ALLOWANCE FOR CREDIT LOSSES FOR LOANS

3 Months Ended

Mar. 31, 2026

ALLOWANCE FOR CREDIT LOSSES FOR LOANS

NOTE 5 – ALLOWANCE FOR CREDIT LOSSES FOR LOANS

The following tables summarize the Company’s allowance for credit losses for loans, reserve for unfunded commitments, and loan balances individually and collectively evaluated by type of loan, as of the dates and for the periods indicated:


	Commercial		Construction		Commercial								Reserve for
	and industrial		and land		real estate		Residential		Consumer		Total		unfunded commitments
Three months ended March 31, 2026
Allowance for credit losses
Beginning balance	$	4,173	$	470	$	14,601	$	1,957	$	9	$	21,210	$	410
Charge-offs		—		—		(16)		—		(1)		(17)		—
Recoveries		2		—		—		—		—		2		—
(Reversal of) provision for credit losses		(92)		57		(529)		(35)		4		(595)		(75)
Ending balance	$	4,083	$	527	$	14,056	$	1,922	$	12	$	20,600	$	335

March 31, 2026
Allowance for credit losses:
Loans individually evaluated	$	—	$	—	$	1,346	$	—	$	—	$	1,346
Loans collectively evaluated		4,083		527		12,456		1,921		12		18,999
PCD loans		—		—		254		1		—		255

Loans receivable:
Individually evaluated	$	—	$	—	$	14,458	$	685	$	—	$	15,143
Collectively evaluated		167,311		10,137		1,693,586		110,758		1,292		1,983,084
PCD loans		—		—		12,495		32		—		12,527
Total loans	$	167,311	$	10,137	$	1,720,539	$	111,475	$	1,292	$	2,010,754


	Commercial		Construction		Commercial								Reserve for
	and industrial		and land		real estate		Residential		Consumer		Total		unfunded commitments
Three months ended March 31, 2025
Allowance for credit losses
Beginning balance	$	4,681	$	72	$	11,365	$	1,780	$	2	$	17,900	$	600
Charge-offs		(100)		—		—		(1)		(5)		(106)		—
Recoveries		2		—		—		1		1		4		—
Provision for (reversal of) credit losses		367		(51)		496		(118)		8		702		(60)
Ending balance	$	4,950		21		11,861		1,662		6		18,500		540

March 31, 2025
Allowance for credit losses:
Loans individually evaluated	$	704	$	—	$	596	$	—	$	—	$	1,300
Loans collectively evaluated		4,246		21		10,988		1,660		6		16,921
PCD loans		—		—		277		2		—		279

Loans receivable:
Individually evaluated	$	1,272	$	—	$	15,781	$	972	$	—	$	18,025
Collectively evaluated		178,131		476		1,642,372		106,091		534		1,927,604
PCD loans		—		1		20,507		208		—		20,716
Total loans	$	179,403	$	477	$	1,678,660	$	107,271	$	534	$	1,966,345

For the three months ended March 31, 2026, the reversal of provision for credit losses and the related decrease in the allowance for credit losses at March 31, 2026, compared to December 31, 2025, was primarily attributable to a decrease in the reserve for pooled loans due to lower loan balances, partially offset by changes in macroeconomic forecasts, including lower forecasted unemployment and an improved national gross domestic product outlook. In addition, there was an $82,000 decrease in the reserve for individually evaluated loans as compared to the prior quarter. Qualitative risk factor classifications remained unchanged during the quarter. Net charge-offs were $15,000 for the first quarter of 2026, compared to $102,000 for the same period in 2025.

The following table summarizes the amortized cost basis of individually evaluated collateral-dependent loans, including nonaccrual loans, modified loans to borrowers experiencing financial difficulty, and accreting purchase credit deteriorated (“PCD”) loans that have experienced post-acquisition declines in cash flows expected to be collected, by loan and collateral type as of the dates indicated.


	Retail and
	Office		Hotel		Other		SFR 1-4		Total		ACL
March 31, 2026
Commercial real estate	$	8,240	$	5,489	$	729	$	—	$	14,458	$	1,346
Residential		—		—		—		685		685		—
Total	$	8,240	$	5,489	$	729	$	685	$	15,143	$	1,346

December 31, 2025
Commercial real estate	$	3,338	$	9,462	$	1,352	$	—	$	14,152	$	1,428
Residential		—		—		—		711		711		—
Total	$	3,338	$	9,462	$	1,352	$	711	$	14,863	$	1,428

The following table shows the amortized cost and allowance for credit losses for loans on nonaccrual status as of the dates indicated:


	As of March 31, 2026						As of December 31, 2025
	Nonaccrual		Nonaccrual				Nonaccrual		Nonaccrual
	with no allowance		with allowance		Total		with no allowance		with allowance		Total
	for credit losses		for credit losses		nonaccrual		for credit losses		for credit losses		nonaccrual
Commercial and industrial	$	—	$	895	$	895	$	—	$	839	$	839
Commercial real estate		10,063		5,036		15,099		5,891		5,997		11,888
Residential		685		2		687		711		5		716
Total	$	10,748	$	5,933	$	16,681	$	6,602	$	6,841	$	13,443

As part of its acquisition of Pacific Enterprise Bancorp (“PEB”) in 2022, the Company acquired certain small business loans to borrowers qualified under The California Capital Access Program for Small Business, a state guaranteed loan program sponsored by the California Pollution Control Financing Authority (“CalCAP”). PEB ceased originating loans under this loan program in 2017. Under this loan program, the borrower, CalCAP and the participating lender contributed funds to a loss reserve account held in a demand deposit account at the participating lender. The borrower’s contributions to the loss reserve account are attributed to the participating lender. Losses on qualified loans are charged to this account after approval by CalCAP. Under the program, if a loan defaults, the participating lender has immediate coverage of 100% of the loss. The participating lender must return recoveries from the borrower, less expenses, to the credit loss reserve account. The funds in the loss reserve account are the property of CalCAP; however, in the event that the participating lender leaves the program any excess funds, after all loans have been repaid or unenrolled from the program by the participating lender and provided there are no pending claims for reimbursement, the remaining excess funds are distributed to CalCAP and the participating lender based on their respective contributions to the loss reserve account. Funds contributed by the participating lender to the loss reserve account are treated as a receivable from CalCAP and evaluated for impairment quarterly. As of March 31, 2026 and December 31, 2025, the Company had $5.8 million and $9.3 million, respectively, of loans enrolled in this loan program. The Company had a loss reserve account of $4.8 million and $4.9 million as of March 31, 2026 and December 31, 2025, respectively.

In addition, as successor to PEB, the Company was approved by CalCAP, in partnership with the California Air Resources Board, to originate loans to California truckers in the On-Road Heavy-Duty Vehicle Air Quality Loan Program. Under this loan program, CalCAP solely contributes funds to a loss reserve account held in a demand deposit account at the participating lender. Losses are handled in the same manner as described above. The funds are the property of CalCAP and are payable upon termination of the program. When the loss reserve account balance exceeds the total associated loan balance, the excess is to be remitted to CalCAP. The Company originated loans under this program of $295,000 and $3.4 million during the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, the Company had $15.5 million of loans enrolled in this program and a loss reserve account of $4.8 million. As of December 31, 2025, the Company had $19.0 million of loans enrolled in this program and a loss reserve account of $4.9 million.