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ALLOWANCE FOR LOAN LOSSES

9 Months Ended

Sep. 30, 2022

Allowance for Loan Losses [Abstract]

NOTE 7 – ALLOWANCE FOR LOAN LOSSES

The following tables summarize the Company’s allowance for loan losses and loan balances individually and collectively evaluated for impairment by type of loan as of or for the three and nine months ended September 30, 2022 and 2021:


	Commercial		Construction		Commercial
	and industrial		and land		real estate		Residential		Consumer		Total
Three months ended September 30, 2022
Allowance for loan losses
Beginning balance	$	2,871	$	74	$	13,830	$	1,007	$	18	$	17,800
Charge-offs		(1,095)		—		—		—		—		(1,095)
Recoveries		151		—		—		—		—		151
Provision for (reversal of) loan losses		1,029		(12)		13		162		2		1,194
Ending balance	$	2,956	$	62	$	13,843	$	1,169	$	20	$	18,050

Nine months ended September 30, 2022
Allowance for loan losses
Beginning balance	$	3,261	$	175	$	12,709	$	1,536	$	19	$	17,700
Charge-offs		(3,620)		—		(1)		(6)		(6)		(3,633)
Recoveries		159		—		—		—		—		159
Provision for (reversal of) loan losses		3,156		(113)		1,135		(361)		7		3,824
Ending balance	$	2,956	$	62	$	13,843	$	1,169	$	20	$	18,050

September 30, 2022
Allowance for loan losses by methodology:
Loans individually evaluated for impairment	$	725	$	—	$	259	$	14	$	—	$	998
Loans collectively evaluated for impairment		2,231		62		13,584		1,155		20		17,052
PCI loans		—		—		—		—		—		—

Loans receivable by methodology:
Individually evaluated for impairment	$	2,620	$	—	$	12,382	$	2,126	$	—	$	17,128
Collectively evaluated for impairment		212,731		8,171		1,637,087		85,669		4,294		1,947,952
PCI loans		4,163		4,060		20,814		1,107		—		30,144
Total loans	$	219,514	$	12,231	$	1,670,283	$	88,902	$	4,294	$	1,995,224


	Commercial		Construction		Commercial
	and industrial		and land		real estate		Residential		Consumer		Total
Three months ended September 30, 2021
Allowance for loan losses
Beginning balance	$	3,645	$	224	$	11,328	$	1,782	$	21	$	17,000
Charge-offs		(180)		—		(1)		—		—		(181)
Recoveries		3		1		—		—		—		4
Provision for (reversal of) loan losses		(113)		15		717		(141)		(1)		477
Ending balance	$	3,355	$	240	$	12,044	$	1,641	$	20	$	17,300

Nine months ended September 30, 2021
Allowance for loan losses
Beginning balance	$	4,042	$	378	$	11,211	$	1,856	$	13	$	17,500
Charge-offs		(182)		—		(1)		—		—		(183)
Recoveries		9		4		—		—		—		13
Provision for (reversal of) loan losses		(514)		(142)		834		(215)		7		(30)
Ending balance	$	3,355	$	240	$	12,044	$	1,641	$	20	$	17,300

September 30, 2021
Allowance for loan losses by methodology:
Loans individually evaluated for impairment	$	580	$	—	$	98	$	22	$	—	$	700
Loans collectively evaluated for impairment		2,775		240		11,928		1,616		20		16,579
PCI loans		—		—		18		3		—		21

Loans receivable by methodology:
Individually evaluated for impairment	$	692	$	36	$	5,681	$	1,688	$	—	$	8,097
Collectively evaluated for impairment		282,635		16,348		1,199,601		121,487		4,060		1,624,131
PCI loans		304		40		10,329		1,900		—		12,573
Total loans	$	283,631	$	16,424	$	1,215,611	$	125,075	$	4,060	$	1,644,801

As part of the acquisition of PEB, the Company acquired certain small business loans to borrowers qualified under The California Capital Access Program for Small Business, a state guaranteed loan program sponsored by the California Pollution Control Financing Authority (“CalCAP”). PEB ceased originating loans under this loan program in 2017. Under this loan program, the borrower, CalCAP and the Company contributed funds to a loss reserve account that is held in a demand deposit account at the Bank. The borrower contributions to the loss reserve account are attributed to the Company. Losses on qualified loans are charged to this account after approval by CalCAP. Under the program, if a loan defaults, the Company has immediate coverage of 100% of the loss. The Company must return recoveries from the borrower, less expenses, to the loan loss reserve account. The funds in the loss reserve account are the property of CalCAP, however, in the event that the Company leaves the program any excess funds, after all loans have been repaid or unenrolled from the program by the Company and provided there are no pending claims for reimbursement, are distributed to CalCAP and the Company based on their respective contributions to the loss reserve account. Funds contributed by the Company to the loss reserve account are treated as a receivable from CalCAP and evaluated for impairment quarterly. As of September 30, 2022, the Company had $30.0 million of loans enrolled in this loan program. The Company had a loss reserve account of $13.7 million as of September 30, 2022.

In addition, as successor to PEB, the Company was approved by the CalCAP, in partnership with the California Air Resources Board, to originate loans to California truckers in the On-Road Heavy-Duty Vehicle Air Quality Loan Program. Under this loan program, CalCAP solely contributes funds to a loss reserve account that is held in a demand deposit account at the Bank. Losses are handled in the same manner as described above. The funds are the property of CalCAP and are payable upon termination of the program. When the loss reserve account balance exceeds the total associated loan balance, the excess is to be remitted to CalCAP. The Company has originated $4.4 million of loans under this program during the nine months ended September 30, 2022. As of September 30, 2022, the Company had $29.3

million of loans enrolled in this program. The Company had a loss reserve account of $6.1 million as of September 30, 2022.