v3.25.2
Loans and Allowance for Credit Losses on Loans
 6 Months Ended
Jun. 30, 2025
Receivables [Abstract]  
Loans and Allowance for Credit Losses on Loans Loans and Allowance for Credit Losses on Loans
Loans

The following table presents the composition of the loan portfolio as of June 30, 2025 and December 31, 2024:
($ in thousands)June 30, 2025December 31, 2024
Commercial real estate ("CRE")$1,021,431 $980,247 
SBA—real estate241,451 231,962 
SBA—non-real estate21,973 21,748 
C&I193,359 213,097 
Home mortgage593,256 509,524 
Consumer and other110 274 
Gross loans2,071,580 1,956,852 
Allowance for credit losses(26,286)(24,796)
Net loans (1)
$2,045,294 $1,932,056 
(1)Includes net deferred loan costs (fees) and net unamortized premiums (discounts) of $398 thousand as of June 30, 2025 and $(702) thousand as of December 31, 2024.

Allowance for Credit Losses on Loans

For loans that share risk characteristics, the Company employs a modeled approach that takes into account current and future economic conditions to estimate lifetime expected losses on a collective basis. With the adoption of Current Expected Credit Losses ("CECL"), the Company elected not to consider accrued interest receivable in its estimated credit losses as the Company writes off the uncollectible accrued interest receivable in a timely manner. Generally, loans are placed on nonaccrual status when they become 90 days past due or more and all unpaid accrued interest is reversed against interest income. Accrued interest receivable on loans totaled $8.6 million and $8.1 million as of June 30, 2025 and December 31, 2024, respectively.

For collectively evaluated loans, the Company uses transition matrices to develop the Probability of Default ("PD") and Loss Given Default ("LGD") approaches, incorporating quantitative factors and qualitative considerations in the calculation of the allowance. The model provides forecasts of PD and LGD based on national unemployment rates using regression analysis. The Company incorporates future economic conditions using a weighted multiple scenario approach: baseline and adverse. The Company applies a reasonable and supportable period of one year for the baseline scenario and two years for the adverse scenario, after which loss assumptions revert to historical loss information through a one-year reversion period for the baseline scenario and a two-year reversion period for the adverse scenario. The Company segments the loan portfolio by major loan type using the Call Report codes and internal loan risk ratings to determine the Bank's allowance for credit losses.

The methodologies described above generally rely on historical loss experience to determine the quantitative portion of the allowance for credit losses. The Company also consider other qualitative and macroeconomic variables related to current conditions and reasonable and supportable forecasts that may indicate current expected credit losses could differ from the historical information reflected in the quantitative models. Key qualitative and macroeconomic variables include GDP, unemployment rates, interest rates, asset quality ratios, loan portfolio concentration, California house price index, and CRE price index. The parameters for making adjustments are established under a Credit Risk Matrix that provides different possible scenarios for each of the factors listed below. The Credit Risk Matrix and the possible scenarios enable the Bank to qualitatively adjust the loss rates. This matrix considers the following nine factors, which are patterned after the guidelines provided under the Federal Financial Institutions Examination Council Interagency Policy Statement on the Allowance for Credit Losses, updated to reflect the adoption of CECL:
•    Changes in lending policies and procedures, including changes in underwriting standards and practices for collection, charge-offs, and recoveries;
•    Actual and expected changes in national and local economic and business conditions and developments in which the institution operates that affect the collectivity of loans;
•    Changes in the nature and volume of the loan portfolio;
•    Changes in the experience, ability, and depth of lending management and staff;
•    Changes in the volume and severity of past-due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified loans;
•    Changes in the quality of the credit review function;
•    Changes in the value of the underlying collateral for loans that are not collateral-dependent;
•    The existence, growth, and effect of any concentrations of credit, and
•    The effect of other external factors, such as the regulatory, legal and technological environments; competition; and events such as natural disasters.

For loans that do not share similar risk characteristics such as nonaccrual loans above $500 thousand, the Company evaluates these loans on an individual loan basis. Such nonaccrual loans are considered to have different risk profiles than performing loans and are therefore evaluated individually. The Company elected to collectively assess nonaccrual loans with balances below $500 thousand along with the performing and accrual loans, in order to reduce the operational burden of individually assessing small nonaccrual loans with immaterial balances. When a loan is individually evaluated for the allowance for credit losses, the Company uses one of two different asset valuation measurement methods: 1) the present value of future cash flows discounted at the loan’s effective interest rate; or 2) the fair value of the collateral for a collateral-dependent loan. For the collateral-dependent loans, the Company obtains a new "as-is" valuation appraisal to determine an updated fair value of collateral. To ensure that appraised values remain current, the Company obtains updated appraisals every twelve months from a qualified independent appraiser. If the fair value of the collateral is less than the amortized balance of the loan, the Company recognizes an allowance for credit losses with a corresponding charge to the provision for credit losses.

The Company maintains a separate allowance for credit losses for its off-balance sheet commitments. The Company uses an estimated funding rate to allocate an allowance to undrawn exposures. This funding rate serves as a credit conversion factor, reflecting the likelihood that undrawn lines of credit may be drawn at any time. The funding rate is determined based on a look-back period of 8 quarters. Credit loss is not estimated for off-balance sheet commitments that are unconditionally cancellable by the Company.
The following table summarizes the activity in the allowance for credit losses on loans by portfolio segment for the three and six months ended June 30, 2025 and 2024:
($ in thousands)
CRE
SBA—
Real Estate
SBA —Non-
Real Estate
C&I
Home
Mortgage
Consumer and OtherTotal
Three Months Ended June 30, 2025
Beginning balance$9,010 $5,381 $512 $1,710 $8,755 $— $25,368 
Provision for (reversal of) credit losses9 931 (17)(372)704 — 1,255 
Charge-offs(129)(413)— — — — (542)
Recoveries80 — 4 121 — — 205 
Ending balance$8,970 $5,899 $499 $1,459 $9,459 $— $26,286 
Three Months Ended June 30, 2024
Beginning balance$8,044 $2,793 $229 $1,663 $9,391 $9 $22,129 
Provision for (reversal of) credit losses(118)134 20 488 108 (5)627 
Charge-offs— — — — — — — 
Recoveries— — 4 — — — 4 
Ending balance$7,926 $2,927 $253 $2,151 $9,499 $4 $22,760 
($ in thousands)
CRE
SBA—
Real Estate
SBA —Non-
Real Estate
C&I
Home
Mortgage
Consumer and OtherTotal
Six Months Ended June 30, 2025
Beginning balance$9,290 $5,557 $418 $1,844 $7,684 $3 $24,796 
Provision for (reversal of) credit losses(271)755 72 (477)1,866 (3)1,942 
Charge-offs(129)(413)(10)(29)(91)— (672)
Recoveries80 — 19 121 — — 220 
Ending balance$8,970 $5,899 $499 $1,459 $9,459 $— $26,286 
Six Months Ended June 30, 2024
Beginning balance$7,915 $1,657 $147 $1,215 $11,045 $14 $21,993 
Provision for (reversal of) credit losses11 1,336 91 936 (1,544)(10)820 
Charge-offs— (66)— — (2)— (68)
Recoveries— — 15 — — — 15 
Ending balance$7,926 $2,927 $253 $2,151 $9,499 $4 $22,760 

Collateral-dependent loans are loans where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment. The estimated credit losses for these loans are based on the collateral’s fair value less selling costs. Generally, the Company records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less selling costs at the time of foreclosure.
The following table represents the amortized cost basis of collateral-dependent loans by property type as of June 30, 2025 and December 31, 2024, for which repayment is expected to be obtained through the sale of the underlying collateral:
($ in thousands)Hotel / MotelRetailGas StationSingle-Family Residential
Total (1)(2)
As of June 30, 2025
CRE
$1,580 $222 $— $— $1,802 
SBA—real estate3,706 1,567 — — 5,273 
Home mortgage— — — 1,418 1,418 
Total$5,286 $1,789 $— $1,418 $8,493 
As of December 31, 2024
CRE
$1,580 $363 $— $— $1,943 
SBA—real estate3,702 2,006 — — 5,708 
Total$5,282 $2,369 $— $— $7,651 
(1)Excludes guaranteed portion of SBA loans totaling $12.5 million and $15.2 million as of June 30, 2025 and December 31, 2024, respectively.
(2)The allowance for credit losses allocated to these loans as of June 30, 2025 and December 31, 2024 was $904 thousand and $1.2 million, respectively.

The following table presents the amortized cost in nonaccrual loans and loans past due 90 or more days and still accruing interest as of June 30, 2025 and December 31, 2024:
($ in thousands)Nonaccrual Loans with a Related Allowance for Credit LossesNonaccrual Loans without a Related Allowance for Credit LossesTotal Nonaccrual Loans
90 or More
Days
Past Due &
Still Accruing
Total (1)
As of June 30, 2025
CRE
$— $1,802 $1,802 $— $1,802 
SBA—real estate2,444 2,932 5,376 — 5,376 
SBA—non-real estate320 — 320 — 320 
C&I— — — — — 
Home mortgage— 1,418 1,418 — 1,418 
Total$2,764 $6,152 $8,916 $— $8,916 
As of December 31, 2024
CRE
$363 $1,580 $1,943 $— $1,943 
SBA—real estate2,006 3,702 5,708 — 5,708 
SBA—non-real estate169 — 169 — 169 
Total$2,538 $5,282 $7,820 $— $7,820 
(1)    Excludes guaranteed portion of loans totaling $13.9 million and $16.3 million as of June 30, 2025 and December 31, 2024, respectively.
Nonaccrual loans and accruing loans past due 90 or more days include both homogeneous loans that are collectively and individually evaluated for impairment and individually classified impaired loans.
The following table represents the aging analysis of gross loans as of June 30, 2025 and December 31, 2024:
Still Accruing
($ in thousands)
30-59
Days
Past Due
60-89
Days
Past Due
90 or More Days
Past Due
Nonaccrual Loans (1)
Current Accruing Loans
Total
As of June 30, 2025
CRE$— $— $— $1,802 $1,019,629 $1,021,431 
SBA—real estate4,275 1,882 — 5,376 229,918 241,451 
SBA—non-real estate234 — — 320 21,419 21,973 
C&I— — — — 193,359 193,359 
Home mortgage298 3,114 — 1,418 588,426 593,256 
Consumer and other— — — — 110 110 
Total$4,807 $4,996 $— $8,916 $2,052,861 $2,071,580 
As of December 31, 2024 (2)
CRE$— $— $— $1,943 $978,304 $980,247 
SBA—real estate237 74 — 5,708 225,943 231,962 
SBA—non-real estate133 137 — 169 21,309 21,748 
C&I15 — — — 213,082 213,097 
Home mortgage2,774 5,594 — — 501,156 509,524 
Consumer and other— — — — 274 274 
Total$3,159 $5,805 $— $7,820 $1,940,068 $1,956,852 
(1)Excludes guaranteed portion of loans totaling $13.9 million and $16.3 million as of June 30, 2025 and December 31, 2024, respectively.
(2)Revised to conform with the current presentation.

Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, other-than-insignificant payment delay, other-than-insignificant term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.
The following table presents the amortized cost of loans as of June 30, 2025 that were modified for borrowers experiencing financial difficulty during the three and six months ended June 30, 2025 and 2024 by loan class and modification type:
Three Months Ended June 30, 2025Modification TypePercentage to Each Loan Segment
($ in thousands)Payment DelayInterest OnlyTotal
CRE$1,084 $— $1,084 0.11 %
SBA—real estate (1)
2,081 — 2,081 0.86 %
Total$3,165 $— $3,165 
Three Months Ended June 30, 2024Modification TypePercentage to Each Loan Segment
($ in thousands)Payment DelayTerm ExtensionTotal
SBA—real estate (1)
$390 $— $390 0.17 %
SBA—non-real estate$— $9 $9 0.05 %
C&I130 — 130 0.07 %
Total$520 $9 $529 
Six Months Ended June 30, 2025Modification TypePercentage to Each Loan Segment
($ in thousands)Payment DelayInterest OnlyTotal
CRE
$1,084 $3,155 $4,239 0.42 %
SBA—real estate (1)
2,730 — 2,730 1.13 %
Total$3,814 $3,155 $6,969 
Six Months Ended June 30, 2024Modification TypePercentage to Each Loan Segment
($ in thousands)Payment DelayTerm ExtensionTotal
SBA—real estate (1)
$1,130 $— $1,130 0.50 %
SBA—non-real estate$— $9 $9 0.05 %
C&I130 — 130 0.07 %
Total$1,260 $9 $1,269 
(1)Excludes guaranteed portion of SBA loans totaling $3.2 million and $5.2 million for the three and six months ended June 30, 2025, respectively. In comparison, no guaranteed portion of SBA loans was excluded for the three and six months ended June 30, 2024.
The following tables describe the financial effect of the loan modifications made to borrowers experiencing financial difficulty for the periods presented:
Financial Effect
Modification & Loan TypesDescription of Financial EffectThree Months Ended June 30, 2025Six Months Ended June 30, 2025
Payment Delay:
CREDeferment of payment by a weighted average of:0.3 years0.3 years
SBA—real estateDeferment of payment by a weighted average of:0.3 years0.3 years
Interest Only:
CREInterest only Payment by a weighted average of:N/A0.5 years
Financial Effect
Modification & Loan TypesDescription of Financial EffectThree Months Ended June 30, 2024Six Months Ended June 30, 2024
Payment Delay:
SBA—real estateDeferment of payment by a weighted average of:0.5 years0.5 years
C&IDeferment of payment by a weighted average of:0.5 years0.5 years
Term Extension:
SBA—non-real estateExtended term by a weighted average of:1.8 years1.8 years

A modified loan may become delinquent and may result in a payment default (generally 90 days past due) subsequent to modification. There were no loans that received modifications within the past 12 months as of June 30, 2025 and 2024, and subsequently defaulted in three and six months ended June 30, 2025, and 2024.

The Company had no additional commitments to lend to borrowers whose loans were modified as of both June 30, 2025 and December 31, 2024.

The Company closely monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that were modified in the twelve months ended June 30, 2025 and 2024:
Payment Performance as of June 30, 2025
($ in thousands)Current30 - 89 Days
Past Due		90+ Days
Past Due		Total
CRE
$1,733 $1,580 $— $3,313 
SBA—real estate (1)
5,236 — 1,960 7,196 
Total$6,969 $1,580 $1,960 $10,509 
Payment Performance as of June 30, 2024
($ in thousands)Current30 - 89 Days
Past Due		90+ Days
Past Due		Total
CRE$622 $— $— $622 
SBA—real estate (1)
1,390 1,054 740 3,184 
SBA—non-real estate130 — — 130 
C&I221 — — 221 
Total$2,363 $1,054 $740 $4,157 
(1)Excludes guaranteed portion of SBA loans totaling $7.4 million and $3.1 million as June 30, 2025 and 2024, respectively.
Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. For consumer loans, a credit grade is established at inception, and generally only adjusted based on performance. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
Special Mention — Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.
Substandard — Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful — Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.

The following table presents the loan portfolio's amortized cost and current year-to-date gross write-offs by loan type, risk rating and year of origination as of June 30, 2025 and December 31, 2024:
June 30, 2025
Term Loans by Origination YearRevolving LoansRevolving Loans Converted to Term LoansTotal
($ in thousands)20252024
2023
20222021Prior
CRE
Pass$143,565 $263,979 $93,795 $229,321 $170,858 $101,659 $9,119 $— $1,012,296 
Special mention— — — 574 2,212 — — — 2,786 
Substandard— — 1,580 4,546 — 223 — — 6,349 
Doubtful— — — — — — — — — 
Subtotal$143,565 $263,979 $95,375 $234,441 $173,070 $101,882 $9,119 $— $1,021,431 
Year-to-date charge-offs$— $— $— $— $— $129 $— $— $129 
SBA— real estate
Pass$27,545 $29,182 $24,926 $35,560 $15,268 $80,732 $— $— $213,213 
Special mention— — — 6,579 1,337 1,260 — — 9,176 
Substandard— — 1,186 9,965 289 7,622 — — 19,062 
Doubtful— — — — — — — — — 
Subtotal$27,545 $29,182 $26,112 $52,104 $16,894 $89,614 $— $— $241,451 
Year-to-date charge-offs$— $— $— $— $— $413 $— $— $413 
SBA—non-real estate
Pass$3,175 $8,638 $3,978 $1,657 $89 $2,958 $— $— $20,495 
Special mention— — — — — — — — — 
Substandard— — — 440 — 940 — — 1,380 
Doubtful— — — — — 98 — — 98 
Subtotal$3,175 $8,638 $3,978 $2,097 $89 $3,996 $— $— $21,973 
Year-to-date charge-offs$— $— $3 $— $— $7 $— $— $10 
C&I
Pass$2,797 $20,625 $10,712 $13,349 $13,856 $2,295 $127,582 $1,568 $192,784 
Special mention— — — — — — 434 — 434 
Substandard— — — — — — 141 — 141 
Doubtful— — — — — — — — — 
Subtotal$2,797 $20,625 $10,712 $13,349 $13,856 $2,295 $128,157 $1,568 $193,359 
Year-to-date charge-offs$— $— $29 $— $— $— $— $— $29 
Home mortgage
Pass$128,214 $37,489 $56,018 $257,609 $68,925 $43,583 $— $— $591,838 
Special mention— — — — — — — — — 
Substandard— — — 1,418 — — — — 1,418 
Doubtful— — — — — — — — — 
Subtotal$128,214 $37,489 $56,018 $259,027 $68,925 $43,583 $— $— $593,256 
Year-to-date charge-offs$— $— $— $77 $— $14 $— $— $91 
Consumer and other
Pass$25 $— $— $— $— $— $85 $— $110 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Subtotal$25 $— $— $— $— $— $85 $— $110 
Year-to-date charge-offs$— $— $— $— $— $— $— $— $— 
Total loans
Pass$305,321 $359,913 $189,429 $537,496 $268,996 $231,227 $136,786 $1,568 $2,030,736 
Special mention— — — 7,153 3,549 1,260 434 — 12,396 
Substandard— — 2,766 16,369 289 8,785 141 — 28,350 
Doubtful— — — — — 98 — — 98 
Subtotal$305,321 $359,913 $192,195 $561,018 $272,834 $241,370 $137,361 $1,568 $2,071,580 
Year-to-date charge-offs$— $— $32 $77 $— $563 $— $— $672 

December 31, 2024
Term Loans by Origination YearRevolving LoansRevolving Loans Converted to Term LoansTotal
($ in thousands)2024
2023
202220212020Prior
CRE
Pass$201,141 $85,056 $190,968 $137,425 $88,993 $250,291 $17,012 $— $970,886 
Special mention— — 579 2,246 — — — — 2,825 
Substandard— 1,580 319 — — 4,637 — — 6,536 
Doubtful— — — — — — — — — 
Subtotal$201,141 $86,636 $191,866 $139,671 $88,993 $254,928 $17,012 $— $980,247 
Year-to-date charge-offs$— $— $— $— $— $— $— $— $— 
SBA— real estate
Pass$31,441 $26,508 $41,375 $18,819 $16,166 $72,440 $— $— $206,749 
Special mention— — 2,345 — — 739 — — 3,084 
Substandard— 1,182 9,965 2,868 — 8,114 — — 22,129 
Doubtful— — — — — — — — — 
Subtotal$31,441 $27,690 $53,685 $21,687 $16,166 $81,293 $— $— $231,962 
Year-to-date charge-offs$— $— $— $66 $— $— $— $— $66 
SBA—non-real estate
Pass$10,443 $4,498 $1,837 $154 $1,303 $2,621 $— $— $20,856 
Special mention— — — — — — — — — 
Substandard— — 483 — 157 154 — — 794 
Doubtful— — — — — 98 — — 98 
Subtotal$10,443 $4,498 $2,320 $154 $1,460 $2,873 $— $— $21,748 
Year-to-date charge-offs$— $— $— $— $— $27 $— $— $27 
C&I
Pass$19,712 $11,525 $14,016 $18,122 $3,356 $2,664 $140,278 $3,024 $212,697 
Special mention— — — — — — 400 — 400 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Subtotal$19,712 $11,525 $14,016 $18,122 $3,356 $2,664 $140,678 $3,024 $213,097 
Year-to-date charge-offs$— $44 $— $— $— $— $— $— $44 
Home mortgage
Pass$42,112 $63,000 $284,208 $70,326 $17,749 $32,129 $— $— $509,524 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Subtotal$42,112 $63,000 $284,208 $70,326 $17,749 $32,129 $— $— $509,524 
Year-to-date charge-offs$— $— $— $— $— $— $— $— $— 
Consumer and other
Pass$27 $— $— $— $— $— $247 $— $274 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Subtotal$27 $— $— $— $— $— $247 $— $274 
Year-to-date charge-offs$— $— $— $— $— $— $— $— $— 
Total loans
Pass$304,876 $190,587 $532,404 $244,846 $127,567 $360,145 $157,537 $3,024 $1,920,986 
Special mention— — 2,924 2,246 — 739 400 — 6,309 
Substandard— 2,762 10,767 2,868 157 12,905 — — 29,459 
Doubtful— — — — — 98 — — 98 
Subtotal$304,876 $193,349 $546,095 $249,960 $127,724 $373,887 $157,937 $3,024 $1,956,852 
Year-to-date charge-offs$— $44 $— $66 $— $27 $— $— $137