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Loans and Allowance for Credit Losses on Loans
 9 Months Ended
Sep. 30, 2025
Receivables [Abstract]  
Loans and Allowance for Credit Losses on Loans Loans and Allowance for Credit Losses on Loans
The following table presents the amortized cost of loans by portfolio class as of September 30, 2025 and December 31, 2024.

(in thousands)September 30, 2025December 31, 2024
Commercial and industrial$154,303 $152,263 
Real estate:
  Commercial owner-occupied313,996 321,962 
  Commercial non-owner occupied1,324,263 1,273,596 
  Construction15,869 36,970 
  Home equity95,872 88,325 
  Other residential122,924 143,207 
Installment and other consumer loans63,127 66,933 
Total loans, at amortized cost 1
2,090,354 2,083,256 
Allowance for credit losses on loans(29,853)(30,656)
Total loans, net of allowance for credit losses on loans$2,060,501 $2,052,600 
1 Amortized cost includes net deferred loan origination costs of $2.6 million and $2.5 million at September 30, 2025 and December 31, 2024, respectively. Amounts are also net of unrecognized purchase discounts of $1.0 million and $1.1 million at September 30, 2025 and December 31, 2024, respectively. Amortized cost excludes accrued interest, which totaled $6.6 million and $6.8 million at September 30, 2025 and December 31, 2024, respectively, and is included in interest receivable and other assets in the consolidated statements of condition.

Lending Risks

Commercial and Industrial Loans - Commercial loans are generally made to established small and mid-sized businesses to provide financing for their growth and working capital needs, equipment purchases and acquisitions.  Management examines historical, current, and projected cash flows to determine the ability of the borrower to repay obligations as agreed. Commercial loans are made based primarily on the identified cash flows of the borrower and secondarily on the underlying collateral and guarantor support. The cash flows of borrowers, however, may not occur as expected, and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed, such as accounts receivable and inventory, and typically include personal guarantees. We target stable businesses with guarantors who provide additional sources of repayment and have proven to be resilient in periods of economic stress.  A weakened economy, and resultant decreased consumer and/or business spending, may have an effect on the credit quality of commercial loans.
Commercial Real Estate Loans - Commercial real estate loans, which include income producing investment properties and owner-occupied real estate used for business purposes, are subject to underwriting standards and processes similar to commercial loans discussed above. We underwrite these loans to be repaid from cash flow from either the business or investment property and supported by real property collateral. Underwriting standards for commercial real estate loans include, but are not limited to, debt coverage and loan-to-value ratios. Furthermore, a large majority of our loans are guaranteed by the owners of the properties. Conditions in the real estate markets or a downturn in the general economy may adversely affect our commercial real estate loans. In the event of a vacancy, we expect guarantors to carry the loans until they find a replacement tenant.  The owner's substantial equity investment provides a strong economic incentive to continue to support the commercial real estate projects. As such, we have generally experienced a relatively low level of loss and delinquencies in this portfolio.

Construction Loans - Construction loans are generally made to developers and builders to finance construction, renovation and occasionally land acquisitions in anticipation of near-term development. Construction loans include interest reserves that are used for the payment of interest during the development and marketing periods and are capitalized as part of the loan balance. When a construction loan is placed on non-accrual status before the depletion of the interest reserve, we apply the interest funded by the interest reserve against the loan's principal balance. These loans are underwritten after evaluation of the borrower's financial strength, reputation, prior track record, and independent appraisals. We monitor all construction projects to determine whether they are on schedule, completed as planned and in accordance with the approved construction budgets. Significant events can affect the construction industry, including: the inherent volatility of real estate markets and vulnerability to delays due to weather, change orders, inability to obtain construction permits, labor or material shortages, and price changes. Estimates of construction costs and value associated with the completed project may be inaccurate. Repayment of construction loans is largely dependent on the ultimate success of the project.

Consumer Loans - Consumer loans primarily consist of home equity lines of credit, other residential loans, floating homes, and indirect luxury auto loans, along with a small number of installment loans. Our other residential loans include tenancy-in-common fractional interest loans ("TIC") located almost entirely in San Francisco County. We originate consumer loans utilizing credit score information, debt-to-income ratio and loan-to-value ratio analysis. Diversification among consumer loan types, coupled with relatively small loan amounts that are spread across many individual borrowers, mitigates risk. We do not originate sub-prime residential mortgage loans, nor is it our practice to underwrite loans commonly referred to as "Alt-A mortgages," the characteristics of which are reduced documentation, borrowers with low FICO scores or collateral with high loan-to-value ratios.

Credit Quality Indicators
 
We use a risk rating system to evaluate asset quality, and to identify and monitor credit risk in individual loans, and in the loan portfolio. Our definitions of “Special Mention” risk graded loans, or worse, are consistent with those used by the Federal Deposit Insurance Corporation ("FDIC").  Our internally assigned grades are as follows:

Pass and Watch - Loans to borrowers of acceptable or better credit quality. Borrowers in this category demonstrate fundamentally sound financial positions, repayment capacity, credit history and management expertise.  Loans in this category must have an identifiable and stable source of repayment and meet the Bank’s policy regarding debt-service-coverage ratios.  These borrowers are capable of sustaining normal economic, market or operational setbacks without significant financial consequences.  Negative external industry factors are generally not present.  The loan may be secured, unsecured or supported by non-real estate collateral for which the value is more difficult to determine and/or marketability is more uncertain. This category also includes “Watch” loans, where the primary source of repayment has been delayed. “Watch” is intended to be a transitional grade, with either an upgrade or downgrade within a reasonable period.

Special Mention - Potential weaknesses that deserve close attention. If left uncorrected, those potential weaknesses may result in deterioration of the payment prospects for the asset. Special Mention assets do not present sufficient risk to warrant adverse classification.

Substandard - Inadequately protected by either the current sound worth and paying capacity of the obligor or the collateral pledged, if any. A Substandard asset has well-defined weaknesses that jeopardize the liquidation of the debt. Substandard assets are characterized by the distinct possibility that we will sustain some loss if such weaknesses or deficiencies are not corrected. Well-defined weaknesses include adverse trends or developments of the borrower’s financial condition, managerial weaknesses and/or significant collateral deficiencies.
Doubtful - Critical weaknesses that make collection or liquidation in full improbable. There may be specific pending events that work to strengthen the asset; however, the amount or timing of the loss may not be determinable. Pending events generally occur within one year of the asset being classified as Doubtful. Examples include: merger, acquisition, or liquidation; capital injection; guarantee; perfecting liens on additional collateral; and refinancing. Such loans are placed on non-accrual status and usually are collateral-dependent.

We regularly review our credits for accuracy of risk grades whenever we receive new information and at each quarterly and year-end reporting period. Borrowers are generally required to submit financial information at regular intervals. Typically, commercial borrowers with lines of credit are required to submit financial information with reporting intervals ranging from monthly to annually depending on credit size, risk and complexity. In addition, investor commercial real estate borrowers with loans exceeding a certain dollar threshold are usually required to submit rent rolls or property income statements annually. We monitor construction loans monthly. We review home equity and other consumer loans based on delinquency. We also review loans graded “Watch” or worse, regardless of loan type, no less than quarterly.

The following tables present the loan portfolio by loan portfolio class, origination/renewal year and internal risk rating as of September 30, 2025 and December 31, 2024. The current year vintage table reflects year to date gross charge-offs by loan portfolio class and year of origination. Generally, existing term loans that were re-underwritten are reflected in the table in the year of renewal. Lines of credit that have a conversion feature at the time of origination, such as construction to perm loans, are presented by year of origination.

(in thousands)Term Loans - Amortized Cost by Origination YearRevolving Loans Amortized Cost
September 30, 202520252024202320222021PriorTotal
Commercial and industrial:
Pass and Watch$17,685 $7,774 $16,188 $6,586 $843 $23,629 $71,751 $144,456 
Special Mention— — — — — 132 — 132 
Substandard— 478 — 2,793 — — 6,444 9,715 
Total commercial and industrial$17,685 $8,252 $16,188 $9,379 $843 $23,761 $78,195 $154,303 
Gross current period charge-offs$— $— $— $— $— $— $(53)$(53)
Commercial real estate, owner-occupied:
Pass and Watch$27,063 $12,206 $12,480 $40,144 $43,430 $148,185 $272 $283,780 
Special Mention— — $369 — 18,336 5,332 — 24,037 
Substandard1,515 — 94 3,176 — 1,394 — 6,179 
Total commercial real estate, owner-occupied$28,578 $12,206 $12,943 $43,320 $61,766 $154,911 $272 $313,996 
Commercial real estate, non-owner occupied:
Pass and Watch$135,256 $102,525 $55,282 $160,497 $192,643 $569,725 $11,373 $1,227,301 
Special Mention3,529 15,249 — — — 45,572 — 64,350 
Substandard— — — — — 32,612 — 32,612 
Total commercial real estate, non-owner occupied$138,785 $117,774 $55,282 $160,497 $192,643 $647,909 $11,373 $1,324,263 
Gross current period charge-offs$— $— $— $— $(809)$— $— $(809)
(in thousands)Term Loans - Amortized Cost by Origination YearRevolving Loans Amortized Cost
September 30, 202520252024202320222021PriorTotal
Construction:
Pass and Watch$4,896 $10,973 $— $— $— $— $— $15,869 
Total construction$4,896 $10,973 $— $— $— $— $— $15,869 
Home equity:
Pass and Watch$99 $76 $13 $— $— $742 $94,328 $95,258 
Substandard— — — — — 165 449 614 
Total home equity$99 $76 $13 $— $— $907 $94,777 $95,872 
Other residential:
Pass and Watch$2,381 $22,641 $16,663 $17,850 $10,780 $52,535 $— $122,850 
Substandard— — 74 — — — — 74 
Total other residential$2,381 $22,641 $16,737 $17,850 $10,780 $52,535 $— $122,924 
Installment and other consumer:
Pass and Watch$9,657 $14,570 $11,380 $8,677 $7,139 $9,912 $1,606 $62,941 
Substandard— — 176 — — 10 — 186 
Total installment and other consumer$9,657 $14,570 $11,556 $8,677 $7,139 $9,922 $1,606 $63,127 
Gross current period charge-offs$— $— $— $— $— $(15)$(1)$(16)
Total loans:
Pass and Watch$197,037 $170,765 $112,006 $233,754 $254,835 $804,728 $179,330 $1,952,455 
Total Special Mention$3,529 $15,249 $369 $— $18,336 $51,036 $— $88,519 
Total Substandard$1,515 $478 $344 $5,969 $— $34,181 $6,893 $49,380 
Totals$202,081 $186,492 $112,719 $239,723 $273,171 $889,945 $186,223 $2,090,354 
Total gross current period charge-offs$— $— $— $— $(809)$(15)$(54)$(878)

(in thousands)Term Loans - Amortized Cost by Origination YearRevolving Loans Amortized Cost
December 31, 202420242023202220212020PriorTotal
Commercial and industrial:
Pass and Watch$9,951 $20,282 $7,742 $1,371 $2,650 $27,487 $71,212 $140,695 
Special Mention598 — — — 5 221 7,286 8,110 
Substandard— — 2,793 — — — 665 3,458 
Total commercial and industrial$10,549 $20,282 $10,535 $1,371 $2,655 $27,708 $79,163 $152,263 
Commercial real estate, owner-occupied:
Pass and Watch$14,638 $13,386 $43,381 $44,536 $41,160 $130,197 $169 $287,467 
Special Mention— 378 — 18,870 804 9,499 — 29,551 
Substandard— — 2,110 — — 2,834 — 4,944 
Total commercial real estate, owner-occupied$14,638 $13,764 $45,491 $63,406 $41,964 $142,530 $169 $321,962 
Commercial real estate, non-owner occupied:
Pass and Watch$119,053 $64,906 $162,804 $196,661 $179,060 $442,574 $9,178 $1,174,236 
Special Mention18,343 — 2,736 2,097 729 39,888 — 63,793 
Substandard— 497 — 2,127 — 32,943 — 35,567 
Total commercial real estate, non-owner occupied$137,396 $65,403 $165,540 $200,885 $179,789 $515,405 $9,178 $1,273,596 
Construction:
Pass and Watch$18,128 $— $11,380 $— $— $— $— $29,508 
Special Mention7,462 — — — — — — 7,462 
Total construction$25,590 $— $11,380 $— $— $— $— $36,970 
Home equity:
Pass and Watch$94 $13 $— $— $— $968 $86,337 $87,412 
Substandard— — — — — 174 739 913 
Total home equity$94 $13 $— $— $— $1,142 $87,076 $88,325 
(in thousands)Term Loans - Amortized Cost by Origination YearRevolving Loans Amortized Cost
December 31, 202420242023202220212020PriorTotal
Other residential:
Pass and Watch$35,390 $17,267 $19,682 $12,989 $24,378 $33,501 $— $143,207 
Total other residential$35,390 $17,267 $19,682 $12,989 $24,378 $33,501 $— $143,207 
Installment and other consumer:
Pass and Watch$17,525 $15,429 $10,841 $7,798 $2,788 $10,901 $1,429 $66,711 
Substandard— — — 207 — 15 — 222 
Total installment and other consumer$17,525 $15,429 $10,841 $8,005 $2,788 $10,916 $1,429 $66,933 
Gross current period charge-offs$— $(14)$— $(39)$— $(1)$(4)$(58)
Total loans:
Pass and Watch$214,779 $131,283 $255,830 $263,355 $250,036 $645,628 $168,325 $1,929,236 
Total Special Mention$26,403 $378 $2,736 $20,967 $1,538 $49,608 $7,286 $108,916 
Total Substandard$— $497 $4,903 $2,334 $— $35,966 $1,404 $45,104 
Totals$241,182 $132,158 $263,469 $286,656 $251,574 $731,202 $177,015 $2,083,256 

The following table shows the amortized cost of loans by portfolio class, payment aging and non-accrual status as of September 30, 2025 and December 31, 2024.
Loan Aging Analysis by Class
(in thousands)Commercial and industrialCommercial real estate, owner-occupiedCommercial real estate, non-owner occupiedConstructionHome equityOther residentialInstallment and other consumerTotal
September 30, 2025        
 30-59 days past due$248 $— $9,556 $— $407 $— $272 $10,483 
 60-89 days past due50 — 437 — — — 146 633 
 90 days or more past due 1
3,488 375 8,118 — 148 74 185 12,388 
Total past due3,786 375 18,111 — 555 74 603 23,504 
Current150,517 313,621 1,306,152 15,869 95,317 122,850 62,524 2,066,850 
Total loans 1
$154,303 $313,996 $1,324,263 $15,869 $95,872 $122,924 $63,127 $2,090,354 
Non-accrual loans 2
$3,488 $1,488 $25,701 $— $553 $74 $185 $31,489 
Non-accrual loans with no allowance$— $1,488 $8,831 $— $553 $— $185 $11,057 
December 31, 2024        
 30-59 days past due$203 $208 $718 $— $738 $— $415 $2,282 
 60-89 days past due— 559 — — 186 — 7 752 
 90 days or more past due 1
2,793 113 10,742 — 248 — 8 13,904 
Total past due2,996 880 11,460 — 1,172 — 430 16,938 
Current149,267 321,082 1,262,136 36,970 87,153 143,207 66,503 2,066,318 
Total loans 1
$152,263 $321,962 $1,273,596 $36,970 $88,325 $143,207 $66,933 $2,083,256 
Non-accrual loans 2
$2,845 $1,537 $28,525 $— $752 $— $222 $33,881 
Non-accrual loans with no allowance$— $1,537 $497 $— $752 $— $207 $2,993 
1 There were no non-performing loans over 90 days past due and accruing interest as of September 30, 2025 or December 31, 2024.
2 None of the non-accrual loans as of September 30, 2025 or December 31, 2024 were earning interest on a cash or accrual basis. We reversed $5 thousand and $49 thousand in accrued interest income for loans that were placed on non-accrual status during the three and nine months ended September 30, 2025, respectively. We reversed accrued interest income of $257 thousand and $523 thousand for loans that were placed on non-accrual status during the three and nine months ended September 30, 2024, respectively.
Collateral Dependent Loans

The following table presents the amortized cost basis of individually analyzed collateral-dependent loans, which were all on non-accrual status, by portfolio class at September 30, 2025 and December 31, 2024.
Amortized Cost by Collateral Type
(in thousands)Commercial Real EstateResidential Real EstateOther
Total 1
Allowance for Credit Losses
September 30, 2025
Commercial real estate, owner-occupied$1,554 $— $— $1,554 $— 
Commercial real estate, non-owner occupied26,012 — — 26,012 7,307 
Home equity— 1,456 — 1,456 — 
Other residential— 282 — 282 36 
Total$27,566 $1,738 $— $29,304 $7,343 
December 31, 2024
Commercial and industrial$52 $— $— $52 $52 
Commercial real estate, owner-occupied1,537 — — 1,537 — 
Commercial real estate, non-owner occupied28,525 — — 28,525 7,933 
Home equity752 752 
Installment and other consumer— — 222 222 15 
Total$30,114 $752 $222 $31,088 $8,000 
1 There were no collateral-dependent residential real estate mortgage loans in process of foreclosure or in substance repossessed at September 30, 2025 and December 31, 2024. The weighted average loan-to-value of real estate secured collateral dependent loans was approximately 104% at September 30, 2025 and 115% at December 31, 2024.

Loan Modifications to Borrowers Experiencing Financial Difficulty


The following table summarizes the amortized cost of loans as of September 30, 2025 and September 30, 2024 that were modified during the three months and nine months ended September 30, 2025 and during the nine months ended September 30, 2024, by portfolio class and type of modification granted. There were no modifications of loans during the three months ended September 30, 2024 requiring disclosure.

(in thousands)Term ExtensionTotal ModificationsPercent of Portfolio Class Total
Three months ended September 30, 2025
Commercial owner-occupied1,515 1,515 0.5 %
Total$1,515 $1,515 
Nine months ended September 30, 2025
Commercial owner-occupied1,515 1,515 0.5 %
Commercial non-owner occupied3,424 3,424 0.3 %
Total$4,939 $4,939 
(in thousands)Term ExtensionTotal ModificationsPercent of Portfolio Class Total
Nine months ended September 30, 2024
Home equity192 192 0.2 %
Total$192 $192 
As of September 30, 2025 and September 30, 2024, there were no unfunded loan commitments for loans that were modified during the period presented.

The following table summarizes the financial effect of loan modifications presented in the tables above during the three and nine months ended September 30, 2025 and September 30, 2024 by portfolio class.

Weighted-Average Term Extension (in years)
Three months ended September 30, 2025
Commercial owner-occupied0.5
Nine months ended September 30, 2025
Commercial owner-occupied0.5
Commercial non-owner occupied1.2
Weighted-Average Term Extension (in years)
Nine months ended September 30, 2024
Home Equity6.5

The loan modifications did not significantly impact the determination of the allowance for credit losses on loans during the three and nine months ended September 30, 2025 and September 30, 2024.

The Bank closely monitors the performance of the modified loans to understand the effectiveness of its modification efforts. The following table summarizes the amortized cost and payment status of loans as of September 30, 2025 and September 30, 2024 that were modified during the three and nine months ended September 30, 2025 and September 30, 2024 by portfolio class.
(in thousands)Current30-59 Days Past Due60-89 Days Past Due90 Days or More Past DueTotalNon-Accrual
Three months ended September 30, 2025
Commercial owner occupied1,515 — — — 1,515 — 
Total$1,515 $— $— $— $1,515 $— 
Nine months ended September 30, 2025
Commercial owner-occupied1,515 — — — 1,515 — 
Commercial non-owner occupied3,424 — — — 3,424 712 
Total$4,939 $— $— $— $4,939 $712 
(in thousands)Current30-59 Days Past Due60-89 Days Past Due90 Days or More Past DueTotalNon-Accrual
Nine months ended September 30, 2024
Home equity192 — — — 192 117 
Total$192 $— $— $— $192 $117 

There were no loans to borrowers experiencing financial difficulty that were modified within the three and nine months ended September 30, 2025 and September 30, 2024 that had subsequently defaulted (i.e., fully or partially charged-off or became 90 days or more past due).
Allocation of the Allowance for Credit Losses on Loans

The following table presents the details of the allowance for credit losses on loans segregated by loan portfolio class as of September 30, 2025 and December 31, 2024.

Allocation of the Allowance for Credit Losses on Loans
(in thousands)Commercial and industrialCommercial real estate, owner-occupiedCommercial real estate, non-owner occupiedConstructionHome equityOther residentialInstallment and other consumerUnallocatedTotal
September 30, 2025        
Modeled expected credit losses$1,307 $1,599 $7,916 $39 $701 $1,168 $754 $— $13,484 
Qualitative adjustments543 866 5,940 190 66 2 227 1,171 9,005 
Specific allocations43 — 7,301 — — 20 — — 7,364 
Total$1,893 $2,465 $21,157 $229 $767 $1,190 $981 $1,171 $29,853 
December 31, 2024        
Modeled expected credit losses$759 $1,241 $7,632 $41 $620 $1,133 $625 $— $12,051 
Qualitative adjustments672 1,120 6,528 597 64 8 268 1,255 10,512 
Specific allocations145 — 7,933 — — — 15 — 8,093 
Total$1,576 $2,361 $22,093 $638 $684 $1,141 $908 $1,255 $30,656 

Allowance for Credit Losses on Loans Rollforward

The following table discloses activity in the allowance for credit losses on loans for the periods presented.

Allowance for Credit Losses on Loans Rollforward
(in thousands)Commercial and industrialCommercial real estate, owner-occupiedCommercial real estate, non-owner occupiedConstructionHome equityOther residentialInstallment and other consumerUnallocatedTotal
Three months ended September 30, 2025
Beginning balance$1,608 $2,402 $21,516 $384 $783 $1,110 $871 $1,180 $29,854 
Provision (Reversal)286 63 (359)(155)(16)80 110 (9)— 
(Charge-offs)(1)— — — — — — — (1)
Recoveries— — — — — — — — — 
Ending balance$1,893 $2,465 $21,157 $229 $767 $1,190 $981 $1,171 $29,853 
Three months ended September 30, 2024
Beginning balance$1,876 $2,408 $22,165 $874 $650 $769 $910 $1,023 $30,675 
(Reversal) Provision(158)(63)(65)(214)(3)376 10 117 — 
(Charge-offs)— — — — — — — — — 
Recoveries— — — — — — — — — 
Ending balance$1,718 $2,345 $22,100 $660 $647 $1,145 $920 $1,140 $30,675 
Nine months ended September 30, 2025
Beginning balance$1,576 $2,361 $22,093 $638 $684 $1,141 $908 $1,255 $30,656 
Provision (Reversal)370 104 (127)(409)83 49 89 (84)75 
(Charge-offs)(53)— (809)— — — (16)— (878)
Recoveries— — — — — — — — — 
Ending balance$1,893 $2,465 $21,157 $229 $767 $1,190 $981 $1,171 $29,853 
Nine months ended September 30, 2024
Beginning balance$1,712 $2,476 $14,933 $1,832 $552 $653 $976 $2,038 $25,172 
Provision (Reversal)38 (131)7,167 (1,172)95 492 (41)(898)5,550 
(Charge-offs)(33)— — — — — (18)— (51)
Recoveries1 — — — — — 3 — 4 
Ending balance$1,718 $2,345 $22,100 $660 $647 $1,145 $920 $1,140 $30,675 
Pledged Loans

Our 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 $1.372 billion and $1.351 billion at September 30, 2025 and December 31, 2024, respectively. In addition, we pledge eligible residential loans, which totaled $101.1 million and $110.0 million
at September 30, 2025 and December 31, 2024, respectively, to secure our borrowing capacity with the Federal Reserve Bank ("FRB"). For additional information, see Note 6, Borrowings.

Related Party Loans
 
The Bank has, and expects to have in the future, banking transactions in the ordinary course of its business with directors, officers, principal shareholders and their businesses or associates. These transactions, including loans, are granted on substantially the same terms, including interest rates and collateral on loans, as those prevailing at the same time for comparable transactions with persons not related to us. Likewise, these transactions do not involve more than the normal risk of collectability or present other unfavorable features. Related party loans totaled $3.7 million and $4.1 million as of September 30, 2025 and December 31, 2024, respectively. In addition, undisbursed commitments to related parties totaled $10 thousand and $211 thousand as of September 30, 2025 and December 31, 2024, respectively.