LOANS AND ALLOWANCE FOR CREDIT LOSSES

12 Months Ended

Dec. 31, 2024

Receivables [Abstract]

LOANS AND ALLOWANCE FOR CREDIT LOSSES

NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES

On January 1, 2023, the Company adopted the new CECL standard, ASU 2016-13, using the modified retrospective method for all financial assets measured at amortized cost. For comparability, the Company has adjusted certain prior period loan amounts to conform to the current presentation of segmentation under CECL. Refer to Note 1 - Summary of Significant Accounting Policies for additional information related to the Company’s methodology for estimating the allowance for credit losses.

The following presents a summary of the Company’s loans at amortized cost as of the dates noted (dollars in thousands):

	December 31,			December 31,
	2024			2023
1-4 Family residential real estate	$	69,330		$	61,645
Commercial		109,924			50,169
Consumer and other		261			698
Construction		26,285			34,538
Non-Owner Occupied (NOO) CRE		258,652			167,203
Owner Occupied (OO) CRE		151,399			82,228
Multifamily		60,241			60,546
Loans held for investment		676,092			457,027
Less: allowance for credit losses		(10,160	)		(5,860	)
Loans, net	$	665,932		$	451,167

Allowance for Credit Losses on Loans

Beginning January 1, 2023, the allowance for credit losses for loans is measured on the loan’s amortized cost basis, excluding interest receivable. Interest receivable excluded at December 31, 2024, and December 31, 2023, was $2.2 million and $1.3 million, respectively, presented in accrued interest receivable on the Condensed Consolidated Balance Sheets. Refer to Note 1 - Summary of Significant Accounting Policies for additional information related to the Company’s methodology for estimating the allowance for credit losses.

Allocation of a portion of the allowance for credit losses to one category of loans does not preclude its availability to absorb losses in other categories. The following table presents the activity in the allowance for credit losses by portfolio segment for the years ended December 31, 2024, and 2023, (dollars in thousands):

	1–4 Family												NOO			OO
	Residential						Consumer						Commercial			Commercial
	Real Estate			Commercial			and Other			Construction			Real Estate			Real Estate		Multifamily		Total
Changes in allowance for credit losses for the year ended December 31, 2024
Beginning balance	$	736		$	924		$	8		$	512		$	1,859		$	1,201	$	620	$	5,860
Acquisition of CBOA Financial PCD Loans		34			777			1			258			83			11		—		1,164
Provision (credit) for loan losses		61			1,544			(4	)		(400	)		1,662			706		33		3,602
Loans charged off		—			(890	)		(2	)		—			—			—		—		(892	)
Recoveries		28			398			—			—						—		—		426
Balance on December 31, 2024	$	859		$	2,753		$	3		$	370		$	3,604		$	1,918	$	653	$	10,160
	1–4 Family Residential Real Estate			Commercial			Consumer and Other			Construction			NOO Commercial Real Estate			OO Commercial Real Estate		Multifamily		Total
Changes in allowance for credit losses for the year ended December 31, 2023
Beginning balance	$	454		$	1,382		$	56		$	222		$	1,680		$	555	$	429	$	4,778
Impact of adopting of ASU 2016-13		(33	)		(307	)		(50	)		441			271			142		140		604
Provision (credit) for loan losses		309			170			2			(151	)		3,290			504		51		4,175
Loans charged off		—			(321	)		—			—			(3,382	)		—		—		(3,703	)
Recoveries		6			—			—			—						—		—		6
Balance on December 31, 2023	$	736		$	924		$	8		$	512		$	1,859		$	1,201	$	620	$	5,860

The following tables present the aging of the recorded investment in contractually past due loans, as of December 31, 2024, and December 31, 2023. It is shown by class of loans (dollars in thousands):

	Loans Contractually Past Due
	30–59		60–89		Over 90				Loans Not
December 31, 2024	Days		Days		Days		Total		Past Due		Total
1-4 Family residential real estate	$	122	$	1,764	$	93	$	1,979	$	67,351	$	69,330
Commercial		621		1,485		2,398		4,504		105,420		109,924
Consumer and other		—		—		—		—		261		261
Construction		—		—		—		—		26,285		26,285
NOO CRE		—		—		—		—		258,652		258,652
OO CRE		—		1,119		—		1,119		150,280		151,399
Multifamily		—		—		126		126		60,115		60,241
Total	$	743	$	4,368	$	2,617	$	7,728	$	668,364	$	676,092
	Loans Contractually Past Due
December 31, 2023	30–59 Days		60–89 Days		Over 90 Days		Total		Loans Not Past Due		Total
1-4 Family residential real estate	$	409	$	—	$	—	$	409	$	61,236	$	61,645
Commercial		—		—		589		589		49,580		50,169
Consumer and other		—		—		—		—		698		698
Construction		—		—		—		—		34,538		34,538
NOO CRE		—		—		—		—		167,203		167,203
OO CRE		—		—		—		—		82,228		82,228
Multifamily		—		—		—		—		60,546		60,546
Total	$	409	$	—	$	589	$	998	$	456,029	$	457,027

Credit quality indicators – The following tables represent the credit exposure by internally assigned grades. This grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements in accordance with the loan terms. The Bank’s internal credit risk grading system is based on management’s experiences with similarly graded loans. Credit risk grades are reassessed each quarter based on any recent developments potentially impacting the creditworthiness of the borrower, as well as other external statistics and factors, which may affect the risk characteristics of the respective loan. The Company uses the following definitions for risk ratings:

Pass: Strong credit with no existing or known potential weaknesses deserving of management’s close attention.

Special Mention: Potential weaknesses that deserve management’s close attention. Borrower and guarantor’s capacity to meet all financial obligations is marginally adequate or deteriorating.

Substandard: Inadequately protected by the paying capacity of the borrower and/or collateral pledged. The borrower or guarantor is unwilling or unable to meet loan terms or loan covenants for the foreseeable future.

Doubtful: All the weakness inherent in one classified as substandard with the added characteristic that those weaknesses in place make the collection or liquidation in full, on the basis of current conditions, highly questionable and improbable.

Loss – Considered uncollectible or no longer a bankable asset. This classification does not mean that the asset has no recoverable value. In fact, a certain salvage value is inherent in these loans. Nevertheless, it is not practical or desirable to defer writing off a portion or whole of a perceived asset even though partial recovery may be collected in the future.

The following tables present the amortized cost basis of loans by credit quality indicator, by class of financing receivable, and year of origination for term loans as of December 31, 2024, and December 31, 2023. For revolving lines of credit that are converted to term loans, if the conversion involved a credit decision, such loans are included in the origination year in which the credit decision was made. If revolving lines of credit converted to term loans without a credit decision, such lines of credit are included in the “Revolving lines of credit converted to term” column in the following tables (dollars in thousands). 

	Term Loans Amortized Cost by Origination
December 31, 2024	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
1-4 Family
Pass	$	2,151	$	4,448	$	25,009	$	11,673	$	6,973	$	10,756	$	6,216	$	—	$	67,226
Special Mention		—		—		1,521		434		—		—		—		—		1,955
Substandard		—		—		—		—		—		149		—		—		149
Doubtful		—		—		—		—		—		—		—		—		—
Total 1-4 Family		2,151		4,448		26,530		12,107		6,973		10,905		6,216		—		69,330
Current year-to-date gross write-offs		—		—		—		—		—		—		—		—		—
Commercial
Pass		13,570		23,872		17,920		7,611		2,873		2,597		32,860		928		101,303
Special Mention		—		32		2,506		447		1,766		137		858		—		5,746
Substandard		—		332		1,448		—		477		219		398		—		2,874
Doubtful		—		—		—		—		—		—		—		—		—
Total Commercial		11,427		24,236		21,874		8,058		5,116		2,953		34,117		—		109,924
Current year-to-date gross write-offs		—		—		682		—		208		—		—		—		890
Consumer and other
Pass		110		—		50		—		—		101		—		—		261
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total Consumer and Other		110		—		50		—		—		101		—		—		261
Current year-to-date gross write-offs		—		—		—		—		—		2		—		—		2
Construction
Pass		5,191		7,712		6,033		1,884		14		2,065		—		—		22,899
Special Mention		—		—		1,651		613		—		—		—		—		2,264
Substandard		—		—		—		—		—		1,122		—		—		1,122
Doubtful		—		—		—		—		—		—		—		—		—
Total Construction		5,191		7,712		7,684		2,497		14		3,187		—		—		26,285
Current year-to-date gross write-offs		—		—		—		—		—		—		—		—		—
NOO CRE
Pass		16,830		36,754		47,480		67,561		29,037		51,920		2,776		—		252,358
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		6,294		—		—		—		—		—		6,294
Doubtful		—		—		—		—		—		—		—		—		—
Total NOO CRE		16,830		36,754		53,774		67,561		29,037		51,920		2,776		—		258,652
Current year-to-date gross write-offs		—		—		—		—		—		—		—		—		—
OO CRE
Pass		4,067		36,218		33,567		43,612		8,123		21,273		399		237		147,259
Special Mention		—		224		—		—		—		1,624		—		—		1,848
Substandard		—		—		1,021		—		31		1,240		—		—		2,292
Doubtful		—		—		—		—		—		—		—		—		—
Total OO CRE		4,067		36,442		34,588		43,612		8,154		24,137		399		—		151,399
Current year-to-date gross write-offs		—		—		—		—		—		—		—		—		—
Multi Family
Pass		—		498		19,739		21,201		6,312		9,543		1,233		—		58,526
Special Mention		—		—		—		—		1,006		—		—		—		1,006
Substandard		—		—		—		709		—		—		—		—		709
Doubtful		—		—		—		—		—		—		—		—		—
Total Multi Family		—		498		19,739		21,910		7,318		9,543		1,233		—		60,241
Current year-to-date gross write-offs		—		—		—		—		—		—		—		—		—
Total	$	41,919	$	110,090	$	164,239	$	155,745	$	56,612	$	102,746	$	44,741	$	1,165	$	676,092
Total year-to-date gross write-offs	$	—	$	—	$	682	$	—	$	208	$	2	$	—	$	—	$	892

	Term Loans Amortized Cost by Origination
December 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
1-4 Family
Pass	$	4,244	$	24,009	$	12,236	$	7,928	$	1,466	$	9,622	$	1,717	$	—	$	61,222
Special Mention		—		—		—		—		—		357		—		—		357
Substandard		—		—		—		—		—		67		—		—		67
Doubtful		—		—		—		—		—		—		—		—		—
Total 1-4 Family		4,244		24,009		12,236		7,928		1,466		10,045		1,717		—		61,645
Current year-to-date gross write-offs		—		—		—		—		—		—		—		—		—
Commercial
Pass		13,150		15,405		3,234		3,176		87		1,546		10,139		779		46,737
Special Mention		—		163		—		2,018		—		—		—		—		2,181
Substandard		—		—		—		903		96		—		—		—		999
Doubtful		—		—		—		—		252		—		—		—		252
Total Commercial		13,150		15,568		3,234		6,097		435		1,546		10,139		779		50,169
Current year-to-date gross write-offs		—		—		—		—		321		—		—		—		321
Consumer and other
Pass		43		138		—		5		10		3		499		—		698
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total Consumer and Other		43		138		—		5		10		3		499		—		698
Current year-to-date gross write-offs		—		—		—		—		—		—		—		—		—
Construction
Pass		7,788		21,551		3,938		38		310		592		321		—		34,538
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total Construction		7,788		21,551		3,938		38		310		592		321		—		34,538
Current year-to-date gross write-offs		—		—		—		—		—		—		—		—		—
NOO CRE
Pass		7,187		35,899		53,442		21,091		13,491		29,710		6,140		—		166,960
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		243		—		—		—		—		243
Doubtful		—		—		—		—		—		—		—		—		—
Total NOO CRE		7,187		35,899		53,442		21,334		13,491		29,710		6,140		—		167,203
Current year-to-date gross write-offs		3,382		—		—		—		—		—		—		—		3,382
OO CRE
Pass		20,726		12,365		20,807		7,966		5,806		4,214		—		—		71,884
Special Mention		228		—		7,196		—		—		1,690		—		—		9,114
Substandard		—		—		—		37		1,193		—		—		—		1,230
Doubtful		—		—		—		—		—		—		—		—		—
Total OO CRE		20,954		12,365		28,003		8,003		6,999		5,904		—		—		82,228
Current year-to-date gross write-offs		—		—		—		—		—		—		—		—		—
Multi Family
Pass		500		15,652		22,007		7,572		6,369		7,105		371		—		59,575
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		970		—		—		—		—		—		970
Doubtful		—		—		—		—		—		—		—		—		—
Total Multi Family		500		15,652		22,977		7,572		6,369		7,105		371		—		60,546
Current year-to-date gross write-offs		—		—		—		—		—		—		—		—		—
Total	$	53,866	$	125,182	$	123,830	$	50,977	$	29,080	$	54,905	$	19,187	$	779	$	457,027
Total year-to-date gross write-offs	$	3,382	$	—	$	—	$	—	$	321	$	—	$	—	$	—	$	3,703

Non-accrual loans – The accrual of interest on loans is discontinued at the time the loan becomes 90 or more days delinquent unless the loan is well secured and in the process of collection or renewal due to maturity. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on non-accrual status or charged off if collection of interest or principal is considered doubtful. There was no interest income recognized from non-accrual loans in the income statement for the years ended December 31, 2024, or December 31, 2023, and non-accrual loans totaled $4.0 million at January 1, 2023. The following presents the amortized cost basis of loans on non-accrual status and loans past due over 89 days still accruing by class as of the date noted (dollars in thousands).

	As of December 31, 2024
	Non-accrual loans				Loans past due
	with		Total non-accrual		over 89 days and
	no ACL		loans		still accruing
1-4 Family residential real estate	$	149	$	149	$	—
Commercial		1,716		2,726		—
Consumer and other		—		—		—
Construction		—		—		—
NOO CRE		—		—		—
OO CRE		1,119		1,119		—
Multifamily		709		709		—
Total	$	3,693	$	4,703	$	—
	As of December 31, 2023
	Non-accrual loans with no ACL		Total non-accrual loans		Loans past due over 89 days and still accruing
1-4 Family residential real estate	$	66	$	66	$	—
Commercial		847		1,208		—
Consumer and other		—		—		—
Construction		—		—		—
NOO CRE		—		—		—
OO CRE		—		—		—
Multifamily		970		970		—
Total	$	1,883	$	2,244	$	—

Non-accrual loan balances guaranteed by the SBA are $1,999,000, or 42.5%, and $589,000, or 26.3%, of the nonaccrual loan balances at December 31, 2024, and December 31, 2023, respectively.

Collateral dependent loans – Non-accrual loans are classified as collateral dependent loans and are individually evaluated. The following presents the amortized cost basis of collateral-dependent loans, which are individually evaluated to determine expected credit losses by class of loans as of the date noted (dollars in thousands):

	As of December 31, 2024 Collateral Dependent Loans
	Secured by		Secured by
	Real Estate		Other		Total
1-4 Family residential real estate	$	149	$	—	$	149
Commercial		—		2,726		2,726
Consumer and other		—		—		—
Construction		—		—		—
NOO CRE		—		—		—
OO CRE		1,119		—		1,119
Multifamily		709		—		709
Total	$	1,977	$	2,726	$	4,703

Loan Modifications Made to Borrowers Experiencing Financial Difficulty – The ACL incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination. The analysis includes losses from modifications of receivables to borrowers experiencing financial difficulty. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the ACL, a change to the ACL is generally not recorded when a loan is modified. Currently, the bank does not hold any loans having modified terms related to economic distress and none were modified during the years ended December 31, 2024, and 2023.