ALLOWANCE FOR CREDIT LOSSES FOR LOANS

6 Months Ended

Jun. 30, 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 June 30, 2026
Allowance for credit losses
Beginning balance	$	4,083	$	527	$	14,056	$	1,922	$	12	$	20,600	$	335
Charge-offs		(25)		—		(2,862)		—		—		(2,887)		—
Recoveries		41		—		—		—		—		41		—
(Reversal of) provision for credit losses		(377)		(4)		4,616		967		(6)		5,196		45
Ending balance	$	3,722	$	523	$	15,810	$	2,889	$	6	$	22,950	$	380

Six months ended June 30, 2026
Allowance for credit losses:
Beginning balance	$	4,173	$	470	$	14,601	$	1,957	$	9	$	21,210	$	410
Charge-offs		(25)		—		(2,878)		—		(1)		(2,904)		—
Recoveries		43		—		—		—		—		43		—
(Reversal of) provision for credit losses		(469)		53		4,087		932		(2)		4,601		(30)
Ending balance	$	3,722	$	523	$	15,810	$	2,889	$	6	$	22,950	$	380

June 30, 2026
Allowance for credit losses:
Loans individually evaluated	$	—	$	—	$	2,911	$	—	$	—	$	2,911
Loans collectively evaluated		3,722		523		12,434		2,889		6		19,574
PCD loans		—		—		465		—		—		465

Loans receivable:
Individually evaluated	$	—	$	—	$	9,896	$	—	$	—	$	9,896
Collectively evaluated		156,003		10,143		1,714,867		169,719		1,164		2,051,896
PCD loans		—		—		12,845		67		—		12,912
Total loans	$	156,003	$	10,143	$	1,737,608	$	169,786	$	1,164	$	2,074,704


	Commercial		Construction		Commercial								Reserve for
	and industrial		and land		real estate		Residential		Consumer		Total		unfunded commitments
Three months ended June 30, 2025
Allowance for credit losses
Beginning balance	$	4,951	$	21	$	11,860	$	1,661	$	7	$	18,500	$	540
Charge-offs		(93)		—		—		—		(2)		(95)		—
Recoveries		13		—		68		1		—		82		—
(Reversal of) provision for credit losses		(404)		120		399		99		(1)		213		(10)
Ending balance	$	4,467	$	141	$	12,327	$	1,761	$	4	$	18,700	$	530

Six months ended June 30, 2025
Allowance for credit losses:
Beginning balance	$	4,681	$	72	$	11,365	$	1,780	$	2	$	17,900	$	600
Charge-offs		(193)		—		—		(1)		(5)		(199)		—
Recoveries		15		—		68		1		—		84		—
(Reversal of) provision for credit losses		(36)		69		894		(19)		7		915		(70)
Ending balance	$	4,467	$	141	$	12,327	$	1,761	$	4	$	18,700	$	530

June 30, 2025
Allowance for credit losses:
Loans individually evaluated	$	248	$	—	$	591	$	—	$	—	$	839
Loans collectively evaluated		4,219		141		11,499		1,760		4		17,623
PCD loans		—		—		237		1		—		238

Loans receivable:
Individually evaluated	$	889	$	—	$	16,383	$	929	$	—	$	18,201
Collectively evaluated		181,264		2,589		1,675,116		104,465		611		1,964,045
PCD loans		—		—		17,216		161		—		17,377
Total loans	$	182,153	$	2,589	$	1,708,715	$	105,555	$	611	$	1,999,623

For the three and six months ended June 30, 2026, the provision for credit losses and the related increase in the allowance for credit losses at June 30, 2026, compared to December 31, 2025, was primarily due to the impact of $2.8 million in net charge-offs during the quarter, together with loan growth and increased specific reserves on certain individually evaluated loans, partially offset by changes in macroeconomic forecasts. Qualitative factors remained unchanged during the three and six months ended June 30, 2026.

Net charge-offs were $2.8 million and $2.9 million for the three and six months ended June 30, 2026, compared to net charge-offs of $13,000 and $115,000 for the three and six months ended June 30, 2025, respectively.

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 PCD loans, by loan and collateral type as of the dates indicated.


	Retail and
	Office		Hotel		Other		SFR 1-4		Total		ACL
June 30, 2026
Commercial real estate	$	5,330	$	2,417	$	2,149	$	—	$	9,896	$	2,911
Total	$	5,330	$	2,417	$	2,149	$	—	$	9,896	$	2,911

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 June 30, 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	$	—	$	748	$	748	$	—	$	839	$	839
Commercial real estate		2,105		6,250		8,355		5,891		5,997		11,888
Residential		—		1		1		711		5		716
Total	$	2,105	$	6,999	$	9,104	$	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”). 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 credit losses quarterly. As of June 30, 2026 and December 31, 2025, the Company had $3.8 million and $9.3 million, respectively, of loans enrolled in this loan program. The Company had a loss reserve account of $2.4 million and $4.9 million as of June 30, 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 $530,000 and $825,000 during the three and six months ended June 30, 2026 and $5.5 million and $8.9 million during the three and six months ended June 30, 2025, respectively. As of June 30, 2026, the Company had $13.0 million of loans enrolled in this program and a loss reserve account of $4.7 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.