discount rate, and reserve requirements for member banks. In 2024, the Federal Open Market Committee (FOMC) lowered interest rates three times, totaling a 100-basis point decrease. Further decreases were anticipated, but recent market turmoil makes future actions uncertain. The increased likelihood of a recession and concerns about rising inflation and unemployment add to the uncertainty. The effects of these factors, combined with international instability, on FRB monetary policy are unknown.

The Company continuously evaluates its strategic business plan in response to changing economic and market conditions. Key priorities include managing the balance sheet, enhancing revenue sources, attracting and retaining deposit customers, and maintaining market share.

Results of Operations

On a year-to-date basis, the Company reported net income of $2.7 million, or $0.16 per share ($0.16 diluted), for the quarter ended March 31, 2025, compared to $4.2 million, or $0.24 per share ($0.24 diluted), for the same period in 2024. The decrease in net income was primarily due to an increase in the credit loss provision for loans, partially offset by a decrease in income tax expense. Additionally, noninterest expenses increased on a year-over-year basis due to increases in salaries and employee benefit expenses, as well as consulting and data processing expenses. These increases in expense were partially offset by increases in loan and fee income. The Company’s annualized return on average assets was 0.91% for the quarter ended March 31, 2025, compared to 1.40% for the quarter ended March 31, 2024. The Company’s annualized return on average equity was 8.19% for the quarter ended March 31, 2025, compared to 13.51% for the quarter ended March 31, 2024. The decrease in the return on average assets is primarily attributable to a decrease in income and an increase in average assets. The decrease in the return on average equity is primarily due to a decrease in net income and an increase in average equity.

Net Interest Income

The following table presents condensed average balance sheet information, together with interest income and yields earned on average interest-earning assets and interest expense and rates paid on average interest-bearing liabilities for the three month periods ended March 31, 2025, and 2024.

Table of Contents

Distribution of Average Assets, Liabilities and Shareholders’ Equity:


	Three Months Ended
	March 31, 2025						March 31, 2024
(Dollars in thousands)	Average Balance		Interest		Yield/Rate (2)		Average Balance		Interest		Yield/Rate (2)
Assets:
Interest-earning assets:
Loans (1) (2)	$	915,741	$	13,943	6.17	%	$	904,392	$	13,481	6.00	%
Investment securities (3)	160,877		1,206		3.04	%	177,276		1,354		3.07	%
Interest-bearing deposits in other banks	12,109		134		4.49	%	3,218		44		5.50	%
Total interest-earning assets	1,088,727		$	15,283	5.69	%	1,084,886		$	14,879	5.52	%
Allowance for credit losses	(15,939)						(15,671)
Noninterest-earning assets:
Cash and non-interest-bearing deposits in other banks	32,524						31,564
Nonaccrual loans	7,933						12,083
Premises and equipment, net	8,590						9,021
Accrued interest receivable	7,221						7,076
Other real estate owned	6,946						4,582
Other non-earning assets	60,189						59,767
Total average assets	$	1,196,191					$	1,193,308
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
NOW accounts	$	125,051	$	195	0.63	%	$	135,114	$	170	0.51	%
Money market accounts	366,078		2,055		2.28	%	241,194		1,022		1.70	%
Savings accounts	114,144		31		0.11	%	119,963		33		0.11	%
Time deposits	77,841		499		2.60	%	104,765		498		1.91	%
Other borrowings	2,790		31		4.51	%	85,436		1,233		5.80	%
Junior subordinated debentures (4)	12,464		176		5.73	%	12,464		209		6.74	%
Total interest-bearing liabilities	698,368		$	2,987	1.73	%	698,936		$	3,165	1.82	%
Noninterest-bearing liabilities:
Noninterest-bearing deposits	352,936						361,671
Other liabilities	11,751						8,773
Total liabilities	1,063,055						1,069,380
Total shareholders’ equity	133,136						123,928
Total average liabilities and shareholders’ equity	$	1,196,191					$	1,193,308
Interest income as a percentage of average earning assets					5.69	%					5.52	%
Interest expense as a percentage of average earning assets					1.11	%					1.17	%
Net interest margin					4.58	%					4.35	%

(1)Loan interest income includes loan fee costs of approximately $302,000 for the three months ended March 31, 2025, and loan fee costs of $199,000 for the three months ended March 31, 2024.

(2)Interest income/expense is divided by actual number of days in the period times 365 days in the yield calculation.

(3)Yields on investment securities, aside from marketable equity securities, are calculated based on average amortized cost balances rather than fair value, as changes in fair value are reflected as a component of shareholders’ equity.

(4)Yields on junior subordinated debentures are calculated based on average amortized cost balances rather than fair value, as changes in fair value are reflected as a component of shareholders’ equity.

Table of Contents

The prime rate decreased from 8.50% at March 31, 2024, to 7.50% at March 31, 2025. Future increases or decreases will affect both interest income and expense and the resultant net interest margin.

Both net interest income and net interest margin are affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as volume change. Both are also affected by changes in yields on interest-earning assets and rates paid on interest-bearing liabilities, referred to as rate change. The following table sets forth the changes in interest income and interest expense for each major category of interest-earning assets and interest-bearing liabilities, and the amount of change attributable to volume and rate changes for the periods indicated.

Rate and Volume Analysis:


	Three Months Ended
	March 31, 2025, compared to March 31, 2024
(In thousands)	Rate		Volume		Total
Increase (decrease) in interest income:
Loans	$	342	$	120	$	462
Investment securities available for sale	(7)		(141)		(148)
Interest-bearing deposits in FRB	12		78		90
Total interest income	347		57		404
Increase (decrease) in interest expense:
Interest-bearing demand accounts	639		419		1,058
Savings and money market accounts	—		(2)		(2)
Time deposits	151		(150)		1
Other borrowings	(214)		(988)		(1,202)
Junior subordinated debentures	(33)		—		(33)
Total interest expense	543		(721)		(178)
(Decrease) increase in net interest income	$	(196)	$	778	$	582

For the three months ended March 31, 2025, total interest income increased $404,000, or 2.7%, compared to the three months ended March 31, 2024. In comparing the two periods, average interest-earning assets increased $3.8 million, with an increase of $8.9 million in average balances held at the Federal Reserve Bank and an increase of $11.3 million in average loan balances, offset by a decrease of $16.4 million in average investment securities balances. The increase in average loan balances is attributed primarily to increases in the commercial and industrial portfolio, the real estate mortgage portfolio, and the agricultural portfolio, offset by decreases in the real estate construction portfolio and the installment portfolio. Loan yields increased 17 basis points and investment securities yields decreased 3 basis points. The average yield on total interest-earning assets increased 17 basis points. The increase in yields is a result of the increases in loan yields, offset by decreases in investment securities yields and yields on overnight deposits held at the Federal Reserve Bank. Included in the increase in net interest income was the collection of $890,000 in foregone interest related to a nonaccrual loan payoff.

The overall average yield on the loan portfolio increased to 6.17% for the quarter ended March 31, 2025, compared to 6.00% for the quarter ended March 31, 2024. At March 31, 2025, 28.7% of the Company’s loan portfolio consisted of floating rate instruments, compared to 29.4% of the portfolio at December 31, 2024, with the majority of those tied to the prime rate. Approximately 62.1%, or $163.9 million, of the floating-rate loans had rate floors at March 31, 2025. Approximately 59.4%, or $162.2 million, of the floating-rate loans had rate floors at December 31, 2024.

The Company’s net interest margin increased to 4.58% for the quarter ended March 31, 2025, compared to 4.35% for the quarter ended March 31, 2024. The net interest margin increased primarily as a result of increases in loan yields and decreases in yields on short-term borrowings, offset by increases in yields on deposits. The yield on average interest-earning assets increased from 5.52% to 5.69%. Yields on average interest-bearing liabilities decreased from 1.82% to 1.74%.

While deposit rates have increased, the Company’s disciplined deposit pricing efforts have helped keep the Company’s cost of funds relatively low. The cost of deposits increased from 0.72% March 31, 2024 to 1.09% at March 31, 2025. The rates paid on interest-bearing liabilities, which includes interest-bearing deposits, short-term borrowings, and TruPS, decreased to 1.74% for the quarter ended March 31, 2025, compared to 1.82% for the quarter ended March 31, 2024. For the quarter ended March 31, 2025, total interest expense decreased approximately $178,000, or 5.62%, as compared to the quarter ended March 31, 2024. Between those two periods, average interest-bearing liabilities decreased by $568,000 due to decreases in NOW

Table of Contents

accounts, savings accounts, time deposits, and short-term borrowings, partially offset by increases in money market accounts. Included in the balance of money market accounts at March 31, 2025 and December 31, 2024, are $100.3 million in purchased brokered deposits. The Company held no brokered deposits at March 31, 2024. The average rate paid on brokered deposits was 4.55% for the quarter ended March 31, 2025.

Interest-Earning Assets and Liabilities:

The following table summarizes the year-to-date (YTD) averages of the components of interest-earning assets as a percentage of total interest-earning assets and the components of interest-bearing liabilities as a percentage of total interest-bearing liabilities:


	YTD Averages
	March 31, 2025	December 31, 2024	March 31, 2024
Loans	84.11%	84.13%	83.53%
Investment securities available for sale	14.78%	15.33%	16.17%
Interest-bearing deposits in other banks	1.11%	0.54%	0.30%
Total interest-earning assets	100.00%	100.00%	100.00%
NOW accounts	17.91%	17.55%	19.33%
Money market accounts	52.42%	45.04%	34.51%
Savings accounts	16.34%	16.36%	17.16%
Time deposits	11.15%	10.60%	14.99%
Other borrowings	0.40%	8.71%	12.22%
Junior subordinated debentures	1.78%	1.74%	1.79%
Total interest-bearing liabilities	100.00%	100.00%	100.00%

Noninterest Income

Changes in Noninterest Income:

The following tables set forth the amount and percentage changes in the categories presented for the three month periods ended March 31, 2025, and 2024:


	Three Months Ended
(In thousands)	March 31, 2025		March 31, 2024		$ Change		% Change
Customer service fees	$	638	$	706	$	(68)	(9.6)	%
Increase in cash surrender value of bank-owned life insurance	132		137		(5)		(3.6)	%

Gain (loss) on fair value of junior subordinated debentures	270		(294)		564		191.8	%
Gain on sale of assets	—		11		(11)		(100.0)	%

Other	320		493		(173)		(35.1)	%
Total noninterest income	$	1,360	$	1,053	$	307	29.2	%

Noninterest income for the quarter ended March 31, 2025, increased $307,000 to $1.4 million compared to the quarter ended March 31, 2024. The change in fair value of junior subordinated debentures caused a $270,000 gain for the quarter ended March 31, 2025, compared to a $294,000 loss for the quarter ended March 31, 2024, resulting in a difference of $564,000. The change in the fair value of junior subordinated debentures was caused by fluctuations in the SOFR yield curve. Customer service fees for the quarter ended March 31, 2025 decreased $68,000 when compared to the quarter ended March 31, 2024.

Table of Contents

Noninterest Expense

Changes in Noninterest Expense:

The following tables set forth the amount and percentage changes in the categories presented for the three month periods ended March 31, 2025, and 2024:


	Three Months Ended
(In thousands)	March 31, 2025		March 31, 2024		$ Change		% Change
Salaries and employee benefits	$	3,926	$	3,498	$	428	12.2	%
Occupancy expense	966		858		108		12.6	%
Data processing	407		111		296		266.7	%
Technology	651		764		(113)		(14.8)	%
Professional fees	646		243		403		165.8	%
Loan-related expenses	17		215		(198)		(92.1)	%
Regulatory assessments	173		173		—		—	%
Director fees	102		128		(26)		(20.3)	%
Other	716		748		(32)		(4.3)	%
Total expense	$	7,604	$	6,738	$	866	12.9	%

Noninterest expense for the quarter ended March 31, 2025, increased $866,000 to $7.6 million, compared to the quarter ended March 31, 2024. The increase was primarily attributed to increases in salaries and employee benefits, professional fees, and data processing expenses, and was partially offset by decreases in loan-related expenses and technology expense. The increase in salaries and employee benefits was caused by increases in group insurance expense and deferred compensation expenses. The increase in professional fees was due to increases in consulting expenses and legal expense. Data processing increases were related to increases in monthly fees related to core processing expense. Loan-related expenses decreased due to the recovery of loan-related legal expenses totaling $168,000 during the quarter ended March 31, 2025, related to the payoff of one nonaccrual loan.

Income Taxes

The Company’s income tax expense is impacted to some degree by permanent taxable differences between income reported for book purposes and income reported for tax purposes, as well as certain tax credits which are not reflected in the Company’s pretax income or loss shown in the statements of operations and comprehensive income. As pretax income or loss amounts become smaller, the impact of these differences becomes more significant and are reflected as variances in the Company’s effective tax rate for the periods presented. In general, the permanent differences and tax credits affecting tax expense have a positive impact and tend to reduce the effective tax rates shown in the Company’s statements of income and comprehensive income.

The Company reviews its current tax positions at least quarterly based on the accounting standards related to uncertainty in income taxes. These standards identify the individual tax position criteria that would have to be met to recognize an income tax benefit on a taxable entity’s financial statements. Under the income tax guidelines, an entity should recognize the financial statement benefit of a tax position if it determines that it is more likely than not that the position will be sustained on examination. The term “more likely than not” means a likelihood of more than 50 percent. In assessing whether the more likely than not criterion is met, the entity should assume that the tax position will be reviewed by the applicable taxing authority.

The Company has reviewed all of its tax positions as of March 31, 2025, and has determined that there are no material additional amounts to be recorded under the current income tax accounting guidelines.

The Company’s effective tax rate for the three months ended March 31, 2025, was 28.52% compared to 28.94% for the three months ended March 31, 2024.

Table of Contents

Financial Condition

The following table illustrates the changes in balances as of and for the periods ended:


(In thousands)	March 31, 2025		December 31, 2024		March 31, 2024		Year-to-Date $ Change		Prior Period $ Change
Cash and cash equivalents	$	37,894	$	56,211	$	43,004	$	(18,317)	$	(5,110)
Net loans	905,297		912,416		913,962		(7,119)		(8,665)
Investment securities	160,534		160,708		168,563		(174)		(8,029)
Total assets	1,191,791		1,211,718		1,206,404		(19,927)		(14,613)
Total deposits	1,026,213		1,057,622		955,934		(31,409)		70,279
Total liabilities	1,058,915		1,081,356		1,082,220		(22,441)		(23,305)
Average interest-earning assets	1,088,727		1,100,634		1,084,886		(11,907)		3,841
Average interest-bearing liabilities	698,368		714,403		698,936		(16,035)		(568)

Net loans decreased on a year-to-date and year-over-year basis due to loan payoffs and principal paydowns. Investment securities decreased on a year-to-date and year-over-year basis due to repayments of principal. Deposits decreased on a year-to-date basis due to decreases in NOW and money market accounts. Deposits increased on a year-over-year basis due to the purchase of $100.0 million in brokered, interest-bearing deposits during the second and third quarters of 2024. The balance changes in cash and cash equivalents were reflective of the changes in deposit balances as well as changes in short-term borrowings. Short-term borrowings totaled $8.0 million at March 31, 2025, and $103.0 million March 31, 2024.

Earning assets averaged $1.09 billion during the quarter ended March 31, 2025, compared to $1.08 billion for the same period in 2024. Average interest-bearing liabilities decreased to $698.4 million for the quarter ended March 31, 2025, from $698.9 million for the comparative period of 2024.

Loans

The Company’s primary business is that of acquiring deposits and making loans, with the loan portfolio representing the largest and most important component of earning assets. Gross loans totaled $920.7 million at March 31, 2025, a decrease of $7.6 million, or 0.84%, when compared to the balance of $928.5 million at December 31, 2024, and a decrease of $8.8 million, or 0.94%, when compared to the balance of $929.4 million reported at March 31, 2024. Loans on average increased $11.3 million, or 1.25%, between the quarter ended March 31, 2024 and March 31, 2025, with loans, excluding nonaccrual loans, averaging $915.7 million for the quarter ended March 31, 2025, as compared to $904.4 million for the same period in 2024.

The following table sets forth the amounts of loans, net of unearned income, outstanding by category and the category percentages for the periods presented:


	March 31, 2025				December 31, 2024				March 31, 2024
(In thousands)	Amount		% of Loans		Amount		% of Loans		Amount		% of Loans
Commercial and industrial	$	60,678	6.6	%	$	63,715	6.9	%	$	56,432	6.1	%
Real estate – mortgage	662,050		71.9	%	666,694		71.8	%	654,552		70.4	%
Real estate construction and development	105,875		11.5	%	111,145		12.0	%	127,913		13.8	%
Agricultural	57,940		6.3	%	49,462		5.3	%	49,050		5.3	%
Installment and student loans	34,110		3.7	%	37,446		4.0	%	41,466		4.4	%
Total gross loans	$	920,653	100.00	%	$	928,462	100.00	%	$	929,413	100.00	%

Loan volume continues to be highest in what has historically been the Bank’s primary lending emphasis: real estate mortgage and real estate construction and development lending. Total loans decreased $7.8 million during the three months ended March 31, 2025. There were decreases of $5.3 million, or 4.7%, in real estate construction and development loans, $4.6 million, or 0.7%, in real estate mortgage loans, $3.3 million, or 8.9%, in installment loans, and $3.0 million, or 4.8%, in commercial and industrial loans, while agricultural loans increased $8.5 million, or 17.1%.

The real estate mortgage loan portfolio, totaling $662.1 million at March 31, 2025, consists of commercial real estate, residential mortgages, and home equity loans. Commercial real estate loans have remained a significant percentage of total loans over the past year, amounting to 45.4%, 45.2%, and 42.7% of the total loan portfolio at March 31, 2025, December 31,

Table of Contents

2024, and March 31, 2024, respectively. Commercial real estate balances decreased to $417.9 million at March 31, 2025, from $419.4 million at December 31, 2024. Commercial real estate loans are generally a mix of short- to medium-term, fixed- and floating-rate instruments and are mainly secured by commercial income and multi-family residential properties.

Residential mortgage loans are generally 30-year amortizing loans with an average life of nine to 11 years. These loans totaled $244.1 million, or 26.5%, of the portfolio at March 31, 2025, $247.2 million, or 26.6%, of the portfolio at December 31, 2024, and $258.0 million, or 27.8%, of the portfolio at March 31, 2024. Included in the residential mortgage portfolio are purchased home-mortgage loan pools with aggregate balances of $218.4 million, comprising 89.5% of the total residential mortgage portfolio at March 31, 2025. These loans were purchased in whole-loan form, in several pools, during 2021 and 2022. Dovenmuehle Mortgage, Inc., (DMI) is the third-party sub-servicer for the Company’s purchased residential mortgage portfolio. DMI’s services include administration, Company-approved modification, escrow management, monitoring, and collection. DMI is paid a monthly servicing fee based primarily upon the number of loans being serviced which, at March 31, 2025, totaled 248.

Real estate construction and development loans, representing 11.5%, 12.0%, and 13.8% of total loans at March 31, 2025, December 31, 2024, and March 31, 2024, respectively, consisted of loans for residential and commercial construction projects, as well as land acquisition and development, and land held for future development. Loans in this category are secured by real estate, including improved and unimproved land, as well as single-family residential, multi-family residential, and commercial properties in various stages of completion. All real estate loans have established equity requirements. Repayment on construction loans generally comes from long-term mortgages with other lending institutions obtained at the completion of the project or from the sale of the constructed homes to individuals.

Commercial and industrial loans decreased $3.0 million between December 31, 2024, and March 31, 2025, and increased $4.2 million between March 31, 2024, and March 31, 2025. Agricultural loans increased $8.5 million between December 31, 2024, and March 31, 2025, and increased $8.9 million between March 31, 2024, and March 31, 2025. Installment loans decreased $3.3 million between December 31, 2024, and March 31, 2025, and decreased $7.4 million between March 31, 2024, and March 31, 2025, primarily due to decreases in student loan balances.

Included in installment loans are $30.6 million in unsecured student loans made to medical and pharmacy school students in the US and Caribbean, all of which are exclusively US citizens. Student loans decreased $7.1 million between the quarter ended March 31, 2025, and 2024, due to paydowns, consolidations with other lenders, and charge-offs. The outstanding balance of loans for students who are in school or in a grace period and have not entered repayment status totaled $827,000 at March 31, 2025. At March 31, 2025, there were 631 loans within repayment, deferment, and forbearance which represented $15.6 million, $10.0 million, and $4.2 million in outstanding balances, respectively. Student loans have not been originated or purchased since 2019.

Repayment of the unsecured student loans is premised on the medical and pharmacy students graduating and becoming high-income earners. Under program guidelines, repayment terms can vary per borrower; however, repayment occurs on average within 10 to 20 years. Additional repayment capacity is provided by non-student, co-borrowers for roughly one-third of the portfolio. The average student loan balance per borrower as of March 31, 2025, was approximately $114,100. At March 31, 2024, the average balance per borrower was approximately $108,000. Loan interest rates are primarily variable and ranged from 6.00% to 12.250% at March 31, 2025.

ZuntaFi is the third-party servicer for the student loan portfolio. ZuntaFi’s services include application administration, processing, approval, documenting, funding, collection, and borrower file custodial responsibilities. Except in cases where applicants/loans do not meet program requirements or extreme delinquency, ZuntaFi is responsible for complete program management. ZuntaFi is paid a monthly servicing fee based on the outstanding principal balance.

The Company classifies student loans delinquent more than 90 days as substandard. As of March 31, 2025, and December 31, 2024, reserves against the student loan portfolio totaled $7.3 million and $7.0 million, respectively. For the quarter ended March 31, 2025, $182,000 in accrued interest receivable was reversed, due to charge-offs of $2.8 million. For the quarter ended March 31, 2024, $28,000 in accrued interest receivable was reversed, due to charge-offs of $395,000.

Table of Contents

The following table sets forth the Bank’s student loan portfolio with activity from December 31, 2024, to March 31, 2025:


(In thousands)	Balance
Balance at December 31, 2024	$	33,889
Capitalized interest	138
Loan consolidations/payoffs	(262)
Payments received	(378)
Loans charged-off	(2,829)
Balance at March 31, 2025	$	30,558

Loan participations purchased totaled $5.0 million, or 0.5%, of the portfolio, at March 31, 2025, $3.6 million, or 0.4%, of the portfolio at December 31, 2024, and $15.0 million, or 1.6%, of the portfolio at March 31, 2024. Loan participations sold totaled $2.4 million, or 0.3%, of the portfolio, at March 31, 2025, $4.2 million, or 0.5%, of the portfolio, at December 31, 2024, and $4.2 million, or 0.5%, of the portfolio at March 31, 2024.

Deposits

Deposit balances totaled $1.03 billion at March 31, 2025, representing a decrease of $31.4 million, or 3.0%, from the balance of $1.06 billion reported at December 31, 2024, and an increase of $70.3 million, or 7.4%, from the balance of $955.9 million at March 31, 2024. Included in the balances reported at March 31, 2025 and December 31, 2024 were $100.3 million in purchased brokered deposits.

The following table sets forth the amounts of deposits outstanding by category at March 31, 2025 and December 31, 2024, and the net change between the two periods presented:


(In thousands)	March 31, 2025				December 31, 2024				$ Change
Noninterest-bearing deposits	$	359,135	35.00	%	$	360,152	34.05	%	$	(1,017)
Interest-bearing deposits:
NOW and money market accounts	478,050		46.58	%	504,466		47.70	%	(26,416)
Savings accounts	114,463		11.15	%	114,648		10.84	%	(185)
Time deposits:
Under $250,000	44,740		4.36	%	45,141		4.27	%	(401)
$250,000 and over	29,825		2.91	%	33,215		3.14	%	(3,390)
Total interest-bearing deposits	667,078		65.00	%	697,470		65.95	%	(30,392)
Total deposits	$	1,026,213	100.00	%	$	1,057,622	100.00	%	$	(31,409)

The following tables set forth estimated deposit balances exceeding the FDIC insurance limits as of:


(In thousands)	March 31, 2025		December 31, 2024
Uninsured deposits (1)	$	488,793	$	524,116

(1) Represents the estimated amount over the FDIC insurance limit


	March 31, 2025
(In thousands)	Three months or less		Over three months through six months		Over six months through twelve months		Over twelve months		Total
Uninsured time deposits (1)	$	5,799	$	2,863	$	6,668	$	4,330	$	19,660

(1) Represents the estimated amount over the FDIC insurance limit.

Table of Contents


	December 31, 2024
(In thousands)	Three months or less		Over three months through six months		Over six months through twelve months		Over twelve months		Total
Uninsured time deposits (1)	$	2,142	$	7,946	$	2,201	$	10,002	$	22,291

(1) Represents the amount over the insurance limit.

Core deposits, defined by the Company as consisting of all deposits other than time deposits of more than $250,000 and brokered deposits, continue to provide the foundation of the Company’s principal sources of funding and liquidity. These core deposits amounted to 87.3% and 87.4% of total deposits at March 31, 2025, and December 31, 2024, respectively. The Company held $100.3 million in brokered deposits at March 31, 2025, and December 31, 2024.

On a year-to-date average basis, the Company experienced an increase of $73.3 million, or 7.6%, in total deposits between the quarter ended March 31, 2025, and the quarter ended March 31, 2024. Between these two periods, interest-bearing deposits increased $82.1 million, or 13.7%, and noninterest-bearing deposits decreased $8.7 million, or 2.4%. Included in the increase in interest-bearing deposits at March 31, 2025, are $100.0 million in purchased brokered deposits.

Short-Term Borrowings

At March 31, 2025, the Company had collateralized lines of credit with the Federal Reserve Bank of San Francisco totaling $500.9 million, as well as Federal Home Loan Bank (FHLB) lines of credit totaling $133.1 million. At March 31, 2025, the Company had uncollateralized lines of credit with Pacific Coast Bankers Bank (PCBB), Zions Bank, and US Bank totaling $50.0 million, $20.0 million, and $20.0 million, respectively. These lines of credit generally have interest rates tied to either the Federal Funds rate or short-term U.S. Treasury rates. All lines of credit are on an “as available” basis and can be revoked by the grantor at any time. The Company had outstanding borrowings of $8.0 million and $103.0 million at March 31, 2025, and March 31, 2024, respectively. The Company had collateralized FRB lines of credit of $499.1 million, collateralized FHLB lines of credit totaling $135.6 million, and uncollateralized lines of credit of $50.0 million with PCBB, $20.0 million with Zion’s Bank, and $20.0 million with US Bank at December 31, 2024.

Asset Quality and Allowance for Credit Losses

Lending money is the Company’s principal business activity, and ensuring appropriate evaluation, diversification, and control of credit risks is a primary management responsibility. Losses are implicit in lending activities and the amount of such losses will vary, depending on the risk characteristics of the loan portfolio as affected by local economic conditions and the financial experience of borrowers.

The Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), effective January 1, 2023, and utilizes a current expected credit loss (CECL) methodology which relies on segmenting the loan portfolio into pools with similar risks, tracking the performance of the pools over time, and using the data to determine pool loss experience. The allowance for credit losses on most loans is measured on a collective (pool) basis for loans with similar characteristics. The Company estimates the appropriate level of allowance for credit losses for collateral-dependent loans by evaluating them separately. The Company also uses the CECL model to calculate the allowance for credit losses on off-balance sheet credit exposures, such as undrawn amounts on lines of credit. While the allowance for credit losses on loans is reported as a contra-asset for loans, the allowance for credit losses on off-balance sheet credit exposure is reported as a liability.

Table of Contents

The eight (8) segments of the loan portfolio are as follows, net of unearned fees and unamortized loan origination costs (subtotals are provided as needed to allow the reader to reconcile the amounts to loan classifications reported elsewhere in this report):


Loan Segments for Allowance for Credit Loss Analysis	March 31, 2025		December 31, 2024
(In thousands)
Commercial and business loans	$	60,619	$	63,653
Government program loans	59		62
Total commercial and industrial	60,678		63,715
Real estate – mortgage:
Commercial real estate	417,940		419,422
Residential mortgages	244,089		247,248
Home improvement and home equity loans	21		24
Total real estate mortgage	662,050		666,694
Real estate construction and development	105,875		111,145
Agricultural	57,940		49,462
Installment and student loans	34,110		37,446




Total loans	$	920,653	$	928,462

Individually-Evaluated Loans and Specific Reserves:

The following table summarizes the components of individually-evaluated loans and related specific reserves:


	March 31, 2025				December 31, 2024
(In thousands)	Individually-Evaluated Loan Balances		Specific Reserve		Individually-Evaluated Loan Balances		Specific Reserve


Real estate construction and development	$	5,686	$	—	$	12,185	$	—
Agricultural	390		—		390		—

Total individually-evaluated loans	$	6,076	$	—	$	12,575	$	—

Individually-evaluated loans decreased $6.5 million to $6.1 million at March 31, 2025, compared to $12.6 million at December 31, 2024. This decline was related to the payoff of one nonaccrual loan and the transfer of one nonaccrual loan to OREO. There were no reserves for individually-evaluated loans using the discounted cash flow method at March 31, 2025 or December 31, 2024.

Collateral-Dependent Loans:

The following table presents the recorded investment in collateral-dependent loans by type of loan:


	March 31, 2025			December 31, 2024
(Dollars in thousands)	Amount		Number of Collateral-Dependent Loans		Amount		Number of Collateral-Dependent Loans







Real estate construction and development loans	$	5,686	1		$	12,185	3
Agricultural loans	390		1		390		1

Total	$	6,076	2		$	12,575	4

Table of Contents

Credit Quality Indicators for Outstanding Student Loans:

The following table summarizes the credit quality indicators for outstanding student loans as of:


	March 31, 2025					December 31, 2024
(Dollars in thousands)	Number of Loans	Amount		Accrued Interest		Number of Loans	Amount		Accrued Interest
School	30	$	827	$	630	26	$	692	$	512
Grace	—	—		—		3	100		63
Repayment	336	15,569		252		406	19,647		324
Deferment	225	10,000		2,804		219	9,954		2,593
Forbearance	70	4,162		206		65	3,496		133
Total	661	$	30,558	$	3,892	719	$	33,889	$	3,625

Included in installment loans are $30.6 million and $33.9 million in student loans at March 31, 2025, and December 31, 2024, respectively, made to medical and pharmacy school students. As of March 31, 2025, and December 31, 2024, the reserve against the student loan portfolio totaled $7.3 million and $7.0 million, respectively. Loan interest rates on the student loan portfolio are primarily variable and ranged from 6.00% to 12.25% at March 31, 2025, and 6.00% to 12.88% at December 31, 2024.

Nonperforming Assets:

The following table summarizes the components of nonperforming assets as of March 31, 2025, and December 31, 2024, and the percentage of nonperforming assets to total gross loans, total assets, and the percentage of nonperforming assets to allowance for loan losses:


(In thousands)	March 31, 2025			December 31, 2024
Nonaccrual loans	$	5,698		$	12,198
Loans past due 90 days or more, still accruing	653			421
Total nonperforming loans	6,351			12,619
Other real estate owned	7,852			4,582
Total nonperforming assets	$	14,203		$	17,201
Nonperforming loans to total gross loans	0.69		%	1.36		%
Nonperforming assets to total assets	1.19		%	1.42		%
Allowance for credit losses to nonperforming loans	241.79		%	127.16		%

Nonperforming assets, which are primarily related to the real estate loan and other-real-estate-owned portfolio, decreased $3.0 from $17.2 million at December 31, 2024, to $14.2 million at March 31, 2025. The increase in other-real-estate-owned was due to a foreclosure on nonaccrual loans related to the York Monterey Properties subdivision totaling $3.3 million. Nonaccrual loan balances decreased to $5.7 million between the two periods. The decrease in nonaccrual loans was related to the transfer of the York Monterey Properties loan to OREO and the payoff of one nonaccrual loan with a book balance of $3.2 million. Nonaccrual loan totals at March 31, 2025, consisted of one loan which was well-collateralized and in the process of collection.

The following table summarizes the nonaccrual totals by loan category for the periods shown:


(In thousands)	March 31, 2025		December 31, 2024		$ Change
Nonaccrual Loans:


Real estate construction and development	$	5,698	$	12,198	$	(6,500)

Loans past due more than 30 days receive increased management attention and are monitored for increased risk. The Company continues to move past-due loans to nonaccrual status in an ongoing effort to recognize and address loan problems as early and most effectively as possible and appropriate. As individually-evaluated loans, nonaccrual, and modified loans are reviewed for specific reserve allocations, the allowance for credit losses is adjusted accordingly.

Table of Contents

Except for nonaccrual and individually-evaluated loans, there were no loans at March 31, 2025, where the known credit problems of a borrower caused the Company to have serious doubts as to the ability of such borrower to comply with loan repayment terms.

Nonaccrual loans, consisting of one real estate construction loan, totaled $5.7 million at March 31, 2025, a decrease of $6.5 million from the $12.2 million reported at December 31, 2024. Of the three nonaccrual loans held at December 31, 2024, one loan, totaling $3.2 million was paid off during the first quarter of 2025, and one loan, totaling $3.3 million, was transferred to the York Monterey Properties investment (please see “Note 17 - Investment in York Monterey Properties” for additional information). In determining the adequacy of the underlying collateral related to this loan, management monitors trends within specific geographical areas, the loan-to-value ratio, appraisals, and other credit-related issues. Nonaccrual loans represented 0.62% of total loans at March 31, 2025 and 1.31% at December 31, 2024. The loan allowance for credit loss represented 269.50% and 131.55%, respectively, of nonaccrual loans for the same periods.

Other real estate owned through foreclosure increased to $7.9 million at March 31, 2025, compared to $4.6 million at December 31, 2024. Nonperforming assets as a percentage of total assets decreased from 1.42% at December 31, 2024, to 1.19% at March 31, 2025.

Management continues to monitor economic conditions in the real estate market for signs of deterioration or improvement which may impact the level of the allowance for credit losses required to cover identified and potential losses in the loan portfolio. Focus has been placed on monitoring and reducing the level of problem assets.

The following table summarizes special mention loans by type as of:


(In thousands)	March 31, 2025		December 31, 2024
Commercial and industrial	$	2,199	$	2,000

Commercial real estate mortgage	5,619		5,653




Agricultural	2,078		2,228

Total special mention loans	$	9,896	$	9,881

The Company remains focused on competition and other economic conditions within its market area which may ultimately affect the risk assessment of the portfolio. The Company continues to experience increased competition from major banks, local independents, and non-bank institutions, which creates pressure on loan pricing. Increased emphasis has been placed on reducing both the level of nonperforming assets and potential losses on the disposition of those assets. It is in the best interest of both the Company and the borrowers to seek alternative options to foreclosure to reduce the impacts on the real estate market. As part of this strategy, the Company enters into loan modifications when it improves collection prospects. Management recognizes the increased risk of loss due to the Company’s exposure to local and worldwide economic conditions, as well as potentially volatile real estate markets, and takes these factors into consideration when analyzing the adequacy of the allowance for credit losses.

Table of Contents

The following table provides a summary of the Company’s allowance for loan credit losses, loan loss provisions, and charge-off and recovery activity affecting the allowance for credit losses for the quarter ended March 31, 2025, and March 31, 2024.

Allowance for Credit Losses - Summary of Activity:


(In thousands)	March 31, 2025			March 31, 2024
Total loans outstanding at end of period before deducting allowances for credit losses	$	920,653		$	929,413
Average loans outstanding during period	923,674			916,475

Balance of allowance at beginning of period	$	16,046		$	15,658
Loans charged-off:



Installment and student loans	(2,829)			(415)
Total loans charged-off	(2,829)			(415)
Recoveries of loans previously charged off:
Real estate	—			4

Installment and student loans	71			122
Total loan recoveries	71			126
Net loans charged-off	(2,758)			(289)
Provision charged to operating expense (1)	2,068			82
Balance of allowance for credit losses at end of period	$	15,356		$	15,451

Net loan charged-off to total average loans (annualized)	1.22		%	0.13		%
Net loan charged-off to loans at end of period (annualized)	0.30		%	0.03		%
Allowance for credit losses to total loans at end of period	1.66		%	1.66		%
Net loan charged-off to allowance for credit losses (annualized)	71.84		%	7.48		%
Provision for credit losses to net charge-offs	74.98		%	28.37		%

(1) There was a provision of $232,000 for unfunded loan commitments made during the quarter ended March 31, 2025. There was a provision of $91,000 for unfunded loan commitments made during the quarter ended March 31, 2024.

Provisions for credit losses are determined based on management’s periodic credit review of the loan portfolio, consideration of past loan loss experience, expected losses within the portfolio, current and future economic conditions, and other pertinent factors. Management believes its estimate of the allowance for credit losses adequately covers estimated losses inherent in the loan portfolio and, based on the condition of the loan portfolio, management believes the allowance is sufficient to cover risk elements in the loan portfolio. For the quarter ended March 31, 2025, a $2.1 million provision was recorded to the allowance for credit losses as compared to an $82,000 provision for the quarter ended March 31, 2024. The increase in provision was primarily related to elevated charge-offs within the student loan portfolio.

The following provides a summary of the Company’s net charge-offs as a percentage of average loan balances (including nonaccrual loans) in each category for the quarter ended March 31, 2025 and March 31, 2024:


	March 31, 2025						March 31, 2024
(In thousands)	Net Charge-offs (Recoveries)		Average Loan Balance		Percentage		Net Charge-offs (Recoveries)		Average Loan Balance		Percentage
Commercial and industrial	$	—	$	58,420	—	%	$	—	$	56,474	—	%
Real estate mortgages	—		663,618		—	%	(4)		643,625		<0.01%
Real estate construction and development	—		109,484		—	%	—		126,556		—	%
Agricultural	—		54,383		—	%	—		47,691		—	%
Installment and student loans	2,758		37,769		7.30	%	293		42,129		0.70	%
Total	$	2,758	$	923,674	0.30	%	$	289	$	916,475	0.03	%

Table of Contents

Net charge-offs during the quarter ended March 31, 2025, totaled $2.8 million as compared to net charge-offs of $289,000 for the quarter ended March 31, 2024. The Company charged off or had partial charge-offs on 47 loans to 12 borrowers during the quarter ended March 31, 2025, compared to seven loans to three borrowers during the same period ended March 31, 2024. The annualized percentage of net charge-offs to average loans was 1.22% for the quarter ended March 31, 2025, 0.28% for the year ended December 31, 2024, and 0.13% for the quarter ended March 31, 2024. The Company’s loans, net of unearned fees, decreased from $929.4 million at March 31, 2024, to $920.7 million at March 31, 2025.

The allowance for credit losses at March 31, 2025, was 1.66% of outstanding loan balances, as compared to 1.72% at December 31, 2024, and 1.66% at March 31, 2024. At March 31, 2025, and March 31, 2024, unfunded loan commitment reserves of $1.01 million and $927,000, respectively, were reported in other liabilities.

Management believes that the loan allowance for credit losses, totaling 1.66% of the loan portfolio at March 31, 2025, is adequate to absorb both known and inherent risks in the loan portfolio. No assurance can be given, however, regarding future economic conditions, or other circumstances, which may adversely affect the Company’s service areas and result in losses in the loan portfolio not captured by the current allowance for credit losses. Management is not currently aware of any conditions that may adversely affect the levels of losses incurred in the Company’s loan portfolio.

Liquidity and Capital Resources

The Company’s asset/liability management, liquidity strategy, and capital planning are guided by policies formulated and monitored by the Asset and Liability Management Committee (ALCO) and Management, to provide adequate liquidity and maintain an appropriate balance between interest-sensitive assets and interest-sensitive liabilities.

Liquidity

Liquidity management may be described as the ability to maintain sufficient cash flows to fulfill both on- and off-balance sheet financial obligations, including loan funding commitments and customer deposit withdrawals, without straining the Company’s equity structure. To maintain an adequate liquidity position, the Company relies on, in addition to cash and cash equivalents, cash inflows from deposits and short-term borrowings, repayments of principal on loans and investments, and interest income received. The Company’s principal cash outflows are for loan originations, purchases of investment securities, depositor withdrawals, and payment of operating expenses.

The Company’s liquid asset base, which generally consists of cash and due from banks, federal funds sold, and investment securities, is maintained at levels deemed sufficient to provide the cash necessary to fund loan growth, unfunded loan commitments, and deposit runoff. Included in this framework is the objective of maximizing the yield on earning assets. This is generally achieved by maintaining a high percentage of earning assets in loans and investment securities, which typically provide higher yields than cash balances.

The following table sets forth asset balances as of:


	March 31, 2025				December 31, 2024
(Dollars in thousands)	Balance		% Total Assets		Balance		% Total Assets
Cash and cash equivalents	$	37,894	3.2	%	$	56,211	4.6	%
Loans, net of unearned income	920,653		77.2	%	928,462		76.6	%
Unpledged investment securities	74,152		6.2	%	79,623		6.6	%

At March 31, 2025, the loan-to-deposit ratio was 89.7%, compared to a loan-to-deposit ratio of 87.8% at December 31, 2024.

Liabilities used to fund liquidity sources include core and non-core deposits as well as short-term borrowing capabilities. Core deposits, which comprised approximately 87.3% of total deposits at March 31, 2025, provide a significant and stable funding source for the Company. The Bank held $8.0 million in borrowings from an unsecured credit line with PCBB at March 31, 2025. Unused lines of credit with the Federal Reserve Bank and FHLB, totaling $716.0 million, were collateralized by investment securities and certain qualifying loans in the Company’s portfolio. The carrying value of loans pledged on these borrowing lines totaled $838.2 million at March 31, 2025. For further detail on the Company’s borrowing arrangements, see “Note 6 - Short-term Borrowings/Other Borrowings” in the notes to the consolidated financial statements.

Table of Contents

The period-end balances of cash and cash equivalents for the periods shown are as follows (from Consolidated Statements of Cash Flows):


(In thousands)	Balance
December 31, 2023	$	40,784
March 31, 2024	43,004
December 31, 2024	56,211
March 31, 2025	37,894

Capital and Dividends

The Company and the Bank are subject to various regulatory capital requirements adopted by the Board of Governors of the Federal Reserve System (the “Board of Governors”). Failure to meet minimum capital requirements can initiate certain mandates and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework, the Company and the Bank must meet specific capital guidelines that include quantitative measures of their assets, liabilities, and certain off-balance sheet items, as calculated under regulatory accounting practices. Capital levels and classifications are also subject to qualitative judgments by the regulators regarding components, risk weightings, and other factors.

The Company’s capital plan includes guidelines and trigger points designed to ensure sufficient capital is maintained at both the Bank and Company levels. Capital ratios are maintained at a level deemed appropriate under regulatory guidelines given the Bank’s level of classified assets, concentrations of credit, allowance for credit losses, current and projected growth, and projected retained earnings. The capital plan contains contingency strategies to obtain additional capital as required to fulfill future capital requirements for both the Bank, as a separate legal entity, and the Company, on a consolidated basis. The capital plan requires the Bank to maintain a Tier 1 Leverage Ratio equal to or greater than 9%. The Bank’s Tier 1 Capital Ratio was 12.84% and 12.50% at March 31, 2025, and 2024, respectively.

The following table sets forth the Company’s and the Bank’s actual capital positions at March 31, 2025 and December 31, 2024:

Capital Ratios:


	March 31, 2025	December 31, 2024	Minimum Requirement to be Well Capitalized	Minimum requirement for CBLR (1)









Tier 1 capital to adjusted average assets (Leverage Ratio)
Company	12.84%	12.57%	5.00%	9.00%
Bank	12.84%	12.59%	5.00%	9.00%

(1) If the Bank’s Leverage Ratio exceeds the minimum ratio under the Community Bank Leverage Ratio Framework (CBLR), it is deemed to be “well capitalized” under all other regulatory capital requirements. If the Bank’s leverage ratio falls below the minimum required, it would no longer be eligible to elect the use of the CBLR framework.

As of March 31, 2025, the Company and the Bank meet all capital adequacy requirements to which they are subject. Management believes that, under the current regulations, both the Company and the Bank will continue to meet their minimum capital requirements for the foreseeable future.

Dividends

Dividends paid to shareholders by the Holding Company are subject to restrictions set forth under the California General Corporation Law. As applicable to the Holding Company, the California General Corporation Law provides that the Holding Company may make a distribution to its shareholders if either retained earnings immediately prior to the dividend payout are at least equal to the amount of the proposed distribution or, proceeding the distribution, the value of the Holding Company’s assets would equal or exceed the sum of its total liabilities. The primary source of funds for dividends paid to shareholders is cash dividends received by the Holding Company from the Bank.

On April 25, 2017, the Board of Directors announced the authorization of the repurchase of up to $3.0 million of the outstanding stock of the Holding Company. This amount represents 2.3% of total shareholders’ equity of $132.9 million at March 31, 2025. The timing of the purchases will depend on certain factors including, but not limited to, market conditions and

Table of Contents

prices, available funds, and alternative uses of capital. The stock repurchase program may be carried out through open-market purchases, block trades, or negotiated private transactions. As of March 31, 2025, there have been no repurchases of any available shares.

During the quarter ended March 31, 2025, the Bank paid $2.4 million in cash dividends to the Holding Company which funded the Holding Company’s operating costs, payments of interest on its junior subordinated debt, and dividend payments to shareholders.

On March 25, 2025, the Company’s Board of Directors declared a cash dividend of $0.12 per share on the Company’s common stock. The dividend was payable on April 22, 2025, to shareholders of record as of April 07, 2025 Approximately $2.1 million was transferred from retained earnings to dividends payable to allow for the distribution of the dividend to shareholders.

The Bank, as a state-chartered bank, is subject to dividend restrictions set forth in the California Financial Code, as administered by the Commissioner of the Department of Financial Protection and Innovation (the “Commissioner”). As applicable to the Bank, the Financial Code provides that the Bank may not pay cash dividends in an amount that exceeds the lesser of the retained earnings of the Bank or the Bank’s net income for the last three fiscal years less the amount of distributions to the Holding Company during that period of time. If the above test is not met, cash dividends may only be paid with the prior approval of the Commissioner, in an amount not exceeding the Bank’s net income for its last fiscal year or the amount of its net income for the current fiscal year. Such restrictions do not apply to stock dividends, which generally require neither the satisfaction of any tests nor the approval of the Commissioner. Notwithstanding the foregoing, if the Commissioner finds that the shareholders’ equity of the Bank is not adequate or that the declaration of a dividend would be unsafe or unsound, the Commissioner may order the Bank not to pay any dividend. The Federal Reserve Bank may also limit dividends paid by the Bank.

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

This item is not applicable to smaller reporting companies.

Item 4. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s 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 for timely decisions regarding required disclosures. In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well-designed and executed, can provide only reasonable assurance that desired control objectives will be achieved. Management is required to apply its judgment in evaluating the cost-benefit relationship of controls and procedures.

As of March 31, 2025, an evaluation of the effectiveness of the design and operation of disclosure controls and procedures was carried out under the supervision and participation of management, including the Chief Executive Officer and the Chief Financial Officer. Based on the foregoing evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes made to the Company’s internal control over financial reporting during the quarter ended March 31, 2025, that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all error and fraud. A control procedure, no matter how well conceived and executed, can provide only reasonable, not absolute, assurance that the objectives of the control procedure will be met. Because of these inherent limitations in control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur due to simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of a person, by collusion of two or more people, or by management override of the control.

Table of Contents

The design of any control procedure 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. Over time, controls may become inadequate due to changes in conditions or deterioration in the degrees of compliance with policies and/or procedures. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and may not be detected.

Table of Contents

PART II. Other Information

Item 1. Legal Proceedings

The Company is involved in various legal proceedings in the normal course of business. In the opinion of Management, any liability resulting from such proceedings would not have a material adverse effect on the Company’s financial condition or results of operations.

Item 1A. Risk Factors

N/A

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

None during the quarter ended March 31, 2025.

Item 3. Defaults Upon Senior Securities

N/A

Item 4. Mine Safety Disclosures

N/A

Item 5. Other Information

N/A

Table of Contents

Item 6. Exhibits:

(a)Exhibits:


3.1			Articles of Incorporation of Registrant (1)

3.1.1			Amended Articles of Incorporation

3.2			Bylaws of Registrant (1)

4.1			Specimen common stock certificate of United Security Bancshares (1)

10.1			Amended and Restated Executive Salary Continuation Agreement for Dennis Woods (2)

10.2			Amended and Restated Employment Agreement for Dennis R. Woods (5)

10.3			Amended and Restated Executive Salary Continuation Agreement for David Eytcheson (2)

10.4			Amended and Restated Change in Control Agreement for David Eytcheson (5)

10.5			USB 2005 Stock Option Plan (3)

10.6			United Security Bancshares 2015 Equity Incentive Award Plan (4)

10.7			Executive Salary Continuation Agreement for William Yarbenet (5)

10.8			Employment Agreement for William Yarbenet (5)

10.9			Change in Control Agreement for Robert Oberg (6)

10.10			Executive Salary Continuation Agreement for Robert Oberg (6)

10.11			Information Technology Engagement Letter with Mahmood, LLC, Dated June 29, 2022

10.12			Employment Agreement for David Kinross (7)

10.13			Employment Agreement for Porsche Saunders

10.14			Change in Control Agreement for Porsche Saunders

11.1			Computation of earnings per share. See Note 10 to Consolidated Financial Statements set forth in “Item 1. Financial Statements and Supplementary Data” of this Report. *

Table of Contents





31.1			Certification of the Chief Executive Officer of United Security Bancshares pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2			Certification of the Chief Financial Officer of United Security Bancshares pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1			Certification of the Chief Executive Officer of United Security Bancshares pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2			Certification of the Chief Financial Officer of United Security Bancshares pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101			Interactive data files pursuant to Rule 405 of Regulation S‑T: (i) the Consolidated Balance Sheets as of December 31, 2022 and 2021, (ii) the Consolidated Statements of Income for the years ended December 31, 2022 and 2021, (iii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2022 and 2021, (iv) the Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2022 and 2021, (v) the Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021, and (vi) the Notes to Consolidated Financial Statements. (Pursuant to Rule 406T of Regulation S‑T, this information is deemed furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.) (Filed herewith).

* Data required by Accounting Standards Codification (ASC) 260, Earnings per Share, is provided in Note 10 to the consolidated financial statements in this report.

(1) Previously filed on April 4, 2001 as an exhibit to the Company’s filing on Form S-4 (file number 333-58256).

(2) Previously filed on March 17, 2008 as an exhibit to the Company’s filing on Form 10-K for the year ended December 31, 2007 (file number 000-32897).

(3) Previously filed on April 18, 2005 as Exhibit B to the Company’s 2005 Schedule 14A Definitive Proxy (file number 000-32897).

(4) Previously filed on April 13, 2015 as Appendix A to the Company’s 2015 Schedule 14A Definitive Proxy (file number 000-32897).

(5) Previously filed on March 2, 2018 as an exhibit to the Company’s filing on Form 10-K for the year ended December 31, 2017 (file number 000-32897).

(6) Previously filed on March 1, 2019 as an exhibit to the Company’s filing on Form 10-K for the year ended December 31, 2018 (file number 000-32897).

(7) Previously filed on November 1, 2022 as an exhibit to the Company’s filing on Form 8-K (file number 000-32897).

(8) Previously filed on March 26, 2024 as an exhibit to the Company’s filing on Form 10-K (file number 000-32897).

Table of Contents

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.


		United Security Bancshares

Date:	May 8, 2025	/S/ Dennis R. Woods
		Dennis R. Woods
		President and Chief Executive Officer

		/S/ David A. Kinross
		David A. Kinross
		Senior Vice President and Chief Financial Officer