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Loans and Allowance for Credit Losses on Loans
 3 Months Ended
Mar. 31, 2025
Receivables [Abstract]  
Loans and Allowance for Credit Losses on Loans Loans and Allowance for Credit Losses on Loans
Loans

The following table presents the composition of the loan portfolio as of March 31, 2025 and December 31, 2024:

($ in thousands)March 31, 2025December 31, 2024
Commercial real estate$1,023,278 $980,247 
SBA—real estate237,212 231,962 
SBA—non-real estate21,566 21,748 
C&I202,250 213,097 
Home mortgage559,543 509,524 
Consumer36 274 
Gross loans receivable2,043,885 1,956,852 
Allowance for credit losses(25,368)(24,796)
Loans receivable, net(1)
$2,018,517 $1,932,056 
(1)Includes net deferred loan costs (fees) and net unamortized premiums (discounts) of $(114) thousand as of March 31, 2025 and $(702) thousand as of December 31, 2024.
No loans were outstanding to related parties as of March 31, 2025 and December 31, 2024.
Allowance for Credit Losses

The Company employs a modeled approach that takes into account current and future economic conditions to estimate lifetime expected losses on a collective basis. With the adoption of Current Expected Credit Losses ("CECL"), the Company elected not to consider accrued interest receivable in its estimated credit losses because the Company writes off uncollectible accrued interest receivable in a timely manner. The Company considers writing off accrued interest amounts once the amounts become 90 days past due to be considered within a timely manner. The Company has elected to write off accrued interest receivable by reversing interest income. The Company uses transition matrices to develop the Probability of Default ("PD") and Loss Given Default ("LGD") approach, incorporating quantitative factors and qualitative considerations in the calculation of the allowance for credit losses for collectively assessed loans. The model provides forecasts of PD and LGD based on national unemployment rates using regression analysis. The Company incorporates future economic conditions using a weighted multiple scenario approach: baseline and adverse. The Company applies a reasonable and supportable period of one year for the baseline scenario and two years for the adverse scenario, after which loss assumptions revert to historical loss information through a one-year reversion period for the baseline scenario and a two-year reversion period for the adverse scenario. Additionally, the Company aggregated loan portfolio based on similar risk characteristics. The Company elected to use the Call Report codes and loan risk ratings for loan segmentation in determining the Bank's allowance for credit losses.

In order to quantify the credit risk impact of other trends and changes within the loan portfolio, the Company utilizes qualitative adjustments to the modeled estimated loss approaches. Included in the qualitative portion of our analysis of the allowance for credit losses are key inputs including GDP, unemployment rates, interest rates, asset quality ratios, loan portfolio concentration, California house price index and commercial real estate price index. The parameters for making adjustments are established under a Credit Risk Matrix that provides different possible scenarios for each of the factors listed below. The Credit Risk Matrix and the possible scenarios enable the Bank to qualitatively adjust the loss rates. This matrix considers the following nine factors, which are patterned after the guidelines provided under the Federal Financial Institutions Examination Council Interagency Policy Statement on the Allowance for Credit Losses, updated to reflect the adoption of CECL:

•    Changes in lending policies and procedures, including changes in underwriting standards and practices for collection, charge-offs, and recoveries;
•    Actual and expected changes in national and local economic and business conditions and developments in which the institution operates that affect the collectivity of loans;
•    Changes in the nature and volume of the loan portfolio;
•    Changes in the experience, ability, and depth of lending management and staff;
•    Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified loans;
•    Changes in the quality of the credit review function;
•    Changes in the value of the underlying collateral for loans that are not collateral-dependent;
•    The existence, growth, and effect of any concentrations of credit, and
•    The effect of other external factors, such as the regulatory, legal and technological environments; competition; and events such as natural disasters.

The Company segments loans primarily by Call Report codes (collateral type) and loan risk ratings, considering that the same type of loans share considerable similar risk characteristics. For loans that do not share similar risk characteristics such as nonaccrual loans above $500 thousand, the Company evaluates these loans on an individual basis in accordance with ASC 326. Such nonaccrual loans are considered to have different risk profiles than performing loans and are therefore evaluated individually. The Company elected to collectively assess nonaccrual loans with balances below $500 thousand along with the performing and accrual loans, in order to reduce the operational burden of individually assessing small nonaccrual loans with immaterial balances. For individually assessed loans, the allowance for credit losses is measured using either 1) the present value of future cash flows discounted at the loan’s effective interest rate; or 2) the fair value of the collateral, if the loan is collateral-dependent. For the collateral-dependent loans, the Company obtains a new appraisal to determine the fair value of collateral. The appraisals are based on an “as-is” valuation. To ensure that appraised values remain current, the Company obtains updated appraisals every twelve months from a qualified
independent appraiser. If the fair value of the collateral is less than the amortized balance of the loan, the Company recognizes an allowance for credit losses with a corresponding charge to the provision for credit losses.

The Company maintains a separate allowance for credit losses for its off-balance sheet commitments. The Company uses an estimated funding rate to allocate an allowance to undrawn exposures. This funding rate is used as a credit conversion factor to capture how much undrawn lines of credit can potentially become drawn at any point. The funding rate is determined based on a look-back period of 8 quarters. Credit loss is not estimated for off-balance sheet commitments that are unconditionally cancellable by the Company.

The following table summarizes the activity in the allowance for credit losses on loans by portfolio segment for the three months ended March 31, 2025 and 2024:

($ in thousands)
Commercial
Real Estate
SBA—
Real Estate
SBA —Non-
Real Estate
C&I
Home
Mortgage
ConsumerTotal
Three Months Ended March 31, 2025
Beginning balance$9,290 $5,557 $418 $1,844 $7,684 $3 $24,796 
Provision for (reversal of) credit losses(280)(176)89 (105)1,162 (3)687 
Charge-offs— — (10)(29)(91)— (130)
Recoveries— — 15 — — — 15 
Ending balance$9,010 $5,381 $512 $1,710 $8,755 $— $25,368 
Three Months Ended March 31, 2024
Beginning balance$7,915 $1,657 $147 $1,215 $11,045 $14 $21,993 
Provision for (reversal of) credit losses129 1,202 71 448 (1,652)(5)193 
Charge-offs— (66)— — (2)— (68)
Recoveries— — 11 — — — 11 
Ending balance$8,044 $2,793 $229 $1,663 $9,391 $9 $22,129 

Collateral-dependent loans are loans where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment. The estimated credit losses for these loans are based on the collateral’s fair value less selling costs. In most cases, the Company records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less selling costs at the time of foreclosure.

As of March 31, 2025 and December 31, 2024, there were $9.9 million and $7.7 million, respectively, of collateral-dependent loans which are primarily secured by SBA—real estate and residential real estate. The allowance for credit losses allocated to these loans as of March 31, 2025 and December 31, 2024 was $901 thousand and $1.2 million, respectively.

The following table represents the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2025 and December 31, 2024, for which repayment is expected to be obtained through the sale of the underlying collateral.
($ in thousands)Hotel / MotelRetailGas StationSingle-Family Residential
Total(1)
As of March 31, 2025
Commercial real estate$1,580 $357 $— $— $1,937 
SBA—real estate3,704 1,990 169 — 5,863 
Home mortgage— — — 2,104 2,104 
Total$5,284 $2,347 $169 $2,104 $9,904 
As of December 31, 2024
Commercial real estate$1,580 $363 $— $— $1,943 
SBA—real estate3,702 2,006 — — 5,708 
Total$5,282 $2,369 $— $— $7,651 
(1)    Excludes guaranteed portion of SBA loans of $13.1 million and $15.2 million as of March 31, 2025 and December 31, 2024, respectively.

The following table presents the recorded investment in nonaccrual loans and loans past due 90 or more days and still accruing interest, by portfolio as of March 31, 2025 and December 31, 2024:

($ in thousands)Nonaccrual Loans with a Related Allowance for Credit LossesNonaccrual Loans without a Related Allowance for Credit LossesTotal Nonaccrual Loans
90 or More
Days
Past Due &
Still Accruing
Total(1)
As of March 31, 2025
Commercial real estate$357 $1,580 $1,937 $— $1,937 
SBA—real estate2,342 3,704 6,046 — 6,046 
SBA—non-real estate325 — 325 — 325 
C&I— — — — — 
Home mortgage— 2,104 2,104 — 2,104 
Total$3,024 $7,388 $10,412 $— $10,412 
As of December 31, 2024
Commercial real estate$363 $1,580 $1,943 $— $1,943 
SBA—real estate2,006 3,702 5,708 — 5,708 
SBA—non-real estate169 — 169 — 169 
Total$2,538 $5,282 $7,820 $— $7,820 
(1)    Excludes guaranteed portion of SBA loans of $14.3 million and $16.3 million as of March 31, 2025 and December 31, 2024, respectively.
Nonaccrual loans and loans past due 90 or more days and still accruing interest include both homogeneous loans that are collectively and individually evaluated for impairment and individually classified impaired loans.
The following table represents the aging analysis of the recorded investment in past due loans as of March 31, 2025 and December 31, 2024:

($ in thousands)
30-59
Days
Past Due
60-89
Days
Past Due
> 90 Days
Past Due
Total
Past Due(1)
Loans Not
Past Due
Total(2)
As of March 31, 2025
Commercial real estate$940 $— $357 $1,297 $1,021,981 $1,023,278 
SBA—real estate2,267 — 2,342 4,609 232,603 237,212 
SBA—non-real estate232 16 139 387 21,179 21,566 
C&I488 — — 488 201,762 202,250 
Home mortgage2,514 1,457 2,104 6,075 553,468 559,543 
Consumer— — — — 36 36 
Total$6,441 $1,473 $4,942 $12,856 $2,031,029 $2,043,885 
As of December 31, 2024
Commercial real estate$— $— $362 $362 $979,885 $980,247 
SBA—real estate237 75 2,006 2,318 229,644 231,962 
SBA—non-real estate254 138 2 394 21,354 21,748 
C&I15 — — 15 213,082 213,097 
Home mortgage2,774 5,594 — 8,368 501,156 509,524 
Consumer— — — — 274 274 
Total$3,280 $5,807 $2,370 $11,457 $1,945,395 $1,956,852 
(1)Excludes guaranteed portion of SBA loans of $6.4 million and $8.7 million as of March 31, 2025 and December 31, 2024, respectively.
(2)Excludes accrued interest receivables of $8.6 million and $8.1 million as of March 31, 2025 and December 31, 2024, respectively.

Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, other than insignificant payment deferrals, other than insignificant term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. No charge-offs of previously modified loans were recorded for the three months ended March 31, 2025 and 2024.

The following table presents the amortized cost of loans as of March 31, 2025 that were modified during the three months ended March 31, 2025 by loan class and modification type:

As of March 31, 2025
Modification TypePercentage to Each Loan Segment
($ in thousands)Payment DelayInterest OnlyTotal
Commercial real estate$— $3,155 $3,155 0.31 %
SBA—real estate(1)
649 — 649 1.08 %
Total$649 $3,155 $3,804 
(1)Excludes guaranteed portion of SBA loans of $1.9 million.
The following tables describe the financial effect of the loan modifications made to borrowers experiencing financial difficulty for the periods presented:

Financial Effect
Modification & Loan TypesDescription of Financial EffectThree Months Ended March 31, 2025
Payment Delay:
SBA—real estateDeferment of Payment by a weighted average of:0.5 years
Interest Only:
Commercial real estateInterest only Payment by a weighted average of:0.5 years

The Company had no modified loan for the three months ended March 31, 2024.

The Company tracks the performance of modified loans. A modified loan may become delinquent and may result in a payment default (generally 90 days past due) subsequent to modification. There were no loans that received a modification within the last 12 months as of March 31, 2025 or March 31, 2024 that subsequently defaulted.

The Company had no additional commitments to lend to borrowers whose loans were modified as of March 31, 2025.

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents financial performance of such loans that have been modified in the last 12 months:
Payment Performance as of March 31, 2025
($ in thousands)Current30 - 89 Days Past Due90+ Days Past DueTotal
Commercial real estate$4,735 $— $— $4,735 
SBA—real estate(1)4,095 — — 4,095 
C&I250 — — 250 
Total$9,080 $— $— $9,080 
(1)Excludes guaranteed portion of SBA loans of $7.4 million.

Payment Performance as of March 31, 2024
($ in thousands)Current30 - 89 Days Past Due90+ Days Past DueTotal
Commercial real estate$624 $— $— $624 
SBA—real estate(1)3,090 3,090 
C&I403 403 
Home mortgage354 — — 354 
Total$4,471 $— $— $4,471 
(1)Excludes guaranteed portion of SBA loans of $2.8 million.

Credit Quality Indicators: The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. For consumer loans, a credit grade is established at inception, and generally only adjusted based on performance. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
Special Mention—Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.
Substandard—Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful—Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.

The following table presents the loan portfolio's amortized cost by loan type, risk rating and year of origination as of March 31, 2025 and December 31, 2024:

March 31, 2025
Term Loans by Origination YearRevolving LoansRevolving Loans Converted to Term Loans
Total(1)
($ in thousands)20242023
2022
20212020Prior
Commercial real estate
Pass$73,633 $267,903 $100,144 $231,730 $172,890 $150,546 $17,125 $— $1,013,971 
Special mention— — — 576 2,229 — — — 2,805 
Substandard— — 1,580 4,565 — 357 — — 6,502 
Doubtful— — — — — — — — — 
Subtotal$73,633 $267,903 $101,724 $236,871 $175,119 $150,903 $17,125 $— $1,023,278 
Current period charge-offs$— $— $— $— $— $— $— $— $— 
SBA— real estate
Pass$14,125 $29,027 $26,295 $37,190 $18,645 $84,454 $— $— $209,736 
Special mention— — — 6,303 — 627 — — 6,930 
Substandard— — 1,492 9,965 291 8,798 — — 20,546 
Doubtful— — — — — — — — — 
Subtotal$14,125 $29,027 $27,787 $53,458 $18,936 $93,879 $— $— $237,212 
Current period charge-offs$— $— $— $— $— $— $— $— $— 
SBA—non-real estate
Pass$1,462 $9,606 $4,190 $1,782 $124 $3,431 $— $— $20,595 
Special mention— — — — — — — — — 
Substandard— — — 440 — 433 — — 873 
Doubtful— — — — — 98 — — 98 
Subtotal$1,462 $9,606 $4,190 $2,222 $124 $3,962 $— $— $21,566 
Current period charge-offs$— $— $3 $— $— $7 $— $— $10 
C&I
Pass$685 $21,527 $11,284 $12,513 $17,326 $4,241 $132,653 $1,632 $201,861 
Special mention— — — — — — 389 — 389 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Subtotal$685 $21,527 $11,284 $12,513 $17,326 $4,241 $133,042 $1,632 $202,250 
Current period charge-offs$— $— $29 $— $— $— $— $— $29 
Home mortgage
Pass$74,007 $39,900 $59,415 $268,021 $69,370 $46,726 $— $— $557,439 
Special mention— — — — — — — — — 
Substandard— — — 1,340 — 764 — — 2,104 
Doubtful— — — — — — — — — 
Subtotal$74,007 $39,900 $59,415 $269,361 $69,370 $47,490 $— $— $559,543 
Current period charge-offs$— $— $— $77 $— $14 $— $— $91 
Consumer
Pass$13 $— $— $— $— $— $23 $— $36 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Subtotal$13 $— $— $— $— $— $23 $— $36 
Current period charge-offs$— $— $— $— $— $— $— $— $— 
Total loans
Pass$163,925 $367,963 $201,328 $551,236 $278,355 $289,398 $149,801 $1,632 $2,003,638 
Special mention— — — 6,879 2,229 627 389 — 10,124 
Substandard— — 3,072 16,310 291 10,352 — — 30,025 
Doubtful— — — — — 98 — — 98 
Subtotal$163,925 $367,963 $204,400 $574,425 $280,875 $300,475 $150,190 $1,632 $2,043,885 
Current period charge-offs$— $— $32 $77 $— $21 $— $— $130 
(1)Excludes accrued interest receivables of $8.6 million as of March 31, 2025.

December 31, 2024
Term Loans by Origination YearRevolving LoansRevolving Loans Converted to Term Loans
Total(1)
($ in thousands)2023
2022
202120202019Prior
Commercial real estate
Pass$201,141 $85,056 $190,968 $137,425 $88,993 $250,291 $17,012 $— $970,886 
Special mention— — 579 2,246 — — — — 2,825 
Substandard— 1,580 319 — — 4,637 — — 6,536 
Doubtful— — — — — — — — — 
Subtotal$201,141 $86,636 $191,866 $139,671 $88,993 $254,928 $17,012 $— $980,247 
Current period charge-offs$— $— $— $— $— $— $— $— $— 
SBA— real estate
Pass$31,441 $26,508 $41,375 $18,819 $16,166 $72,440 $— $— $206,749 
Special mention— — 2,345 — — 739 — — 3,084 
Substandard— 1,182 9,965 2,868 — 8,114 — — 22,129 
Doubtful— — — — — — — — — 
Subtotal$31,441 $27,690 $53,685 $21,687 $16,166 $81,293 $— $— $231,962 
Current period charge-offs$— $— $— $66 $— $— $— $— $66 
SBA—non-real estate
Pass$10,443 $4,498 $1,837 $154 $1,303 $2,621 $— $— $20,856 
Special mention— — — — — — — — — 
Substandard— — 483 — 157 154 — — 794 
Doubtful— — — — — 98 — — 98 
Subtotal$10,443 $4,498 $2,320 $154 $1,460 $2,873 $— $— $21,748 
Current period charge-offs$— $— $— $— $— $27 $— $— $27 
C&I
Pass$19,712 $11,525 $14,016 $18,122 $3,356 $2,664 $140,278 $3,024 $212,697 
Special mention— — — — — — 400 — 400 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Subtotal$19,712 $11,525 $14,016 $18,122 $3,356 $2,664 $140,678 $3,024 $213,097 
Current period charge-offs$— $44 $— $— $— $— $— $— $44 
Home mortgage
Pass$42,112 $63,000 $284,208 $70,326 $17,749 $32,129 $— $— $509,524 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Subtotal$42,112 $63,000 $284,208 $70,326 $17,749 $32,129 $— $— $509,524 
Current period charge-offs$— $— $— $— $— $— $— $— $— 
Consumer
Pass$27 $— $— $— $— $— $247 $— $274 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Subtotal$27 $— $— $— $— $— $247 $— $274 
Current period charge-offs$— $— $— $— $— $— $— $— $— 
Total loans
Pass$304,876 $190,587 $532,404 $244,846 $127,567 $360,145 $157,537 $3,024 $1,920,986 
Special mention— — 2,924 2,246 — 739 400 — 6,309 
Substandard— 2,762 10,767 2,868 157 12,905 — — 29,459 
Doubtful— — — — — 98 — — 98 
Subtotal$304,876 $193,349 $546,095 $249,960 $127,724 $373,887 $157,937 $3,024 $1,956,852 
Current period charge-offs$— $44 $— $66 $— $27 $— $— $137 
(1)Excludes accrued interest receivables of $8.1 million as of December 31, 2024.