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Note 5 - Loans and Allowance for Credit Losses - Loans

12 Months Ended

Dec. 31, 2023

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 5 - LOANS AND ALLOWANCE FOR CREDIT LOSSES - LOANS

The Company's loan portfolio consists primarily of loans to borrowers within the Los Angeles, California metropolitan area, the New York City metropolitan area, Chicago, Illinois metropolitan area and Las Vegas, Nevada. 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 and, as a result, the Company's loan and collateral portfolios are, to some degree, concentrated in those industries.

The types of loans in the Company's consolidated balance sheets as of December 31, 2023, and December 31, 2022 were as follows:

*(dollars in thousands)*	*2023*			*2022*
Loans: ⁽¹⁾
Construction and land development	$181,469			$276,876
Commercial real estate ⁽²⁾		1,167,857			1,312,132
Single-family residential mortgages		1,487,796			1,464,108
Commercial and industrial		130,096			201,223
SBA		52,074			61,411
Other loans		12,569			20,699
Total loans ⁽¹⁾	$	3,031,861		$	3,336,449
Allowance for loan losses		(41,903	)		(41,076	)
Total loans, net	$	2,989,958		$	3,295,373

(1)	net of discounts on acquired loans and deferred fees and costs
(2)	includes non-farm & non-residential real estate loans, multifamily resident and 1-4 family single-family residential loan for a business purpose

A summary of the changes in the ACL for the years indicated follows:

*(dollars in thousands)*	*2023*									*2022*									*2021 (1*								)
	*Allowance for loan losses*			*Reserve for unfunded loan commitments*			*Allowance for credit losses*			*Allowance for loan losses*			*Reserve for unfunded loan commitments*			*Allowance for credit losses*			*Allowance for loan losses*			*Reserve for unfunded loan commitments*			*Allowance for credit losses*
Beginning balance	$	41,076		$	1,156		$	42,232		$	32,912		$	1,203		$	34,115		$	29,337		$	1,383		$	30,720
ASU 2016-13 transition adjustment		—			—			—			2,135			1,045			3,180			—			—			—
Adjusted beginning balance	$	41,076		$	1,156		$	42,232		$	35,047		$	2,248		$	37,295		$	29,337		$	1,383		$	30,720
Provision/(reversal) for credit losses		3,878			(516	)		3,362			6,027			(1,092	)		4,935			3,959			(180	)		3,779
Less loans charged-off		(3,194	)		—			(3,194	)		(256	)		—			(256	)		(627	)		—			(627	)
Recoveries on loans charged-off		143			—			143			258			—			258			243			—			243
Ending balance	$	41,903		$	640		$	42,543		$	41,076		$	1,156		$	42,232		$	32,912		$	1,203		$	34,115

(1) Reserve was under the ALL method in accordance with ASC 450 and ASC 310.

The following tables present the activity in the ALL by portfolio segment for the years ended December 31, 2023 and 2022:

*(dollars in thousands)*
December 31, 2023	*Construction and land development*			*Commercial real estate*			*Single-family residential mortgages*			*Commercial and industrial*			*SBA*			*Other*			*Total*
Allowance for loan losses:
Beginning of year	$	2,638		$	17,657		$	17,640		$	1,804		$	621		$	716		$	41,076
(Reversals)/provisions for credit losses		(1,279	)		2,626			2,570			(458	)		636			(217	)		3,878
Charge-offs		(140	)		(2,537	)		(93	)		—			(62	)		(362	)		(3,194	)
Recoveries		—			80			—			2			1			60			143
Ending allowance balance	$	1,219		$	17,826		$	20,117		$	1,348		$	1,196		$	197		$	41,903

*(dollars in thousands)*
December 31, 2022	*Construction and land development*			*Commercial real estate*			*Single-family residential mortgages*		*Commercial and industrial*			*SBA*			*Other*			*Total*
Allowance for loan losses:
Beginning of year	$	4,150		$	16,603		$	7,839	$	2,813		$	980		$	527		$	32,912
ASU 2016-13 Transition Adjustment		314			(2,662	)		3,960		(188	)		(416	)		1,127			2,135
Adjusted beginning balance	$	4,464		$	13,941		$	11,799	$	2,625		$	564		$	1,654		$	35,047
(Reversals)/provisions for credit losses		(1,826	)		3,716			5,841		(818	)		(156	)		(730	)		6,027
Charge-offs		—			—			—		(5	)		(14	)		(237	)		(256	)
Recoveries		—			—			—		2			227			29			258
Ending allowance balance	$	2,638		$	17,657		$	17,640	$	1,804		$	621		$	716		$	41,076

The following table presents the activity in the ALL by portfolio segment for the year ended December 31, 2021, prior to the adoption of ASU 2016-13:

*(dollars in thousands)*
December 31, 2021	*Construction and land development*		*Commercial real estate*			*Single-family residential mortgages*			*Commercial and industrial*			*SBA*		*Other*			*Total*
Allowance for loan losses:
Beginning of year	$	2,472	$	13,719		$	8,486		$	3,690		$	927	$	43		$	29,337
Provisions/(reversals)		1,678		2,951			(647	)		(533	)		53		457			3,959
Charge-offs		—		(67	)		—			(501	)		—		(59	)		(627	)
Recoveries		—		—			—			157			—		86			243
Ending allowance balance	$	4,150	$	16,603		$	7,839		$	2,813		$	980	$	527		$	32,912

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, collateral adequacy, credit documentation, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as commercial real estate and commercial and industrial 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.

The following tables summarize the Company's loan held for investment as of December 31, 2023 and 2022 by loan portfolio segments, risk ratings and vintage year. The vintage year is the year of origination, renewal or major modification. Revolving loans that are converted to term loans presented in the table below are excluded from the term loans by vintage year columns.

*(dollars in thousands)*	*Term Loan by Vintage*
December 31, 2023	*2023*		*2022*		*2021*		*2020*		*2019*		*Prior*		*Revolving*		*Revolving Converted to Term During the Period*		*Total*
Real estate:
Construction and land development
Pass	$	127,602	$	25,880	$	12,168	$	3,919	$	192	$	32	$	—	$	—	$	169,793
Special mention		—		—		11,676		—		—		—		—		—		11,676
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	127,602	$	25,880	$	23,844	$	3,919	$	192	$	32	$	—	$	—	$	181,469
YTD gross write-offs	$	—	$	—	$	—	$	—	$	—	$	140	$	—	$	—	$	140
Commercial real estate
Pass	$	90,126	$	423,564	$	186,904	$	175,650	$	94,796	$	152,847	$	—	$	—	$	1,123,887
Special mention		—		—		—		—		7,719		4,880		—		—		12,599
Substandard		301		—		—		11,410		2,295		17,365		—		—		31,371
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	90,427	$	423,564	$	186,904	$	187,060	$	104,810	$	175,092	$	—	$	—	$	1,167,857
YTD gross write-offs	$	—	$	2,078	$	—	$	459	$	—	$	—	$	—	$	—	$	2,537
Single-family residential mortgages
Pass	$	156,372	$	593,539	$	239,502	$	125,346	$	83,002	$	265,050	$	1,720	$	—	$	1,464,531
Special mention		—		—		619		—		—		3,855		—		—		4,474
Substandard		—		719		758		4,985		545		11,740		44		—		18,791
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	156,372	$	594,258	$	240,879	$	130,331	$	83,547	$	280,645	$	1,764	$	—	$	1,487,796
YTD gross write-offs	$	—	$	—	$	—	$	93	$	—	$	—	$	—	$	—	$	93
Commercial:
Commercial and industrial
Pass	$	1,305	$	3,283	$	6,281	$	2,901	$	2,049	$	4,700	$	99,339	$	—	$	119,858
Special mention		—		—		—		—		—		—		2,737		—		2,737
Substandard		—		87		—		1,410		7		4,952		1,045		—		7,501
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	1,305	$	3,370	$	6,281	$	4,311	$	2,056	$	9,652	$	103,121	$	—	$	130,096
YTD gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
SBA
Pass	$	5,642	$	11,023	$	10,037	$	2,324	$	4,588	$	13,783	$	—	$	—	$	47,397
Special mention		—		—		331		—		—		1,025		—		—		1,356
Substandard		—		—		—		—		85		3,236		—		—		3,321
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	5,642	$	11,023	$	10,368	$	2,324	$	4,673	$	18,044	$	—	$	—	$	52,074
YTD gross write-offs	$	—	$	—	$	—	$	—	$	—	$	62	$	—	$	—	$	62
Other:
Pass	$	193	$	2,727	$	8,813	$	674	$	29	$	—	$	18	$	—	$	12,454
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		80		28		7		—		—		—		—		115
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	193	$	2,807	$	8,841	$	681	$	29	$	—	$	18	$	—	$	12,569
YTD gross write-offs	$	—	$	79	$	273	$	10	$	—	$	—	$	—	$	—	$	362
Total by risk rating:
Pass	$	381,240	$	1,060,016	$	463,705	$	310,814	$	184,656	$	436,412	$	101,077	$	—	$	2,937,920
Special mention		—		—		12,626		—		7,719		9,760		2,737		—		32,842
Substandard		301		886		786		17,812		2,932		37,293		1,089		—		61,099
Doubtful		—		—		—		—		—		—		—		—		—
Total loans	$	381,541	$	1,060,902	$	477,117	$	328,626	$	195,307	$	483,465	$	104,903	$	—	$	3,031,861
Total YTD gross write-offs	$	—	$	2,157	$	273	$	562	$	—	$	202	$	—	$	—	$	3,194

*(Dollars in thousands)*	*Term Loan by Vintage*
December 31, 2022	*2022*		*2021*		*2020*		*2019*		*2018*		*Prior*		*Revolving*		*Revolving Converted to Term During the Period*		*Total*
Real estate:
Construction and land development
Pass	$	125,216	$	52,262	$	99,016	$	201	$	—	$	40	$	—	$	—	$	276,735
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		141		—		—		141
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	125,216	$	52,262	$	99,016	$	201	$	—	$	181	$	—	$	—	$	276,876
YTD gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate
Pass	$	479,304	$	293,058	$	195,051	$	110,442	$	73,013	$	117,068	$	—	$	—	$	1,267,936
Special mention		—		—		9,280		—		—		—		—		—		9,280
Substandard		287		—		8,652		2,329		222		23,426		—		—		34,916
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	479,591	$	293,058	$	212,983	$	112,771	$	73,235	$	140,494	$	—	$	—	$	1,312,132
YTD gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Single-family residential mortgages
Pass	$	637,893	$	255,529	$	137,964	$	96,355	$	134,415	$	182,893	$	2,992	$	—	$	1,448,041
Special mention		—		—		—		—		3,925		—		—		—		3,925
Substandard		—		—		3,954		—		7,631		452		105		—		12,142
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	637,893	$	255,529	$	141,918	$	96,355	$	145,971	$	183,345	$	3,097	$	—	$	1,464,108
YTD gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial:
Commercial and industrial
Pass	$	8,038	$	7,513	$	4,448	$	3,470	$	1,016	$	8,827	$	129,483	$	86	$	162,881
Special mention		—		5,987		—		—		1,638		17,805		3,577		—		29,007
Substandard		—		—		1,600		16		—		339		7,380		—		9,335
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	8,038	$	13,500	$	6,048	$	3,486	$	2,654	$	26,971	$	140,440	$	86	$	201,223
YTD gross write-offs	$	—	$	—	$	—	$	5	$	—	$	—	$	—	$	—	$	5
SBA
Pass	$	14,922	$	10,664	$	6,496	$	4,688	$	2,579	$	16,793	$	—	$	—	$	56,142
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		91		1,017		4,161		—		—		5,269
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	14,922	$	10,664	$	6,496	$	4,779	$	3,596	$	20,954	$	—	$	—	$	61,411
YTD gross write-offs	$	—	$	—	$	—	$	—	$	—	$	14	$	—	$	—	$	14
Other:
Pass	$	4,224	$	14,684	$	1,505	$	90	$	7	$	—	$	26	$	—	$	20,536
Special mention		—		—		—		—		—		—		—		—		—
Substandard		105		48		10		—		—		—		—		—		163
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	4,329	$	14,732	$	1,515	$	90	$	7	$	—	$	26	$	—	$	20,699
YTD gross write-offs	$	—	$	237	$	—	$	—	$	—	$	—	$	—	$	—	$	237
Total by risk rating:
Pass	$	1,269,597	$	633,710	$	444,480	$	215,246	$	211,030	$	325,621	$	132,501	$	86	$	3,232,271
Special mention		—		5,987		9,280		—		5,563		17,805		3,577		—		42,212
Substandard		392		48		14,216		2,436		8,870		28,519		7,485		—		61,966
Doubtful		—		—		—		—		—		—		—		—		—
Total loans	$	1,269,989	$	639,745	$	467,976	$	217,682	$	225,463	$	371,945	$	143,563	$	86	$	3,336,449
Total YTD gross write-offs	$	—	$	237	$	—	$	5	$	—	$	14	$	—	$	—	$	256

The following tables present the aging of the recorded investment in past-due loans as of December 31, 2023 and 2022 by class of loans. Past due loans presented in tables below also include non-accrual loans.

*(dollars in thousands)*	30-59		60-89		*90 Days*		*Total*		*Loans Not*				*Non-Accrual*
December 31, 2023	*Days*		*Days*		*Or More*		*Past Due*		*Past Due*		*Total Loans*		Loans ⁽¹⁾
Real estate:
Construction and land development	$	—	$	—	$	—	$	—	$	181,469	$	181,469	$	—
Commercial real estate		1,341		216		1,582		3,139		1,164,718		1,167,857		10,569
Single-family residential mortgages		9,050		5,795		15,134		29,979		1,457,817		1,487,796		18,103
Commercial:
Commercial and industrial		1,544		—		854		2,398		127,698		130,096		854
SBA		356		—		2,085		2,441		49,633		52,074		2,085
Other:		160		20		8		188		12,381		12,569		8
	$	12,451	$	6,031	$	19,663	$	38,145	$	2,993,716	$	3,031,861	$	31,619
Real estate:
Single-family residential mortgage loans held for sale	$	—	$	—	$	—	$	—	$	1,911	$	1,911	$	—

________________

(1)

Included in total loans

*(dollars in thousands)*	30-59		60-89		*90 Days*		*Total*		*Loans Not*				*Non-Accrual*
December 31, 2022	*Days*		*Days*		*Or More*		*Past Due*		*Past Due*		*Total Loans*		Loans ⁽¹⁾
Real estate:
Construction and land development	$	—	$	—	$	141	$	141	$	276,735	$	276,876	$	141
Commercial real estate		558		240		1,191		1,989		1,310,143		1,312,132		13,189
Single-family residential mortgages		12,764		2,555		4,100		19,419		1,444,689		1,464,108		5,936
Commercial:
Commercial and industrial		—		545		7		552		200,671		201,223		713
SBA		150		1,017		1,228		2,395		59,016		61,411		2,245
Other:		154		76		99		329		20,370		20,699		99
	$	13,626	$	4,433	$	6,766	$	24,825	$	3,311,624	$	3,336,449	$	22,323
Real estate:
Single-family residential mortgage loans held for sale	$	—	$	—	$	—	$	—	$	—	$	—	$	—

(1)

Included in total loans

The Company has no loans that are 90 days or more past due and still accruing at December 31, 2023 and December 31, 2022.

The following tables present the loans on nonaccrual status as of December 31, 2023 and 2022:

	*Nonaccrual*
	*With No*
*(dollars in thousands)*	*Allowance*
December 31, 2023	*for Credit Loss*		*Nonaccrual*
Real estate:
Commercial real estate		10,569		10,569
Single-family residential mortgages		18,103		18,103
Commercial:
Commercial and industrial		610		854
SBA		937		2,085
Other:		—		8
Total	$	30,219	$	31,619

	Nonaccrual
	With No
*(dollars in thousands)*	*Allowance*
December 31, 2022	*for Credit Loss*		*Nonaccrual*
Real estate:
Construction and land development	$	141	$	141
Commercial real estate		1,191		13,189
Single-family residential mortgages		5,936		5,936
Commercial:
Commercial and industrial		713		713
SBA		2,245		2,245
Other:		51		99
Total	$	10,277	$	22,323

At December 31, 2023, nonaccrual commercial real estate loans comprised of $8.8 million collateralized by office, $1.4 million by warehouse, and $360,000 by other.

No interest income was recognized on a cash basis during the years ended December 31, 2023 and 2022. We did not recognize any interest income on nonaccrual loans during the years ended December 31, 2023 and December 31, 2022 while the loans were in nonaccrual status.

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, or interest rate reduction. The Company may provide multiple types of concessions on one loan. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for loan losses.

There were no loans that were both experiencing financial difficulty and modified during the year ended December 31, 2023 and 2022.

There were no commitments to lend additional amounts at December 31, 2023 and 2022 to customers with outstanding modified loans. There were no nonaccrual loans that were modified during the past twelve months that had payment defaults during the periods.