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Note 4 - Loans and Allowance for Credit Losses - Loans

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

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

NOTE 4 - LOANS AND ALLOWANCE FOR CREDIT LOSSES - LOANS

Our loan portfolio consists primarily of loans to borrowers within the Southern California metropolitan area, the New York City metropolitan area, Chicago (Illinois), Las Vegas (Nevada), Edison (New Jersey) and Honolulu (Hawaii). Although we seek 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 our market area and, as a result, our loan and collateral portfolios are, to some degree, concentrated in those industries.

The following table presents the balances in our loans held for investment (“HFI”) portfolio as of December 31, 2024, and December 31, 2023:

		*2024*				*2023*
Loans HFI: ⁽¹⁾		*(dollars in thousands)*
Real Estate:
Construction and land development		$	173,290			$	181,469
Commercial real estate ⁽²⁾			1,201,420				1,167,857
Single-family residential mortgages			1,494,022				1,487,796
Commercial:
Commercial and industrial			129,585				130,096
SBA			47,263				52,074
Other			7,650				12,569
Total loans HFI ⁽¹⁾		$	3,053,230			$	3,031,861
Allowance for loan losses			(47,729	)			(41,903	)
Total loans HFI, net		$	3,005,501			$	2,989,958

(1)	Net of premiums(discounts) on acquired loans and deferred (fees) and costs
(2)	Includes non-farm and non-residential real estate loans, multifamily residential and single-family residential loans for a business purpose

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

		*2024*												*2023*												*2022*
		*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*
		*(dollars in thousands)*
Beginning balance		$	41,903			$	640			$	42,543			$	41,076			$	1,156			$	42,232			$	32,912			$	1,203			$	34,115
ASU 2016-13 transition adjustment			—				—				—				—				—				—				2,135				1,045				3,180
Adjusted beginning balance		$	41,903			$	640			$	42,543			$	41,076			$	1,156			$	42,232			$	35,047			$	2,248			$	37,295
Provision/(reversal) for credit losses			9,768				89				9,857				3,878				(516	)			3,362				6,027				(1,092	)			4,935
Less loans charged-off			(4,083	)			—				(4,083	)			(3,194	)			—				(3,194	)			(256	)			—				(256	)
Recoveries on loans charged-off			141				—				141				143				—				143				258				—				258
Ending balance		$	47,729			$	729			$	48,458			$	41,903			$	640			$	42,543			$	41,076			$	1,156			$	42,232

The following tables present the balance and activity in the ALL by portfolio segment for the years ended December 31, 2024, 2023, and 2022:


December 31, 2024		*Construction and Land Development*				*Commercial Real Estate*				*Single-Family Residential Mortgages*				*Commercial and Industrial*				*SBA*				*Other*				*Total*
Allowance for loan losses:			*(dollars in thousands)*
Beginning of year		$	1,219			$	17,826			$	20,117			$	1,348			$	1,196			$	197			$	41,903
Provisions/(reversals) for credit losses			5,982				6,637				(2,599	)			—				(464	)			212				9,768
Charge-offs			(1,148	)			(2,645	)			—				(11	)			(78	)			(201	)			(4,083	)
Recoveries			—				61				—				2				—				78				141
Ending allowance balance		$	6,053			$	21,879			$	17,518			$	1,339			$	654			$	286			$	47,729


December 31, 2023		*Construction and Land Development*				*Commercial Real Estate*				*Single-Family Residential Mortgages*				*Commercial and Industrial*				*SBA*				*Other*				*Total*
Allowance for loan losses:			*(dollars in thousands)*
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


December 31, 2022		*Construction and Land Development*				*Commercial Real Estate*				*Single-Family Residential Mortgages*				*Commercial and Industrial*				*SBA*				*Other*				*Total*
Allowance for loan losses:			*(dollars in thousands)*
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

We categorize 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. We analyze loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as C&D, CRE and C&I loans. This analysis is performed on an ongoing basis as new information is obtained. We use 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 our loans HFI by loan portfolio segment, risk rating and vintage year as of the dates indicated. The vintage year is the year of origination, renewal or major modification.

		*Term Loan by Vintage*
December 31, 2024		*2024*				*2023*				*2022*				*2021*				*2020*				*Prior*				*Revolving*				*Revolving Converted to Term During the Period*				*Total*
Real estate:		*(dollars in thousands)*
Construction and land development
Pass		$	62,541			$	8,945			$	—			$	—			$	1,370			$	65			$	—			$	—			$	72,921
Special mention			—				—				—				—				44,042				—				—				—				44,042
Substandard			—				8,782				—				38,101				9,444				—				—				—				56,327
Doubtful			—				—				—				—				—				—				—				—				—
Total		$	62,541			$	17,727			$	—			$	38,101			$	54,856			$	65			$	—			$	—			$	173,290
YTD gross charge-offs		$	—			$	—			$	1,148			$	—			$	—			$	—			$	—			$	—			$	1,148
Commercial real estate
Pass		$	220,623			$	58,597			$	389,578			$	158,188			$	157,480			$	186,619			$	—			$	—			$	1,171,085
Special mention			—				—				936				10,251				3,040				7,060				—				—				21,287
Substandard			—				—				—				—				1,188				7,860				—				—				9,048
Doubtful			—				—				—				—				—				—				—				—				—
Total		$	220,623			$	58,597			$	390,514			$	168,439			$	161,708			$	201,539			$	—			$	—			$	1,201,420
YTD gross charge-offs		$	—			$	164			$	—			$	—			$	2,064			$	417			$	—			$	—			$	2,645
Single-family residential mortgages
Pass		$	159,940			$	137,264			$	549,525			$	225,877			$	108,541			$	299,553			$	1,126			$	—			$	1,481,826
Special mention			—				—				—				—				—				—				—				—				—
Substandard			—				—				2,178				1,401				1,858				6,759				—				—				12,196
Doubtful			—				—				—				—				—				—				—				—				—
Total		$	159,940			$	137,264			$	551,703			$	227,278			$	110,399			$	306,312			$	1,126			$	—			$	1,494,022
YTD gross charge-offs		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Commercial:
Commercial and industrial
Pass		$	7,304			$	1,126			$	2,593			$	3,991			$	2,270			$	5,242			$	98,878			$	—			$	121,404
Special mention			—				—				—				—				—				—				—				—				—
Substandard			—				—				70				—				1,317				4,820				1,974				—				8,181
Doubtful			—				—				—				—				—				—				—				—				—
Total		$	7,304			$	1,126			$	2,663			$	3,991			$	3,587			$	10,062			$	100,852			$	—			$	129,585
YTD gross charge-offs		$	8			$	—			$	3			$	—			$	—			$	—			$	—			$	—			$	11
SBA
Pass		$	6,889			$	1,813			$	10,855			$	9,731			$	400			$	14,209			$	—			$	—			$	43,897
Special mention			—				—				—				—				—				—				—				—				—
Substandard			65				—				—				334				—				2,967				—				—				3,366
Doubtful			—				—				—				—				—				—				—				—				—
Total		$	6,954			$	1,813			$	10,855			$	10,065			$	400			$	17,176			$	—			$	—			$	47,263
YTD gross charge-offs		$	78			$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	78
Other:
Pass		$	—			$	130			$	1,517			$	5,718			$	246			$	—			$	16			$	—			$	7,627
Special mention			—				—				—				—				—				—				—				—				—
Substandard			—				—				—				23				—				—				—				—				23
Doubtful			—				—				—				—				—				—				—				—				—
Total		$	—			$	130			$	1,517			$	5,741			$	246			$	—			$	16			$	—			$	7,650
YTD gross charge-offs		$	—			$	—			$	4			$	191			$	6			$	—			$	—			$	—			$	201
Total by risk rating:
Pass		$	457,297			$	207,875			$	954,068			$	403,505			$	270,307			$	505,688			$	100,020			$	—			$	2,898,760
Special mention			—				—				936				10,251				47,082				7,060				—				—				65,329
Substandard			65				8,782				2,248				39,859				13,807				22,406				1,974				—				89,141
Doubtful			—				—				—				—				—				—				—				—				—
Total loans		$	457,362			$	216,657			$	957,252			$	453,615			$	331,196			$	535,154			$	101,994			$	—			$	3,053,230
Total YTD gross charge-offs		$	86			$	164			$	1,155			$	191			$	2,070			$	417			$	—			$	—			$	4,083

		*Term Loan by Vintage*
December 31, 2023		*2023*				*2022*				*2021*				*2020*				*2019*				*Prior*				*Revolving*				*Revolving Converted to Term During the Period*				*Total*
Real estate:		*(Dollars in thousands)*
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 charge-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 charge-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 charge-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 charge-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 charge-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 charge-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 charge-offs		$	—			$	2,157			$	273			$	562			$	—			$	202			$	—			$	—			$	3,194

The following tables present the aging of the recorded investment in past due loans HFI as of December 31, 2024 and 2023 by loan class. Past due loans presented in tables below also include nonaccrual loans.


December 31, 2024		*30-59 Days*				*60-89 Days*				*90 Days Or More (1)*				*Total Past Due*				*Current*				*Total Loans HFI*				*Nonaccrual Loans (2)*
Real estate:		*(dollars in thousands)*
Construction and land development		$	—			$	38,101			$	8,782			$	46,883			$	126,407			$	173,290			$	44,621
Commercial real estate			504				216				7,131				7,851				1,193,569				1,201,420				7,353
Single-family residential mortgages⁽³⁾			9,806				1,688				7,253				18,747				1,475,275				1,494,022				11,524
Commercial:
Commercial and industrial			30				61				4,819				4,910				124,675				129,585				4,819
SBA			314				1,951				609				2,874				44,389				47,263				1,514
Other:			16				—				11				27				7,623				7,650				12
Total		$	10,670			$	42,017			$	28,605			$	81,292			$	2,971,938			$	3,053,230			$	69,843

________________

	(1)	All loans 90 days or more past due are nonaccrual. We had no loans that were 90 days or more past due and still accruing.
	(2)	Included in total loans
	(3)	Nonaccrual SFR mortgage loans include $4.4 million of loans in the process of foreclosure.


December 31, 2023		*30-59 Days*				*60-89 Days*				*90 Days Or More (1)*				*Total Past Due*				*Current*				*Total Loans HFI*				*Nonaccrual Loans (2)*
Real estate:		*(dollars in thousands)*
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
Total		$	12,451			$	6,031			$	19,663			$	38,145			$	2,993,716			$	3,031,861			$	31,619

	(1)	All 90 days or more past due are nonaccrual. We had no loans that were 90 days or more past due and still accruing.
	(2)	Included in total loans

The following table present the loans HFI on nonaccrual status and the balance of such loans with no ALL, by loan class, as of the dates indicated:

		*December 31, 2024*								*December 31, 2023*
		*Nonaccrual Loans*								*Nonaccrual Loans*
		*with no*								*with no*
		*Allowance*								*Allowance*
		*for Loan Loss*				*Nonaccrual Loans*				*for Loan Loss*				*Nonaccrual Loans*
Real estate:		*(dollars in thousands)*
Construction and land development		$	18,226			$	44,621			$	—			$	—
Commercial real estate			346				7,353				10,569				10,569
Single-family residential mortgages			11,524				11,524				18,103				18,103
Commercial:
Commercial and industrial ⁽¹⁾			4,708				4,819				610				854
SBA			1,514				1,514				937				2,085
Other:			—				12				—				8
Total		$	36,318			$	69,843			$	30,219			$	31,619

(1)

A C&I loan of $4.7 million is secured by a SFR and is cross collateralized with a CRE loan with a specific reserve.

The following tables present the amortized cost basis of individually evaluated collateral-dependent loans, by loan segment and class and type of collateral which secures such loans as of the dates indicated:

		*December 31, 2024*
		*Commercial Real Estate*				*Residential Real Estate*				*Business Assets*				*Total*
Real Estate:		*(dollars in thousands)*
Construction and land development		$	18,226			$	26,395			$	—			$	44,621
Commercial real estate			7,131				222				—				7,353
Single-family residential mortgages			—				11,524				—				11,524
Commercial:
Commercial and industrial			—				4,708				111				4,819
SBA			1,323				40				151				1,514
Total loans		$	26,680			$	42,889			$	262			$	69,831

		December 31, 2023
		Commercial Real Estate				Residential Real Estate				Business Assets				Total
Real Estate:		*(dollars in thousands)*
Commercial real estate		$	10,353			$	216			$	—			$	10,569
Single-family residential mortgages			—				18,103				—				18,103
Commercial:
Commercial and industrial			—				610				244				854
SBA			800				1,200				85				2,085
Total loans		$	11,153			$	20,129			$	329			$	31,611

No interest income was recognized on a cash basis during the years ended December 31, 2024 and 2023. We did not recognize any interest income on nonaccrual loans during the years ended December 31, 2024 and December 31, 2023 while the loans were in nonaccrual status.

On January 1, 2023, we adopted ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures." Under this guidance, in cases where a borrower is experiencing financial difficulties, we may make certain concessionary modifications to the contractual terms. These concessions may include principal forgiveness, an interest rate reduction, term extension, payment delay, or other actions intended to minimize potential losses.

We 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.

Loans modified to borrowers experiencing financial difficulty totaled $54.4 million at December 31, 2024 and zero at December 31, 2023. During 2024, three C&D loans and two CRE loans were modified with balances totaling $47.6 million and $6.8 million at December 31, 2024. There were no loans modified to borrowers experiencing financial difficulty during the year ended December 31, 2023.

The modifications made during 2024 included $35.8 million of term extensions for C&D loans impacted by construction delays and an increase in market interest rates since origination, including a $26.4 million loan for a partially complete mixed-use commercial project for which we have established a specific reserve of $4.5 million. We had $5.6 million in unfunded commitments related to these borrowers.

We closely monitor the performance of loans modified to borrowers experiencing financial difficulty to understand the effectiveness of our modification efforts. The following table presents the type of concession, by class of loans, during the last 12 months:

		Payment Delay				Term Extension				Combination Term Extension Interest Rate Reduction				Total Modified Loans				Modified Loans as a Percentage of Class of Loans				Weighted-Average Term Extension (in Years)				Weighted-Average Rate Reduction
		*(dollars in thousands)*
Construction and land development		$	—			$	35,839			$	11,706			$	47,545				27.4	%			0.41				0.12	%
Commercial real estate			6,616				—				222				6,838				0.6	%			1.83				0.00	%
Total		$	6,616			$	35,839			$	11,928			$	54,383