LOANS

9 Months Ended

Sep. 30, 2026

LOANS

LOANS

NOTE 4 – LOANS

The Company’s loan portfolio at the dates indicated is summarized below:


		September 30,			December 31,
		2026			2025
Commercial and industrial		$	180,170		$	175,409
Construction and land			9,760			8,958
Commercial real estate			1,744,158			1,766,964
Residential			216,838			113,186
Consumer			911			1,175
Total loans			2,151,837			2,065,692
Net deferred loan costs			603			644
Allowance for credit losses			(23,700)			(21,210)
Net loans		$	2,128,740		$	2,045,126

Net loans exclude accrued interest receivable of $7.0 million and $6.6 million at September 30, 2026 and December 31, 2025, respectively, which is included in interest receivable and other assets in the condensed consolidated balance sheets.

The Company’s total individually evaluated loans, including collateral dependent loans, nonaccrual loans, modified loans to borrowers experiencing financial difficulty, and purchase credit deteriorated (“PCD”) loans, are summarized as follows:


		Commercial			Construction			Commercial
		and industrial			and land			real estate			Residential			Consumer			Total
September 30, 2026
Recorded investment in loans individually evaluated:
With no specific allowance recorded		$	—		$	—		$	5,005		$	—		$	—		$	5,005
With a specific allowance recorded			—			—			6,344			—			—			6,344
Total recorded investment in loans individually evaluated		$	—		$	—		$	11,349		$	—		$	—		$	11,349
Specific allowance on loans individually evaluated		$	—		$	—		$	2,617		$	—		$	—		$	2,617

December 31, 2025
Recorded investment in loans individually evaluated:
With no specific allowance recorded		$	—		$	—		$	9,680		$	711		$	—		$	10,391
With a specific allowance recorded			—			—			4,472			—			—			4,472
Total recorded investment in loans individually evaluated		$	—		$	—		$	14,152		$	711		$	—		$	14,863
Specific allowance on loans individually evaluated		$	—		$	—		$	1,428		$	—		$	—		$	1,428

The recorded investment in individually evaluated loans on nonaccrual were $10.5 million and $13.4 million at September 30, 2026 and December 31, 2025, respectively.

The Company may modify the contractual terms of a loan to a borrower experiencing financial difficulty as a part of ongoing loss mitigation strategies. These modifications may result in an interest rate reduction, term extension, an other-than-insignificant payment delay, or a combination thereof. The Company typically does not offer principal forgiveness. An assessment of whether a borrower is experiencing financial difficulty is made on the date of modification. The effect of most modifications made for borrowers experiencing financial difficulty is already included in the allowance for credit losses on loans because of the measurement methodologies used to estimate the allowance.

During the three and nine months ended September 30, 2026, there were no modifications of loans to borrowers experiencing financial difficulty and one such modification, for a $1.5 million loan, respectively. During both the three and nine months ended September 30, 2025, there were no modifications of loans to borrowers experiencing financial difficulty. The loan modified during the nine months ended September 30, 2026 was a term extension, which extended the maturity date by approximately nine months.

A summary of previously modified loans to borrowers experiencing financial difficulty by type of concession and type of loan, as of the dates indicated, is set forth below:


		Number of		Rate			Term			Rate & term						% of Total
		loans		modification			modification			modification			Total			loans outstanding
September 30, 2026
Commercial and industrial		—		$	—		$	—		$	—		$	—			—	%
Construction and land		—			—			—			—			—			—	%
Commercial real estate		2			—			1,978			—			1,978			0.11	%
Residential		—			—			—			—			—			—	%
Consumer		—			—			—			—			—			—	%
Total		2		$	—		$	1,978		$	—		$	1,978			0.09	%


		Number of		Rate			Term			Rate & term						% of Total
		loans		modification			modification			modification			Total			loans outstanding
December 31, 2025
Commercial and industrial		1		$	—		$	73		$	—		$	73			0.04	%
Construction and land		—			—			—			—			—			—	%
Commercial real estate		1			—			554			—			554			0.03	%
Residential		1			—			711			—			711			0.63	%
Consumer		—			—			—			—			—			—	%
Total		3		$	—		$	1,338		$	—		$	1,338			0.06	%

For the three and nine months ended September 30, 2026 and 2025, the Company recorded no charge-offs for modified loans to borrowers experiencing financial difficulty.

At September 30, 2026 and December 31, 2025, individually evaluated modified loans to borrowers experiencing financial difficulty had a specific allowance of $607,000 and none, respectively. At both dates, none of the modified loans to borrowers experiencing financial difficulty were performing in accordance with their modified terms. All accruing modified loans to borrowers experiencing financial difficulty, if any, are included in the loans individually evaluated in the calculation of the allowance for credit losses.

Risk Rating System

The Company evaluates and assigns a risk grade to each loan based on criteria designed to assess the credit quality of the loan. Each loan is assigned a risk grade at origination and continually reviewed until the debt is repaid. Any material adverse or beneficial trends will trigger a review of the assigned risk grade. Loans with low to average credit risk are assigned a lower risk grade than those with higher credit risk as determined by the individual loan characteristics.

The Company’s Pass loans include loans with acceptable business or individual credit risk where the borrower’s operations, cash flow, collateral or financial condition support repayment in accordance with the contractual terms and indicate low to average levels of risk.

Loans assigned higher risk grades are loans that generally exhibit the following characteristics:

Special Mention loans have potential weaknesses that deserve close attention. If left uncorrected, these potential weaknesses may result in a deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date. Special Mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Special Mention is a temporary rating, pending the occurrence of an event that would cause the risk rating either to improve or to be downgraded.

Loans in this category would be characterized by any of the following situations:

●

Credit that is currently protected but exhibits potential weakness;

●

Credit that is difficult to administer because of deficiencies in loan documentation, collateral control, loan agreements, or other deviations from established lending practices; or

●

Adverse financial or operating trends.

Substandard loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged. Loans classified substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. A loan may be classified as Substandard even though a specific loss has not yet been identified. A loan can be fully and adequately secured and still be considered Substandard.

Some characteristics of Substandard loans are:

●

Inability to service debt from ordinary and recurring cash flow;

●

Chronic delinquency;

●

Reliance upon alternative sources of repayment;

●

Term loans that are granted on liberal terms because the borrower cannot service normal payments for that type of debt;

●

Repayment is dependent upon the liquidation of collateral;

●

Inability to perform as agreed, but adequately protected by collateral;

●

Necessity to renegotiate payments to a non-standard level to ensure performance; and

●

The borrower is in bankruptcy, or for any other reason, future repayment is dependent on court action.

Doubtful loans possess all the weaknesses inherent in loans classified as Substandard with the added characteristic that collection or liquidation in full, based on currently existing facts, conditions, and values, is highly questionable and improbable. Doubtful loans have a high probability of loss, yet certain specific and identifiable factors may strengthen the credit and improve the prospects for repayment.

Losses are recognized as charges to the allowance when the loan or portion of the loan is considered uncollectible or at the time of foreclosure. Recoveries on loans previously charged off are credited to the allowance for credit losses.

Revolving loans that are converted to term loans are treated as new originations for purposes of the tables below but continue to be presented based on the year of the original revolving loan’s initial origination. During the nine months ended September 30, 2026, and the year ended December 31, 2025, $3.9 million and none, respectively, of the Company’s revolving loans were converted to term loans.

The following tables present the internally assigned risk grade by class of loans at the dates indicated:


																				Revolving
			Term loans - amortized cost by origination year																	loans
		2026			2025			2024			2023			2022			Prior			amortized cost			Total
September 30, 2026
Commercial and industrial:
Pass		$	14,348		$	24,978		$	36,138		$	10,029		$	13,376		$	26,291		$	53,509		$	178,669
Special mention			—			960			—			—			—			100			—			1,060
Substandard			—			—			—			99			—			331			11			441
Total commercial and industrial		$	14,348		$	25,938		$	36,138		$	10,128		$	13,376		$	26,722		$	53,520		$	180,170
YTD gross charge-offs		$	—			25			—			—			—			1			—		$	26
Construction and land:
Pass		$	—		$	—		$	9,500			—			—			260			—		$	9,760
Special mention			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			—			—			—
Total construction and land		$	—		$	—		$	9,500		$	—		$	—		$	260		$	—		$	9,760
YTD gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Commercial real estate:
Pass		$	167,531		$	315,791		$	166,664			54,712			312,680			648,312			735		$	1,666,425
Special mention			—			—			9,748			—			4,539			32,377			—			46,664
Substandard			—			—			—			—			3,591			27,478			—			31,069
Total commercial real estate		$	167,531		$	315,791		$	176,412		$	54,712		$	320,810		$	708,167		$	735		$	1,744,158
YTD gross charge-offs		$	—			—			—			—			—			2,898			—		$	2,898
Residential:
Pass		$	114,233		$	46,464		$	16,656			—			—			34,471			4,775		$	216,599
Special mention			—			—			—			—			—			—			83			83
Substandard			—			—			—			—			—			92			64			156
Total residential		$	114,233		$	46,464		$	16,656		$	—		$	—		$	34,563		$	4,922		$	216,838
YTD gross charge-offs		$	—			—			—			—			—			—			—		$	—
Consumer:
Pass		$	106		$	176		$	128			—			8			99			394		$	911
Special mention			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			—			—			—
Total consumer		$	106		$	176		$	128		$	—		$	8		$	99		$	394		$	911
YTD gross charge-offs		$	—			—			—			—			—			1			—		$	1
Total loans outstanding
Risk ratings
Pass		$	296,218		$	387,409		$	229,086		$	64,741		$	326,064		$	709,433		$	59,413		$	2,072,364
Special mention			—			960			9,748			—			4,539			32,477			83			47,807
Substandard			—			—			—			99			3,591			27,901			75			31,666
Total loans outstanding		$	296,218		$	388,369		$	238,834		$	64,840		$	334,194		$	769,811		$	59,571		$	2,151,837
YTD gross charge-offs		$	—		$	25		$	—		$	—		$	—		$	2,900		$	—		$	2,925


																				Revolving
			Term loans - amortized cost by origination year																	loans
		2025			2024			2023			2022			2021			Prior			amortized cost			Total
December 31, 2025
Commercial and industrial:
Pass		$	32,969		$	48,839		$	14,375		$	16,454		$	7,202		$	27,511		$	26,011		$	173,361
Special mention			—			—			—			—			—			580			—			580
Substandard			—			—			152			—			55			980			281			1,468
Total commercial and industrial		$	32,969		$	48,839		$	14,527		$	16,454		$	7,257		$	29,071		$	26,292		$	175,409
YTD gross charge-offs		$	—			41			—			—			—			154			—		$	195
Construction and land:
Pass		$	228		$	8,412		$	—			—			115			203			—		$	8,958
Special mention			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			—			—			—
Total construction and land		$	228		$	8,412		$	—		$	—		$	115		$	203		$	—		$	8,958
YTD gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Commercial real estate:
Pass		$	324,728		$	177,675		$	67,901			320,160			333,477			397,516			3,287		$	1,624,744
Special mention			—			—			—			32,144			23,672			39,213			—			95,029
Substandard			—			—			4,835			—			14,642			27,714			—			47,191
Total commercial real estate		$	324,728		$	177,675		$	72,736		$	352,304		$	371,791		$	464,443		$	3,287		$	1,766,964
YTD gross charge-offs		$	—			—			—			—			—			840			—		$	840
Residential:
Pass		$	47,156		$	23,536		$	—			—			30,969			6,121			4,515		$	112,297
Special mention			—			—			—			—			—			—			11			11
Substandard			—			—			—			—			20			794			64			878
Total residential		$	47,156		$	23,536		$	—		$	—		$	30,989		$	6,915		$	4,590		$	113,186
YTD gross charge-offs		$	—			—			—			—			1			—			—		$	1
Consumer:
Pass		$	273		$	119		$	260			17			10			102			394		$	1,175
Special mention			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			—			—			—
Total consumer		$	273		$	119		$	260		$	17		$	10		$	102		$	394		$	1,175
YTD gross charge-offs		$	—			—			—			—			—			5			—		$	5
Total loans outstanding
Risk ratings
Pass		$	405,354		$	258,581		$	82,536		$	336,631		$	371,773		$	431,453		$	34,207		$	1,920,535
Special mention			—			—			—			32,144			23,672			39,793			11			95,620
Substandard			—			—			4,987			—			14,717			29,488			345			49,537
Total loans outstanding		$	405,354		$	258,581		$	87,523		$	368,775		$	410,162		$	500,734		$	34,563		$	2,065,692
YTD gross charge-offs		$	—		$	41		$	—		$	—		$	1		$	999		$	—		$	1,041

The following tables provide an aging of the Company’s loans receivable as of the dates indicated:


																							Recorded
								90 Days															investments
		30–59 Days			60–89 Days			or more			Total									Total loans			90 days or more past due
		past due			past due			past due			past due			Current			PCD loans			receivable			and still accruing
September 30, 2026
Commercial and industrial		$	291		$	1,112		$	723		$	2,126		$	178,044		$	—		$	180,170		$	—
Construction and land			—			—			—			—			9,760			—			9,760			—
Commercial real estate			8,526			5,631			3,280			17,437			1,714,043			12,678			1,744,158			—
Residential			467			—			623			1,090			215,685			63			216,838			623
Consumer			5			—			—			5			906			—			911			—
Total		$	9,289		$	6,743		$	4,626		$	20,658		$	2,118,438		$	12,741		$	2,151,837		$	623


																							Recorded
								90 Days															investments
		30–59 Days			60–89 Days			or more			Total									Total loans			90 days or more past due
		past due			past due			past due			past due			Current			PCD loans			receivable			and still accruing
December 31, 2025
Commercial and industrial		$	671		$	119		$	748		$	1,538		$	173,871		$	—		$	175,409		$	—
Construction and land			—			—			—			—			8,958			—			8,958			—
Commercial real estate			818			—			1,942			2,760			1,747,458			16,746			1,766,964			—
Residential			40			—			711			751			112,393			42			113,186			—
Consumer			1			—			—			1			1,174			—			1,175			—
Total		$	1,530		$	119		$	3,401		$	5,050		$	2,043,854		$	16,788		$	2,065,692		$	—

Nonaccrual loans totaled $10.5 million and $13.4 million at September 30, 2026 and December 31, 2025, respectively. Nonaccrual loans guaranteed by a government agency, which reduces the Company’s credit exposure, were $849,000 at September 30, 2026 compared to $1.7 million at December 31, 2025. At September 30, 2026, nonaccrual loans included $3.7 million of loans 30-89 days past due and $2.8 million of loans less than 30 days past due. At December 31, 2025, nonaccrual loans included $562,000 of loans 30-89 days past due and $9.4 million of loans less than 30 days past due. The decrease in nonaccrual loans from December 31, 2025 was primarily due to the payoff of ten nonaccrual loans totaling $4.1 million and the sale of two nonaccrual loans totaling $7.7 million, partially offset by four new nonaccrual commercial real estate loans totaling $9.6 million.

At September 30, 2026, the $3.7 million of nonaccrual loans 30-89 days past due were comprised of two loans and the $2.8 million of loans less than 30 days past due were comprised of nine loans. All of these loans were placed on nonaccrual due to concerns over the financial condition of the borrowers.

At September 30, 2026, there was one loan that was 90 days or more past due and still accruing, with a balance of $623,000 compared to no loans 90 days or more past due and still accruing at December 31, 2025.

Interest foregone on nonaccrual loans was approximately $270,000 and $693,000 for the three and nine months ended September 30, 2026, compared to $257,000 and $896,000 for the three and nine months ended September 30, 2025. Interest income recognized on nonaccrual loans was approximately $155,000 and $633,000 for the three and nine months ended September 30, 2026, compared to $70,000 and $136,000 for the three and nine months ended September 30, 2025.

Pledged Loans

The Bank’s 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 $1.12 billion and $1.10 billion at September 30, 2026 and December 31, 2025, respectively. At September 30, 2026 and December 31, 2025, $72.9 million and $88.0 million of loans were

pledged to the FRB of San Francisco, respectively. For additional information, see “Note 11 - Borrowings” of the Notes to Condensed Consolidated Financial Statements.