v3.26.1
Loans and Allowance for Credit Losses on Loans
 6 Months Ended
Jun. 30, 2026
Receivables [Abstract]  
Loans and Allowance for Credit Losses on Loans Loans and Allowance for Credit Losses on Loans
The following table presents the amortized cost of loans by portfolio class as of June 30, 2026 and December 31, 2025.

(in thousands)June 30, 2026December 31, 2025
Commercial and industrial$162,434 $159,898 
Real estate:
  Commercial owner-occupied288,744 310,219 
  Commercial non-owner occupied1,373,990 1,366,251 
  Construction16,317 15,101 
  Home equity101,404 99,222 
  Other residential100,710 110,614 
Installment and other consumer loans57,377 59,548 
Total loans, at amortized cost 1
2,100,976 2,120,853 
Allowance for credit losses on loans(22,464)(30,089)
Total loans, net of allowance for credit losses on loans$2,078,512 $2,090,764 
1 Amortized cost includes net deferred loan origination costs of $2.0 million and $2.2 million at June 30, 2026 and December 31, 2025, respectively. Amounts are also net of unrecognized purchase discounts of $977 thousand and $952 thousand at June 30, 2026 and December 31, 2025, respectively. Amortized cost excludes accrued interest, which totaled $6.9 million and $6.8 million at June 30, 2026 and December 31, 2025, respectively, and is included in interest receivable and other assets in the consolidated statements of condition.

Lending Risks

Commercial and Industrial Loans - Commercial loans are generally made to established small and mid-sized businesses to provide financing for their growth and working capital needs, equipment purchases and acquisitions.  Management examines historical, current, and projected cash flows to determine the ability of the borrower to repay obligations as agreed. Commercial loans are made based primarily on the identified cash flows of the borrower and secondarily on the underlying collateral and guarantor support. The cash flows of borrowers, however, may not occur as expected, and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed, such as accounts receivable and inventory, and typically include personal guarantees. We target stable businesses with guarantors who provide additional sources of repayment and have proven to be resilient in periods of economic stress.  A weakened economy, and the resultant decreased consumer and/or business spending, may have an effect on the credit quality of commercial loans.

Commercial Real Estate Loans - Commercial real estate loans, which include income producing investment properties and owner-occupied real estate used for business purposes, are subject to underwriting standards and processes similar to commercial loans discussed above. We underwrite these loans to be repaid from cash flow from either the business or investment property and supported by real property collateral. Underwriting standards for commercial real estate loans include, but are not limited to, debt coverage and loan-to-value ratios. Furthermore, a large majority of our loans are guaranteed by the owners of the properties. Conditions in the real estate markets or a downturn in the general economy may adversely affect our commercial real estate loans. In the event of a vacancy, we expect guarantors to carry the loans until they find a replacement tenant.  The owner's substantial equity investment provides a strong economic incentive to continue to support their commercial real estate projects. As such, we have generally experienced a relatively low level of losses and delinquencies in this portfolio.

Construction Loans - Construction loans are generally made to developers and builders to finance construction, renovation and occasionally land acquisitions in anticipation of near-term development. Construction loans include interest reserves that are used for the payment of interest during the development and marketing periods and are capitalized as part of the loan balance. When a construction loan is placed on non-accrual status before the depletion of the interest reserve, we apply the interest funded by the interest reserve against the loan's principal
balance. These loans are underwritten after an evaluation of the borrower's financial strength, reputation, prior track record, and independent appraisals. We monitor all construction projects to determine whether they are on schedule, completed as planned and in accordance with the approved construction budgets. Significant events can affect the construction industry, including: the inherent volatility of real estate markets and vulnerability to delays due to weather, change orders, inability to obtain construction permits, labor or material shortages, and price changes. Estimates of construction costs and value associated with the completed project may be inaccurate. Repayment of construction loans is largely dependent on the ultimate success of the project.

Consumer Loans - Consumer loans primarily consist of home equity lines of credit, other residential loans, floating homes, and indirect luxury auto loans, along with a small number of installment loans. Our other residential loans include tenancy-in-common fractional interest loans ("TIC") located almost entirely in San Francisco County. We originate consumer loans utilizing credit score information, debt-to-income ratio, and loan-to-value ratio analysis. Diversification among consumer loan types, coupled with relatively small loan amounts that are spread across many individual borrowers, mitigates risk. We do not originate sub-prime residential mortgage loans, nor is it our practice to underwrite loans commonly referred to as "Alt-A mortgages," the characteristics of which are reduced documentation, borrowers with low FICO scores, or collateral with high loan-to-value ratios.

Credit Quality Indicators
 
We use a risk rating system to evaluate asset quality, and to identify and monitor credit risk in individual loans, and in the loan portfolio. Our definitions of “Special Mention” risk graded loans, or worse, are consistent with those used by the Federal Deposit Insurance Corporation ("FDIC").  Our internally assigned grades are as follows:

Pass and Watch - Loans to borrowers of acceptable or better credit quality. Borrowers in this category demonstrate fundamentally sound financial positions, repayment capacity, credit history and management expertise.  Loans in this category must have an identifiable and stable source of repayment and meet the Bank’s policy regarding debt-service-coverage ratios.  These borrowers are capable of sustaining normal economic, market or operational setbacks without significant financial consequences. Negative external industry factors are generally not present. The loan may be secured, unsecured, or supported by non-real estate collateral for which the value is more difficult to determine and/or whose marketability is more uncertain. This category also includes “Watch” loans, where the primary source of repayment has been delayed. The “Watch” risk rating is intended to be a transitional grade, with either an upgrade or downgrade within a reasonable period.

Special Mention - Potential weaknesses that deserve close attention. If left uncorrected, those potential weaknesses may result in deterioration of the payment prospects for the asset. Special Mention assets do not present sufficient risk to warrant adverse classification.

Substandard - Inadequately protected by either the current sound worth and paying capacity of the obligor or the collateral pledged, if any. A Substandard asset has well-defined weaknesses that jeopardize the liquidation of the debt. Substandard assets are characterized by the distinct possibility that we will sustain some loss if such weaknesses or deficiencies are not corrected. Well-defined weaknesses include adverse trends or developments in the borrower’s financial condition, managerial weaknesses and/or significant collateral deficiencies.

Doubtful - Critical weaknesses that make collection or liquidation in full improbable. There may be specific pending events that work to strengthen the asset; however, the amount or timing of the loss may not be determinable. Pending events generally occur within one year of the asset being classified as Doubtful. Examples include: merger, acquisition, or liquidation; capital injection; guarantee; perfecting liens on additional collateral; and refinancing. Such loans are placed on non-accrual status and are usually collateral-dependent.

We regularly review our credits for the accuracy of risk grades whenever we receive new information and at each quarterly and year-end reporting period. Borrowers are generally required to submit financial information at regular intervals. Typically, commercial borrowers with lines of credit are required to submit financial information with reporting intervals ranging from monthly to annually depending on credit size, risk and complexity. In addition, investor commercial real estate borrowers with loans exceeding a certain dollar threshold are usually required to submit rent rolls or property income statements annually. We monitor construction loans monthly. We review home equity and other consumer loans based on delinquency. We also review loans graded “Watch” or worse, regardless of loan type, no less than quarterly.
The following tables present the loan portfolio by loan portfolio class, origination/renewal year and internal risk rating as of June 30, 2026 and December 31, 2025. The current year vintage table reflects year-to-date gross charge-offs by loan portfolio class and year of origination. Generally, existing term loans that were re-underwritten are reflected in the table in the year of renewal. Lines of credit that have a conversion feature at the time of origination, such as construction to perm loans, are presented by year of origination.

(in thousands)Term Loans - Amortized Cost by Origination YearRevolving Loans Amortized Cost
June 30, 202620262025202420232022PriorTotal
Commercial and industrial:
Pass and Watch$8,418 $31,621 $5,595 $13,101 $5,278 $20,396 $75,184 $159,593 
Special Mention— — 1,870 — — 41 560 2,471 
Substandard— 5 365 — — — — 370 
Total commercial and industrial$8,418 $31,626 $7,830 $13,101 $5,278 $20,437 $75,744 $162,434 
Gross current period charge-offs$— $(47)$— $— $— $— $(54)$(101)
Commercial real estate, owner-occupied:
Pass and Watch$10,772 $24,790 $11,961 $10,700 $31,902 $159,940 $177 $250,242 
Special Mention101 290 — — 3,986 30,091 34,468 
Substandard— — — — 3,059 975 — 4,034 
Total commercial real estate, owner-occupied$10,873 $25,080 $11,961 $10,700 $38,947 $191,006 $177 $288,744 
Commercial real estate, non-owner occupied:
Pass and Watch$107,307 $234,437 $90,935 $48,869 $148,068 $650,567 $14,839 $1,295,022 
Special Mention3,763 18,300 $— — 2,163 39,762 — 63,988 
Substandard— 2,587 — 790 — 11,603 — 14,980 
Total commercial real estate, non-owner occupied$111,070 $255,324 $90,935 $49,659 $150,231 $701,932 $14,839 $1,373,990 
Gross current period charge-offs$— $— $— $— $— $(7,192)$— $(7,192)
Construction:
Pass and Watch$9,391 $6,753 $— $— $— $— $173 $16,317 
Total construction$9,391 $6,753 $— $— $— $— $173 $16,317 
Home equity:
Pass and Watch$76 $154 $1 $12 $12 $548 $100,321 $101,124 
Substandard— — — — — 156 124 280 
Total home equity$76 $154 $1 $12 $12 $704 $100,445 $101,404 
Other residential:
Pass and Watch$4,468 $2,826 $8,802 $14,873 $15,705 $53,969 $— $100,643 
Substandard— — — 67 — — — 67 
Total other residential$4,468 $2,826 $8,802 $14,940 $15,705 $53,969 $— $100,710 
Installment and other consumer:
Pass and Watch$6,373 $8,813 $11,968 $8,599 $6,259 $13,621 $1,598 $57,231 
Substandard— — 95 — 23 28 — 146 
Total installment and other consumer$6,373 $8,813 $12,063 $8,599 $6,282 $13,649 $1,598 $57,377 
Gross current period charge-offs$— $— $— $(6)$— $— $(6)$(12)
Total loans:
Pass and Watch$146,805 $309,394 $129,263 $96,154 $207,224 $899,041 $192,292 $1,980,173 
Total Special Mention$3,864 $18,590 $1,870 $— $6,149 $69,894 $560 $100,926 
Total Substandard$— $2,592 $460 $857 $3,082 $12,762 $124 $19,877 
Totals$150,669 $330,576 $131,593 $97,011 $216,455 $981,697 $192,976 $2,100,976 
Total gross current period charge-offs$— $(47)$— $(6)$— $(7,192)$(60)$(7,305)

(in thousands)Term Loans - Amortized Cost by Origination YearRevolving Loans Amortized Cost
December 31, 202520252024202320222021PriorTotal
Commercial and industrial:
Pass and Watch$32,723 $5,735 $15,069 $6,002 $632 $22,238 $62,490 $144,889 
Special Mention1,002 2,392 — — — 102 10,925 14,421 
(in thousands)Term Loans - Amortized Cost by Origination YearRevolving Loans Amortized Cost
December 31, 202520252024202320222021PriorTotal
Substandard19 520 — — — — 49 588 
Total commercial and industrial$33,744 $8,647 $15,069 $6,002 $632 $22,340 $73,464 $159,898 
Commercial real estate, owner-occupied:
Pass and Watch$25,844 $12,158 $11,858 $35,709 $42,288 $132,766 $284 $260,907 
Special Mention7,275 — 367 4,092 18,153 14,461 — 44,348 
Substandard1,513 — — 3,137 — 314 — 4,964 
Total commercial real estate, owner-occupied$34,632 $12,158 $12,225 $42,938 $60,441 $147,541 $284 $310,219 
Commercial real estate, non-owner occupied:
Pass and Watch$238,253 $99,947 $53,969 $155,608 $189,703 $531,672 $12,022 $1,281,174 
Special Mention21,857 — — — — 37,399 — 59,256 
Substandard— — — — — 25,821 — 25,821 
Total commercial real estate, non-owner occupied$260,110 $99,947 $53,969 $155,608 $189,703 $594,892 $12,022 $1,366,251 
Construction:
Pass and Watch$4,602 $10,499 $— $— $— $— $— $15,101 
Total construction$4,602 $10,499 $— $— $— $— $— $15,101 
Home equity:
Pass and Watch$97 $44 $13 $— $— $630 $97,976 $98,760 
Substandard— — — — — 161 301 462 
Total home equity$97 $44 $13 $— $— $791 $98,277 $99,222 
Other residential:
Pass and Watch$2,971 $15,899 $15,479 $17,745 $9,280 $49,168 $— $110,542 
Substandard— — 72 — — — — 72 
Total other residential$2,971 $15,899 $15,551 $17,745 $9,280 $49,168 $— $110,614 
Installment and other consumer:
Pass and Watch$10,515 $13,253 $9,858 $8,057 $6,553 $9,447 $1,661 $59,344 
Substandard— — 176 — — 28 — 204 
Total installment and other consumer$10,515 $13,253 $10,034 $8,057 $6,553 $9,475 $1,661 $59,548 
Total loans:
Pass and Watch$315,005 $157,535 $106,246 $223,121 $248,456 $745,921 $174,433 $1,970,717 
Total Special Mention$30,134 $2,392 $367 $4,092 $18,153 $51,962 $10,925 $118,025 
Total Substandard$1,532 $520 $248 $3,137 $— $26,324 $350 $32,111 
Totals$346,671 $160,447 $106,861 $230,350 $266,609 $824,207 $185,708 $2,120,853 
The following table shows the amortized cost of loans by portfolio class, payment aging and non-accrual status as of June 30, 2026 and December 31, 2025.
Loan Aging Analysis by Portfolio Class
(in thousands)Commercial and industrialCommercial real estate, owner-occupiedCommercial real estate, non-owner occupiedConstructionHome equityOther residentialInstallment and other consumerTotal
June 30, 2026
 30-59 days past due$54 $— $509 $— $741 $— $290 $1,594 
 60-89 days past due13 — — — 397 — — 410 
 90 days or more past due 1
297 — 8,118 — — 67 44 8,526 
Total past due364 — 8,627 — 1,138 67 334 10,530 
Current162,070 288,744 1,365,363 16,317 100,266 100,643 57,043 2,090,446 
Total loans 1
$162,434 $288,744 $1,373,990 $16,317 $101,404 $100,710 $57,377 $2,100,976 
Non-accrual loans 2
$5 $— $8,118 $— $219 $67 $44 $8,453 
Non-accrual loans with no allowance$— $— $8,118 $— $219 $— $28 $8,365 
December 31, 2025
 30-59 days past due$76 $— $— $— $381 $— $1,070 $1,527 
 60-89 days past due66 — 1,250 — — — — 1,316 
 90 days or more past due 1
19 77 8,118 — — 72 204 8,490 
Total past due161 77 9,368 — 381 72 1,274 11,333 
Current159,737 310,142 1,356,882 15,102 98,841 110,542 58,274 2,109,520 
Total loans 1
$159,898 $310,219 $1,366,250 $15,102 $99,222 $110,614 $59,548 $2,120,853 
Non-accrual loans 2
$524 $314 $25,387 $— $401 $72 $204 $26,902 
Non-accrual loans with no allowance$— $314 $8,822 $— $401 $— $204 $9,741 
1 There was one commercial and industrial loan over 90 days past due and accruing interest as of June 30, 2026 that was approved for term-out but subsequently delayed. However, the loan remains in the process of collection and is expected to be restored to a current payment schedule in the near future. There were no non-performing loans over 90 days past due and accruing interest as of December 31, 2025.
2 None of the non-accrual loans as of June 30, 2026 or December 31, 2025 were earning interest on a cash or accrual basis. We reversed $1.5 thousand in accrued interest income for loans that were placed on non-accrual status during the three and six months ended June 30, 2026, respectively. We reversed accrued interest income of $11 thousand and $44 thousand for loans that were placed on non-accrual status during the three and six months ended June 30, 2025, respectively.

Collateral Dependent Loans

The following table presents the amortized cost basis of individually analyzed collateral-dependent loans, which were all on non-accrual status, by portfolio class at June 30, 2026 and December 31, 2025.
Amortized Cost by Collateral Type
(in thousands)Commercial Real EstateResidential Real EstateOther
Total 1
Allowance for Credit Losses
June 30, 2026
Commercial real estate, non-owner occupied$8,118 $— $— $8,118 $— 
Home equity— 219 — 219 — 
Other residential— 67 — 67 15 
Installment and other consumer— — 44 44 2 
Total$8,118 $286 $44 $8,448 $17 
December 31, 2025
Commercial real estate, owner-occupied$314 $— $— $314 $— 
Commercial real estate, non-owner occupied25,387 — — 25,387 7,226 
Home equity— 401 — 401 — 
Other residential— 72 — 72 18 
Total$25,701 $473 $— $26,174 $7,244 
1 There were no collateral-dependent residential real estate mortgage loans in process of foreclosure or in substance repossessed at June 30, 2026 and December 31, 2025. The weighted average loan-to-value of real estate secured collateral dependent loans was approximately 66% at June 30, 2026 and 106% at December 31, 2025.

Loan Modifications to Borrowers Experiencing Financial Difficulty

There were no modifications of loans during the three and six months ended June 30, 2026 requiring disclosure. The following table summarizes the amortized cost of loans as of June 30, 2025 that were modified during the three and six months ended June 30, 2025, by portfolio class and type of modification granted.
(in thousands)Term ExtensionTotal ModificationsPercent of Portfolio Class Total
Three months ended June 30, 2025
Commercial non-owner occupied$3,488 $3,488 0.3 %
Total$3,488 $3,488 
Six months ended June 30, 2025
Commercial non-owner occupied$3,488 $3,488 0.3 %
Total$3,488 $3,488 

As of June 30, 2025, there were no unfunded loan commitments for loans that were modified during the three and six months ended June 30, 2025.

The following table summarizes the financial effect of loan modifications presented in the tables above during the three and six months ended June 30, 2025 by portfolio class.

Weighted-Average Term Extension (in years)
Three months ended June 30, 2025
Commercial non-owner occupied1.2
Six months ended June 30, 2025
Commercial non-owner occupied1.2

The loan modifications did not significantly impact the determination of the allowance for credit losses on loans during the three and six months ended June 30, 2025.

The Bank closely monitors the performance of the modified loans to understand the effectiveness of its modification efforts. The following table summarizes the amortized cost and payment status of loans as of June 30, 2025 that were modified during the three and six months ended June 30, 2025 by portfolio class.


(in thousands)Current30-59 Days Past Due60-89 Days Past Due90 Days or More Past DueTotalNon-Accrual
Three months ended June 30, 2025
Commercial non-owner occupied$3,488 $— $— $— $3,488 $717 
Total$3,488 $— $— $— $3,488 $717 
Six months ended June 30, 2025
Commercial non-owner occupied$3,488 $— $— $— $3,488 $717 
Total$3,488 $— $— $— $3,488 $717 
Allocation of the Allowance for Credit Losses on Loans

The following table presents the details of the allowance for credit losses on loans segregated by loan portfolio class as of June 30, 2026 and December 31, 2025.

Allocation of the Allowance for Credit Losses on Loans
(in thousands)Commercial and industrialCommercial real estate, owner-occupiedCommercial real estate, non-owner occupiedConstructionHome equityOther residentialInstallment and other consumerUnallocatedTotal
June 30, 2026
Modeled expected credit losses$1,526 $1,453 $8,168 $50 $709 $885 $652 $— $13,443 
Qualitative adjustments543 796 5,946 193 75 2 104 1,340 8,999 
Specific allocations5 — — — — 15 2 — 22 
Total$2,074 $2,249 $14,114 $243 $784 $902 $758 $1,340 $22,464 
December 31, 2025
Modeled expected credit losses$1,512 $1,553 $8,449 $38 $736 $1,059 $697 $— $14,044 
Qualitative adjustments522 901 5,802 161 67 2 106 1,185 8,746 
Specific allocations55 — 7,226 — — 18 — — 7,299 
Total$2,089 $2,454 $21,477 $199 $803 $1,079 $803 $1,185 $30,089 

Allowance for Credit Losses on Loans Rollforward

The following table discloses activity in the allowance for credit losses on loans for the periods presented.

Allowance for Credit Losses on Loans Rollforward
(in thousands)Commercial and industrialCommercial real estate, owner-occupiedCommercial real estate, non-owner occupiedConstructionHome equityOther residentialInstallment and other consumerUnallocatedTotal
Three months ended June 30, 2026
Beginning balance$2,014 $2,452 $14,327 $204 $764 $974 $745 $1,343 $22,823 
Provision (Reversal)90 (203)(213)39 20 (72)22 (3)(320)
(Charge-offs)(30)— — — — — (9)— (39)
Recoveries— — — — — — — — — 
Ending balance$2,074 $2,249 $14,114 $243 $784 $902 $758 $1,340 $22,464 
Three months ended June 30, 2025
Beginning balance$1,508 $2,319 $21,761 $416 $698 $1,074 $884 $1,246 $29,906 
Provision (Reversal)152 83 (245)(32)85 36 (13)(66)— 
(Charge-offs)(52)— — — — — — — (52)
Recoveries— — — — — — — — — 
Ending balance$1,608 $2,402 $21,516 $384 $783 $1,110 $871 $1,180 $29,854 
Six months ended June 30, 2026
Beginning balance$2,089 $2,454 $21,477 $199 $803 $1,079 $803 $1,185 $30,089 
Provision (Reversal)86 (205)(171)44 (19)(177)(33)155 (320)
(Charge-offs)(101)— (7,192)— — — (12)— (7,305)
Recoveries— — — — — — — — — 
Ending balance$2,074 $2,249 $14,114 $243 $784 $902 $758 $1,340 $22,464 
Six months ended June 30, 2025
Beginning balance$1,576 $2,361 $22,093 $638 $684 $1,141 $908 $1,255 $30,656 
Provision (Reversal)84 41 232 (254)99 (31)(21)(75)75 
(Charge-offs)(52)— (809)— — — (16)— (877)
Recoveries— — — — — — — — — 
Ending balance$1,608 $2,402 $21,516 $384 $783 $1,110 $871 $1,180 $29,854 
Pledged Loans

Our FHLB line of credit is secured under terms of a blanket collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $1.460 billion and $1.396 billion at June 30, 2026 and December 31, 2025,
respectively. In addition, we pledge eligible residential loans, which totaled $52.0 million and $97.2 million at June 30, 2026 and December 31, 2025, respectively, to secure our borrowing capacity with the Federal Reserve Bank ("FRB"). For additional information, see Note 6, Borrowings and Other Obligations.

Related Party Loans
 
The Bank has, and expects to have in the future, banking transactions in the ordinary course of its business with directors, officers, principal shareholders and their businesses or associates. These transactions, including loans, are granted on substantially the same terms, including interest rates and collateral on loans, as those prevailing at the same time for comparable transactions with persons not related to us. Likewise, these transactions do not involve more than the normal risk of collectability or present other unfavorable features. Related party loans totaled $3.7 million and $3.6 million as of June 30, 2026 and December 31, 2025, respectively. In addition, undisbursed commitments to related parties totaled $139 thousand as of both June 30, 2026 and December 31, 2025.