XML 21 R11.htm IDEA: XBRL DOCUMENT

LOANS AND ALLOWANCE FOR CREDIT LOSSES

3 Months Ended

Mar. 31, 2025

Loans Held for Investment

The Company’s loan portfolio consists primarily of loans to borrowers within the California market effective July 31, 2024. Although the Company seeks to avoid concentrations of loans to a single industry or based upon a single class of collateral, real estate and real estate associated businesses are among the principal industries in the Company’s market area. The Company’s loan portfolio in real estate secured credit represented 77% and 77% of total loans at March 31, 2025 and December 31, 2024, respectively. The Company also originates SBA loans either for sale to institutional investors or for retention in the loan portfolio. Loans identified as held for sale are carried at the lower of cost or market value and separately designated as such in the consolidated financial statements. A portion of the Company’s revenues are from origination of loans guaranteed by the SBA under its various programs and sale of the guaranteed portions of the loans. Funding for these loans depends on annual appropriations by the U.S. Congress.

The composition of the Company’s loan portfolio at March 31, 2025 and December 31, 2024 was as follows:


(dollars in thousands)	March 31, 2025		December 31, 2024
Construction and land development	$	221,437	$	227,325
Real estate - other:
1-4 family residential	157,442		164,401
Multifamily residential	237,896		243,993
Commercial real estate and other	1,755,962		1,767,727
Commercial and industrial	672,468		710,970
Consumer	23,569		24,749
Loans held for investment (1)	3,068,774		3,139,165
Allowance for credit losses	(45,839)		(50,540)
Loans held for investment, net	$	3,022,935	$	3,088,625

(1)Loans held for investment includes net unearned fees of $1.7 million and $1.8 million and net unearned discounts on acquired loans of $51.3 million and $58.5 million at March 31, 2025 and December 31, 2024, respectively. The Company recognized $5.7 million and $61 thousand in interest accretion for acquired loans for the three months ended March 31, 2025 and 2024, respectively.

The Company has pledged $2.18 billion of loans with the FHLB under a blanket lien, of which an unpaid principal balance of $1.33 billion was considered as eligible collateral under this secured borrowing arrangement and loans with an unpaid principal balance totaling $363.0 million were pledged as collateral under a secured borrowing arrangement with the Federal Reserve as of March 31, 2025. See Note 8 – Borrowing Arrangements for additional information regarding the FHLB and Federal Reserve secured lines of credit.

Loans Held for Sale

At March 31, 2025, the Company had loans held for sale totaling $4.6 million, consisting of SBA 7(a) loans. At December 31, 2024, loans held for sale totaled $17.2 million, consisting of $10.3 million SBA 7(a) loans and $6.9 million C&I loans transferred from loans held for investment. The Company accounts for loans held for sale at the lower of carrying value or fair value. At March 31, 2025 and December 31, 2024, the fair value of loans held for sale totaled $4.9 million and $17.9 million, respectively.

Credit Quality Indicators

The Company categorizes loans using risk ratings based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. Larger, non-homogeneous loans such as CRE and C&I loans are analyzed individually for risk rating assessment. For purposes of risk classification, 1-4 Family Residential loans for investment purposes are evaluated with CRE loans. This analysis is performed on an ongoing basis as new information is obtained. The Company uses the following definitions for risk ratings:

Pass - Loans classified as pass include loans not meeting the risk ratings defined below.

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 institution’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.

Loss - Loans classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

The risk category of loans by class of loans and origination year as of March 31, 2025 follows:


	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term During the Period
(dollars in thousands)	2025		2024		2023		2022		2021		Prior						Total
March 31, 2025
Construction and land development
Pass	$	27	$	35,329	$	31,371	$	72,500	$	39,617	$	2,668	$	9,858	$	—	$	191,370
Special mention	—		—		—		—		—		13,660		—		—		13,660
Substandard	—		—		—		14,659		—		1,748		—		—		16,407
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total construction and land development	27		35,329		31,371		87,159		39,617		18,076		9,858		—		221,437
YTD gross charge-offs	—		—		—		—		—		—		—		—		—
Real estate - other:
1-4 family residential
Pass	—		19,045		15,527		33,535		17,805		23,898		41,896		3,023		154,729
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		2,713		—		—		—		—		2,713
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total 1-4 family residential	—		19,045		15,527		36,248		17,805		23,898		41,896		3,023		157,442
YTD gross charge-offs	—		—		—		—		—		—		—		—		—
Multifamily residential
Pass	5,478		15,997		11,073		71,793		88,747		41,795		—		—		234,883
Special mention	—		—		—		—		—		3,013		—		—		3,013
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—


	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term During the Period
(dollars in thousands)	2025		2024		2023		2022		2021		Prior						Total
March 31, 2025
Loss	—		—		—		—		—		—		—		—		—
Total multifamily residential	5,478		15,997		11,073		71,793		88,747		44,808		—		—		237,896
YTD gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial real estate and other
Pass	15,256		119,152		85,876		435,705		394,847		542,084		79,472		15,868		1,688,260
Special mention	—		—		175		15,283		11,222		8,925		6,199		—		41,804
Substandard	—		701		7,385		194		4,441		13,177		—		—		25,898
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total commercial real estate and other	15,256		119,853		93,436		451,182		410,510		564,186		85,671		15,868		1,755,962
YTD gross charge-offs	—		—		—		—		1,654		—		—		—		1,654
Commercial and industrial
Pass	30,780		52,284		36,036		69,156		24,375		72,781		303,841		809		590,062
Special mention	—		222		43		—		24		1,173		9,510		4,972		15,944
Substandard	—		116		1,133		21,675		2,730		2,652		38,156		—		66,462
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial	30,780		52,622		37,212		90,831		27,129		76,606		351,507		5,781		672,468
YTD gross charge-offs	—		—		91		—		—		1,141		—		—		1,232
Consumer
Pass	152		371		—		929		21,654		67		90		—		23,263
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		306		—		—		—		306
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total consumer	152		371		—		929		21,960		67		90		—		23,569
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	273	$	—	$	—	$	—	$	273


Total by risk rating:
Pass	$	51,693	$	242,178	$	179,883	$	683,618	$	587,045	$	683,293	$	435,157	$	19,700	$	2,882,567


	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term During the Period
(dollars in thousands)	2025		2024		2023		2022		2021		Prior						Total
March 31, 2025
Special mention	—		222		218		15,283		11,246		26,771		15,709		4,972		74,421
Substandard	—		817		8,518		39,241		7,477		17,577		38,156		—		111,786
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total loans	$	51,693	$	243,217	$	188,619	$	738,142	$	605,768	$	727,641	$	489,022	$	24,672	$	3,068,774
YTD gross charge-offs	$	—	$	—	$	91	$	—	$	1,927	$	1,141	$	—	$	—	$	3,159

The risk category of loans by class of loans and origination year as of December 31, 2024 follows:


	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term During the Period
(dollars in thousands)	2024		2023		2022		2021		2020		Prior						Total
December 31, 2024
Construction and land development
Pass	$	25,812	$	25,857	$	84,638	$	47,687	$	7,297	$	2,328	$	9,865	$	—	$	203,484
Special mention	—		—		—		—		12,431		—		—		—		12,431
Substandard	—		—		9,659		—		1,669		82		—		—		11,410
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total construction and land development	25,812		25,857		94,297		47,687		21,397		2,410		9,865		—		227,325
YTD gross charge-offs	—		—		967		—		—		—		—		—		967
Real estate - other:
1-4 family residential
Pass	20,297		15,581		33,660		17,902		6,683		18,628		44,286		—		157,037
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		2,895		—		—		—		4,469		—		7,364
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total 1-4 family residential	20,297		15,581		36,555		17,902		6,683		18,628		48,755		—		164,401
YTD gross charge-offs	—		—		—		—		—		—		1		—		1
Multifamily residential
Pass	15,998		11,087		85,834		84,671		5,107		37,510		—		—		240,207
Special mention	—		—		—		—		—		3,786		—		—		3,786
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total multifamily residential	15,998		11,087		85,834		84,671		5,107		41,296		—		—		243,993
YTD gross charge-offs	—		—		1,456		—		—		—		—		—		1,456
Commercial real estate and other
Pass	111,911		86,261		454,470		399,393		100,110		453,301		104,456		148		1,710,050


	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term During the Period
(dollars in thousands)	2024		2023		2022		2021		2020		Prior						Total
Special mention	—		9,568		2,583		11,268		2,264		9,848		—		495		36,026
Substandard	—		—		—		11,551		—		10,100		—		—		21,651
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total commercial real estate and other	111,911		95,829		457,053		422,212		102,374		473,249		104,456		643		1,767,727
YTD gross charge-offs	—		—		51		—		—		—		—		—		51
Commercial and industrial
Pass	55,350		39,484		91,049		38,303		14,663		63,973		314,284		—		617,106
Special mention	307		46		1,403		1,322		230		1,920		11,868		—		17,096
Substandard	120		1,286		20,859		2,890		—		3,543		48,070		—		76,768
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial	55,777		40,816		113,311		42,515		14,893		69,436		374,222		—		710,970
YTD gross charge-offs	—		37		24		—		—		—		—		—		61
Consumer
Pass	692		—		1,019		22,340		81		6		206		—		24,344
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		405		—		—		—		—		405
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total consumer	692		—		1,019		22,745		81		6		206		—		24,749
YTD gross charge-offs	$	—	$	—	$	—	$	238	$	—	$	—	$	—	$	—	$	238


Total by risk rating:
Pass	$	230,060	$	178,270	$	750,670	$	610,296	$	133,941	$	575,746	$	473,097	$	148	$	2,952,228
Special mention	307		9,614		3,986		12,590		14,925		15,554		11,868		495		69,339
Substandard	120		1,286		33,413		14,846		1,669		13,725		52,539		—		117,598
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total loans	$	230,487	$	189,170	$	788,069	$	637,732	$	150,535	$	605,025	$	537,504	$	643	$	3,139,165
YTD gross charge-offs	$	—	$	37	$	2,498	$	238	$	—	$	—	$	1	$	—	$	2,774

Past Due and Nonaccrual Loans

A summary of past due loans as of March 31, 2025 and December 31, 2024 follows:


	Accruing Loans
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Nonaccrual		Current		Total
March 31, 2025
Construction and land development	$	—	$	—	$	—	$	—	$	14,659	$	206,778	$	221,437
Real estate - other:
1-4 family residential	—		—		—		—		—		157,442		157,442
Multifamily residential	—		—		—		—		—		237,896		237,896
Commercial real estate and other	4,569		—		—		4,569		1,763		1,749,630		1,755,962
Commercial and industrial	309		—		—		309		6,358		665,801		672,468
Consumer	41		184		45		270		—		23,299		23,569
	$	4,919	$	184	$	45	$	5,148	$	22,780	$	3,040,846	$	3,068,774


	Accruing Loans
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Nonaccrual		Current		Total
December 31, 2024
Construction and land development	$	4,104	$	—	$	—	$	4,104	$	9,659	$	213,562	$	227,325
Real estate - other:
1-4 family residential	40		4,469		—		4,509		2,895		156,997		164,401
Multifamily residential	—		—		—		—		—		243,993		243,993
Commercial real estate and other	195		—		—		195		8,915		1,758,617		1,767,727
Commercial and industrial	1,866		1,113		—		2,979		4,917		703,074		710,970
Consumer	69		226		150		445		—		24,304		24,749
	$	6,274	$	5,808	$	150	$	12,232	$	26,386	$	3,100,547	$	3,139,165

The Company had $45 thousand and $150 thousand in consumer solar loans that were over 90 days past due that were accruing interest at March 31, 2025 and December 31, 2024, respectively.

Nonaccrual Loans

A summary of total nonaccrual loans and the amount of nonaccrual loans with no related ACL as of March 31, 2025 and December 31, 2024 follows:


	Nonaccrual Loans
	Collateral Dependent Loans				Non-Collateral Dependent Loans
(dollars in thousands)	Balance		ACL		Balance		ACL		Total Nonaccrual Loans		Nonaccrual Loans with no ACL
March 31, 2025
Construction and land development	$	14,659	$	—	$	—	$	—	$	14,659	$	14,659
Real estate - other:
1-4 family residential	—		—		—		—		—		—
Multifamily residential	—		—		—		—		—		—
Commercial real estate and other	1,763		170		—		—		1,763		83
Commercial and industrial	4,685		769		1,673		659		6,358		348
Consumer	—		—		—		—		—		—
Total	$	21,107	$	939	$	1,673	$	659	$	22,780	$	15,090


	Nonaccrual Loans
	Collateral Dependent Loans				Non-Collateral Dependent Loans
(dollars in thousands)	Balance		ACL		Balance		ACL		Total Nonaccrual Loans		Nonaccrual Loans with no ACL
December 31, 2024
Construction and land development	$	9,659	$	—	$	—	$	—	$	9,659	$	9,659
Real estate - other:
1-4 family residential	2,895		—		—		—		2,895		2,895
Multifamily residential	—		—		—		—		—		—
Commercial real estate and other	8,915		820		—		—		8,915		—
Commercial and industrial	4,809		675		108		—		4,917		108
Consumer	—		—		—		—		—		—
Total	$	26,278	$	1,495	$	108	$	—	$	26,386	$	12,662

Modified Loans to Borrowers Experiencing Financial Difficulty

The following table presents the period-end amortized cost basis of modified loans to borrowers experiencing financial difficulty during the three months ended March 31, 2025. There were no loans that were modified during the three months ended March 31, 2024.


	Three Months Ended 03/31/2025
(dollars in thousands)	Term Extension		Total		Total as a % of Loan Class
Construction and land development	$	1,669	$	1,669	0.8	%




Commercial and industrial	348		348		0.1	%

Total	$	2,017	$	2,017	0.1	%

The following tables present the financial effect of loans to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2025. There were no loans that were modified during the three months ended March 31, 2024.

Three Months Ended 03/31/2025

(dollars in thousands)

Weighted-Average

Term Extension

(in Months)

Construction and land development

Commercial and industrial

The following tables present a payment aging analysis of the period-end amortized cost of loans to borrowers experiencing financial difficulty that were modified during the twelve month period ended March 31, 2025. There were no loans that were modified during the twelve month period ended March 31, 2024.


	Accruing Loans
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Nonaccrual		Current		Total
Construction and land development	$	—	$	—	$	—	$	—	$	—	$	1,669	$	1,669




Commercial and industrial	—		—		—		—		3,743		14,514		18,257

	$	—	$	—	$	—	$	—	$	3,743	$	16,183	$	19,926

During the three months ended March 31, 2025, defaults of loans that had been modified within the last 12 months were $358 thousand. During the three months ended March 31, 2024, there were no defaults of loans that had been modified within the last 12 months.

Collateral Dependent Loans

Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Estimates for costs to sell are included in the determination of the ACL when liquidation of the collateral is anticipated. In cases where the loan is well secured and the estimated value of the collateral exceeds the amortized cost of the loan, no ACL is recorded.

A summary of collateral dependent loans by collateral type as of March 31, 2025 and December 31, 2024 follows:


	Type of Collateral
(dollars in thousands)	Commercial Real Estate		Residential Real Estate		Business Assets
March 31, 2025
Construction and land development	$	—	$	14,659	$	—
Real estate - other:
1-4 family residential	—		—		—

Commercial real estate and other	—		1,763		—
Commercial and industrial	1,391		—		3,294

	$	1,391	$	16,422	$	3,294



December 31, 2024
Construction and land development	$	—	$	9,659	$	—
Real estate - other:
1-4 family residential	—		2,895		—

Commercial real estate and other	8,915		—		—
Commercial and industrial	1,402				3,407

	$	10,317	$	12,554	$	3,407

Allowance for Credit Losses - Loans

The ACL consists of: (i) a specific allowance established for CECL on loans individually evaluated, (ii) a quantitative allowance for current expected loan losses based on the portfolio and expected economic conditions over a reasonable and supportable forecast period that reverts back to long-term trends to cover the expected life of the loan, (iii) a qualitative allowance including management judgment to capture factors and trends that are not adequately reflected in the quantitative allowance, and (iv) the ACL for off-balance sheet credit exposure for unfunded loan commitments.

For prepayment and curtailment rates, the Company used its own historical quarterly prepayment and curtailment experience covering the period starting February 2021 through February 2025 to estimate the ACL. The Company used the probability-weighted two-scenario forecasts, representing a base-case scenario and one downside scenario, to estimate the ACL. The Company utilized economic forecasts released by Moody’s Analytics during the second week of March 2025. Other sources of economic forecasts and meeting minutes of the Federal Open Market Committee meeting were also considered by the Company when determining the scenario weighting. At March 31, 2025, modest adjustments were made to the Moody’s March 2025 U.S. baseline forecast based on a reassessment of policy actions, new data and market movements. Real GDP growth is expected to weaken starting in the second quarter of 2025 through first quarter of 2026 and slowly rebounded starting in the second quarter of 2026. Moody’s economic forecast assumed a 25 basis point interest rate cut in both September and December of 2025. The underlying assumptions in the Moody’s baseline economic forecasts remained consistent in the expectation that the Federal Reserve is expected to gradually reduce the policy rate to its neutral level of 3% by late 2026.

Moody's updated its baseline forecast, decreasing the real GDP projection from the previous quarter's estimate, bringing it to an annual average of 1.9% for 2025. Growth in 2025 was revised downward by 0.3% from 2.2%. For 2026, the national GDP was forecasted to be slightly higher at 1.7%. The Conference Board’s forecast for 2025 GDP is now 2.0%, down from 2.7% previously and in line with Moody’s Baseline scenario of 1.9%. The Conference Board’s 2026 GDP forecast of 1.6% compares to Moody’s 2026 Baseline forecast of 1.7%. The upward revision is now in line with Moody’s Baseline scenario while the Federal Reserve members median projection for GDP growth was 1.7% and 1.8% for 2025 and 2026, respectively.

Moody’s economic forecasts for California suggested California gross state product (“GSP”) growth of 1.6% in 2025, and rebounding to 1.8% in 2026. The report forecasts 2025 unemployment at 4.9%, and falling to 4.8% in 2026. Beacon Economics also forecasted the California unemployment rate falling to 5.1% from the second quarter of 2025 to the first quarter of 2026.

Moody’s downside scenario forecasted the economy to fall into a mild recession starting in the second quarter of 2025. The decline lasts for three quarters, and the peak-to-trough decline in real GDP is 1.0%. Despite the recession in the second quarter of 2025, rising inflation causes the Fed to raise the fed funds rate. It resumes easing in the third quarter of 2025 as the recession persists, and the Fed funds rate falls below the baseline at that point. The weakening in the economy causes the unemployment rate to rise in the first quarter of 2025. Moody’s downside scenario forecasted for California suggested the state unemployment rate would reach 7.91% in the first quarter of 2026 from the weakening economy. The outlook for GSP growth rate was adjusted lower at the near term in baseline and downside scenario. The other economic forecasts used in the ACL calculation were revised higher in the near term in baseline and downside scenario. These varied changes in key economic forecasts for California are expected to have a mixed impact on the Company's ACL.

Based on the above reviews and analyses, the Company decided to keep using the two probability-weighted scenario forecasts. The recommended weightings are based on the Federal Open Market Committee (“FOMC”) lowering the Fed funds rate by 100 basis points since its September 2024 meeting, inflation trending lower, strong recent jobs reports and increasing GDP forecasts suggesting more positive growth in the coming quarters. The Company opts to utilize solely the base-case scenario for the ACL model; however, given recent heightened domestic and geopolitical uncertainty and an inflation level that is still considerably above the Fed’s 2.0% target rate, it is prudent to assign a weighting to a downside scenario (S2) that considered the potential for rising inflation. Inflation is the most difficult economic variable to predict, as it is subject to a variety of factors and there are limited tools to control it.. A new presidential administration promised a change in U.S. economic policy, the effects of which are unknown and may potentially lead to higher inflation, as could other domestic and geopolitical developments. Incorporating the S2 scenario in our ACL model would expect to provide a hedge against the potential for increasing inflation in an uncertain economic environment.

During the first quarter of 2025, the Company updated its historical prepayment and curtailment rates analysis, which reflected a slight increase in prepayment rates and slight decrease in curtailment rates from the fourth quarter of 2024 primarily due to higher payoffs and lower paydowns.

Accrued interest receivable on loans, totaled $10.1 million and $11.7 million at March 31, 2025 and December 31, 2024, respectively, and is included within accrued interest receivable and other assets in the accompanying consolidated balance sheets. Accrued interest receivable is excluded from the ACL.

Allowance for Credit Losses - Unfunded Loan Commitments

The allowance for credit losses on unfunded credit commitments is maintained at a level that management believes to be sufficient to absorb estimated expected credit losses related to unfunded credit facilities. The Company evaluates the loss exposure for unfunded loan commitments to extend credit following the same principles used for the ACL, with consideration for experienced utilization rates on client credit lines and the inherently lower risk of unfunded loan commitments relative to disbursed commitments. The Company recognized a reversal of credit losses for unfunded loan commitments of $618 thousand for the three months ended March 31, 2025. There was a $17 thousand reversal of credit losses for unfunded loan commitments for the three months ended March 31, 2024. The reversal of credit losses for unfunded loan commitments is included in reversal of credit losses in the consolidated statements of operations. The reserve for unfunded loan commitments was $2.5 million and $3.1 million at March 31, 2025 and December 31, 2024, respectively. The reserve for unfunded loan commitments is included in accrued interest payable and other liabilities in the consolidated balance sheets.

A summary of the changes in the ACL for loans and unfunded commitments for the periods indicated follows:


	Three Months Ended March 31,
(dollars in thousands)	2025		2024
Allowance for loan losses (ALL)
Balance, beginning of period	$	50,540	$	22,569


Reversal of loan losses	(3,158)		(314)
Charge-offs	(3,159)		(1)
Recoveries	1,616		—
Net charge-offs	(1,543)		(1)
Balance, end of period	$	45,839	$	22,254
Reserve for unfunded loan commitments
Balance, beginning of period	$	3,103	$	933

Reversal of credit losses for unfunded loan commitments	(618)		(17)
Balance, end of period	2,485		916
Allowance for credit losses, end of period	$	48,324	$	23,170

A summary of changes in the ALL by loan portfolio segment for the periods indicated follows:


(dollars in thousands)	Construction and Land Development		Real Estate - Other		Commercial & Industrial		Consumer		Total


Three Months Ended March 31, 2025
Beginning of period	$	1,953	$	29,398	$	18,056	$	1,133	$	50,540


(Reversal of) provision for loan losses	(249)		(818)		(2,273)		182		(3,158)
Charge-offs	—		(1,654)		(1,232)		(273)		(3,159)
Recoveries	—		3		1,613		—		1,616
Net charge-offs	—		(1,651)		381		(273)		(1,543)
End of period	$	1,704	$	26,929	$	16,164	$	1,042	$	45,839









Three Months Ended March 31, 2024
Beginning of period	$	2,032	$	16,280	$	4,242	$	15	$	22,569

Provision for (reversal of) loan losses	101		293		(704)		(4)		(314)
Charge-offs	—		(1)		—		—		(1)
Recoveries	—		—		—		—		—
Net charge-offs	—		(1)		—		—		(1)
End of period	$	2,133	$	16,572	$	3,538	$	11	$	22,254

Other Real Estate Owned (“OREO”), Net

Real estate acquired by foreclosure or deed in lieu of foreclosure is recorded at fair value less costs to sell at the date of foreclosure, establishing a new cost basis by a charge to the ACL, if necessary. The Company had $4.1 million of foreclosed assets at March 31, 2025 and December 31, 2024.