INVESTMENT SECURITIES

3 Months Ended

Mar. 31, 2025

Investments, Debt and Equity Securities [Abstract]

Debt Securities

Debt securities have been classified as either held-to-maturity or available-for-sale in the consolidated balance sheets according to management’s intent. The amortized cost of held-to-maturity debt securities and their approximate fair values at March 31, 2025 and December 31, 2024 were as follows:


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2025

Taxable municipals	$	553	$	—	$	(76)	$	477


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Tax exempt bank-qualified municipals	52,641		—		(5,789)		46,852
	$	53,194	$	—	$	(5,865)	$	47,329

December 31, 2024
Taxable municipals	$	553	$	—	$	(90)	$	463
Tax exempt bank-qualified municipals	52,727		—		(5,367)		47,360
	$	53,280	$	—	$	(5,457)	$	47,823

The amortized cost of available-for-sale debt securities and their approximate fair values at March 31, 2025 and December 31, 2024 were as follows:


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2025
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities	$	81,019	$	300	$	(3,421)	$	77,898
SBA securities	4,689		6		(80)		4,615
U.S. Treasury	7,677		3		(261)		7,419
U.S. Agency	2,000		—		(272)		1,728
Collateralized mortgage obligations	40,633		135		(2,581)		38,187
Taxable municipals	1,007		—		(89)		918
Tax exempt bank-qualified municipals	830		—		(2)		828

	$	137,855	$	444	$	(6,706)	$	131,593

December 31, 2024
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities	$	87,930	$	109	$	(4,765)	$	83,274
SBA securities	5,423		7		(97)		5,333
U.S. Treasury	12,624		17		(315)		12,326
U.S. Agency	2,000		—		(330)		1,670
Collateralized mortgage obligations	41,615		11		(3,963)		37,663
Taxable municipals	1,007		—		(98)		909
Tax exempt bank-qualified municipals	830		—		(4)		826

	$	151,429	$	144	$	(9,572)	$	142,001

During the three months ended March 31, 2025 and 2024, there were no transfers between held-to-maturity and available-for-sale debt securities.

At March 31, 2025 and December 31, 2024, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of our shareholders’ equity.

Accrued interest receivable on held-to-maturity and available-for-sale debt securities totaled $914 thousand and $879 thousand at March 31, 2025 and December 31, 2024, respectively, and is included within accrued interest receivable and other assets in the consolidated balance sheets. Accrued interest receivable is excluded from the ACL.

At March 31, 2025, available-for-sale debt securities with an amortized cost of $3.0 million were pledged to the Federal Reserve Bank (“Federal Reserve”) as collateral for a secured public deposits and for other purposes as required by law or contract provisions, in addition to held-to-maturity debt securities with an amortized cost of $53.2 million were pledged as collateral for a secured line of credit with the Federal Reserve. See Note 8 – Borrowing Arrangements for additional information regarding the FHLB and Federal Reserve secured lines of credit. The Company also pledged $10.4 million available-for-sale debt securities to another financial institution to support the collateralization requirement against certain customers’ standby lines of credit.

Contractual Maturities

The amortized cost and estimated fair value of all held-to-maturity and available-for-sale debt securities as of March 31, 2025 by contractual maturities are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Held-to-Maturity				Available-for-Sale
(dollars in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
March 31, 2025
Due in one year or less	$	—	$	—	$	8,668	$	8,645
Due after one year through five years	—		—		12,583		11,700
Due after five years through ten years	28,023		25,426		14,006		12,791
Due after ten years	25,171		21,903		102,598		98,457
	$	53,194	$	47,329	$	137,855	$	131,593

Realized Gains and Losses

There were no gross realized gains and losses for sales and calls of available-for-sale debt securities during the three months ended March 31, 2025 and 2024.

Unrealized Gains and Losses

The gross unrealized losses and related estimated fair values of all available-for-sale debt securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2025 and December 31, 2024 are summarized as follows:


	Less than 12 Months				12 Months or Longer				Total
(dollars in thousands)	Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value
March 31, 2025:
Available-for-sale debt securities:
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities	$	(811)	$	45,262	$	(2,610)	$	20,793	$	(3,421)	$	66,055
SBA securities	(2)		572		(78)		2,773		(80)		3,345
U.S. Treasury	—		—		(261)		2,434		(261)		2,434
U.S. Agency	—		—		(272)		1,728		(272)		1,728
Collateralized mortgage obligations	(54)		2,650		(2,527)		29,328		(2,581)		31,978
Taxable municipals	—		—		(89)		418		(89)		418
Tax exempt bank-qualified municipals	—		—		(2)		828		(2)		828

	$	(867)	$	48,484	$	(5,839)	$	58,302	$	(6,706)	$	106,786


	Less than 12 Months				12 Months or Longer				Total
(dollars in thousands)	Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value
December 31, 2024:
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities	$	(1,659)	$	47,792	$	(3,106)	$	20,692	$	(4,765)	$	68,484
SBA securities	(2)		924		(95)		3,011		(97)		3,935
U.S. Treasury	—		—		(315)		2,392		(315)		2,392
U.S. Agency	—		—		(330)		1,670		(330)		1,670
Collateralized mortgage obligations	(279)		7,922		(3,684)		28,985		(3,963)		36,907
Taxable municipals	—		—		(98)		409		(98)		409
Tax exempt bank-qualified municipals	—		—		(4)		826		(4)		826

	$	(1,940)	$	56,638	$	(7,632)	$	57,985	$	(9,572)	$	114,623

As of March 31, 2025, the Company had a total of 84 available-for-sale debt securities in a gross unrealized loss position totaling $6.7 million, including 64 securities with total gross unrealized losses of $5.8 million that had been in a continual loss position for twelve months and longer. As of December 31, 2024, the Company had a total of 89 available-for-sale debt securities in a gross unrealized loss position totaling $9.6 million, including 64 securities with total gross unrealized losses of $7.6 million that had been in a continual loss position for twelve months and longer. Such unrealized losses on these investment securities have not been recognized into income.

Unrealized losses on available-for-sale debt securities are recognized in shareholders’ equity as accumulated other comprehensive loss. At March 31, 2025, the Company had a net unrealized loss on available-for-sale debt securities of $6.3 million, or $4.4 million net of tax in accumulated other comprehensive loss, compared to a net unrealized loss of $9.4 million, or $6.6 million net of tax in accumulated other comprehensive loss, at December 31, 2024.

Allowance for Credit Losses on Debt Securities

For available-for-sale debt securities with unrealized losses, management considered the financial condition of the issuer and the Company’s intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. The Company’s available-for-sale debt securities consisted of U.S. Treasury, U.S. government and agency and government sponsored enterprise securities, and municipals, which historically have had limited credit loss experience. In addition, the Company reviewed the credit rating of the municipal securities. At March 31, 2025, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities was $918 thousand and $828 thousand, respectively. At March 31, 2025, all of these securities were rated AA and above. At December 31, 2024, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities was $909 thousand and $826 thousand, respectively. At December 31, 2024, all of these securities were rated AA and above.

At March 31, 2025, 61 held-to-maturity debt securities with fair values totaling $47.3 million had gross unrealized losses totaling $5.9 million, compared to 61 held-to-maturity debt securities with fair values totaling $47.8 million had gross unrealized losses totaling $5.5 million at December 31, 2024. The Company has the intent and ability to hold the securities classified as held-to-maturity until they mature, at which time the Company will receive full value for the securities. At March 31, 2025 and December 31, 2024, fair values of held-to-maturity debt securities rated AA and above totaled $44.2 million and $44.7 million, respectively and those rated AA- totaled $3.1 million and $3.2 million, respectively.

Management evaluates securities in an unrealized loss position at least on a quarterly basis, and determined that the unrealized losses at March 31, 2025 and 2024 related to each investment were primarily attributable to factors other than credit related, including changes in interest rates driven by the Federal Reserve’s policy to fight against inflation and general volatility in market conditions. As such, the Company applied a zero

credit loss assumption for these securities and no provision for credit losses was recorded for held-to-maturity or available-for-sale debt securities during the three months ended March 31, 2025 and 2024.

Restricted Stock

As a member of the Federal Reserve System, the Company must hold stock of the Federal Reserve in an amount equal to 3% of the Company’s common stock and additional paid-in capital. In addition, as a member of the Federal Home Loan Bank (“FHLB”) of San Francisco, the Company is required to own stock of the FHLB based on the Company’s outstanding mortgage assets and outstanding advances from the FHLB.

The table below summarizes the Company’s restricted stock investments at March 31, 2025 and December 31, 2024:


(dollars in thousands)	March 31, 2025		December 31, 2024
Federal Reserve Bank	$	15,540	$	15,524
Federal Home Loan Bank	15,305		15,305
	$	30,845	$	30,829

During the three months ended March 31, 2025, the Company purchased $16.0 thousand of Federal Reserve stock, and there were no purchases of FHLB stock.

Other Equity Securities Without A Readily Determinable Fair Value

The Company also has equity securities in the form of capital stock invested in two different banker’s bank stocks which totaled $819 thousand at both March 31, 2025 and December 31, 2024. These equity securities are reported in accrued interest receivable and other assets in the consolidated balance sheets. At March 31, 2025 and December 31, 2024, the Company evaluated the carrying value of these equity securities and determined that they were not impaired. During the three months ended March 31, 2025 and 2024, there were no losses related to changes in the fair value of these equity securities.

The Company has other equity investments and investments in a technology venture capital fund focused on the intersection of fintech and community banking. These equity investments represent variable interest entities (“VIEs”), however the Company is not the primary beneficiary. The Company’s maximum exposure to loss related to its investments in these unconsolidated VIEs is limited to the carrying value of each of the investments plus any unfunded capital commitments. At March 31, 2025 and December 31, 2024, the balance of these investments, which is included in accrued interest receivable and other assets in the consolidated balance sheets, was $7.1 million and $7.1 million, respectively. Total unfunded capital commitments for these investments were $4.0 million at March 31, 2025. These equity securities are measured using the equity method of accounting when the Company’s ownership interest in such investments exceeds 5%, or carried at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same issuer. Cash distributions that are considered a return of capital are recorded as a reduction of the Company’s investment. During the three months ended March 31, 2025, the Company received $68 thousand of net capital distributions from these equity investments. During the three months ended March 31, 2024, the Company received $73 thousand of net capital distributions related to these equity investments. At March 31, 2025 and December 31, 2024, the Company evaluated the carrying value of these equity investments and determined they were not impaired. During the three months ended March 31, 2025 and 2024, there were no losses recognized related to changes in the fair value.

The Company has also invested in and acquired limited partnerships that operate affordable housing projects that qualify for and have received an allocation of federal and/or state low-income housing tax credits. These investments represent VIEs, however the Company is not the primary beneficiary. The Company’s maximum exposure to loss related to its investments in these unconsolidated VIEs is limited to the carrying amount of the investment and previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level. At March 31, 2025 and December 31, 2024, the net amortized balance of these investments was $5.6 million and $5.7 million, respectively, and is included in accrued interest and other assets in the consolidated balance sheets. The unfunded

portion of these investments totaled $1.7 million and $1.8 million at March 31, 2025 and December 31, 2024, respectively, and is included in accrued interest payable and other liabilities in the consolidated balance sheets.

The following table presents activity in qualifying low income housing projects for the three months ended March 31, 2025 and 2024 follows:


	Three Months Ended
(dollars in thousands)	March 31, 2025		March 31, 2024
Proportional amortization	$	306	$	36
Tax credits	253		49
Contributions	114		—

At March 31, 2025 and December 31, 2024, the Company evaluated the carrying value of these tax credit equity investments and determined they were not impaired, and no loss was recognized related to changes in the fair value.