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LOANS

9 Months Ended

Sep. 30, 2025

LOANS

LOANS

NOTE 4 – LOANS

The Company’s loan portfolio at the dates indicated is summarized below:


		September 30,			December 31,
		2025			2024
Commercial and industrial		$	177,250		$	173,948
Construction and land			5,124			1,515
Commercial real estate			1,743,268			1,667,231
Residential			115,292			109,662
Consumer			749			391
Total loans			2,041,683			1,952,747
Net deferred loan costs			654			149
Allowance for credit losses			(20,800)			(17,900)
Net loans		$	2,021,537		$	1,934,996

Net loans exclude accrued interest receivable of $6.5 million and $6.7 million at September 30, 2025 and December 31, 2024, respectively, which is included in interest receivable and other assets in the condensed consolidated balance sheets.

The Company’s total individually evaluated loans, including collateral dependent loans, nonaccrual loans, modified loans to borrowers experiencing financial difficulty, and accreting purchase credit deteriorated (“PCD”) loans that have experienced post-acquisition declines in cash flows expected to be collected are summarized as follows:


		Commercial			Construction			Commercial
		and industrial			and land			real estate			Residential			Consumer			Total
September 30, 2025
Recorded investment in loans individually evaluated:
With no specific allowance recorded		$	—		$	—		$	13,333		$	711		$	—		$	14,044
With a specific allowance recorded			—			—			4,711			—			—			4,711
Total recorded investment in loans individually evaluated		$	—		$	—		$	18,044		$	711		$	—		$	18,755
Specific allowance on loans individually evaluated		$	—		$	—		$	868		$	—		$	—		$	868

December 31, 2024
Recorded investment in loans individually evaluated:
With no specific allowance recorded		$	—		$	—		$	13,671		$	984		$	—		$	14,655
With a specific allowance recorded			954			—			1,754			—			—			2,708
Total recorded investment in loans individually evaluated		$	954		$	—		$	15,425		$	984		$	—		$	17,363
Specific allowance on loans individually evaluated		$	367		$	—		$	25		$	—		$	—		$	392

The Company may modify the contractual terms of a loan to a borrower experiencing financial difficulty as a part of ongoing loss mitigation strategies. These modifications may result in an interest rate reduction, term extension, an other-than-insignificant payment delay, or a combination thereof. The Company typically does not offer principal forgiveness. An assessment of whether a borrower is experiencing financial difficulty is made on the date of modification. The effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses on loans because of the measurement methodologies used to estimate the allowance.

During the three and nine months ended September 30, 2025 and 2024, there were no modifications of loans to borrowers experiencing financial difficulty.

A summary of previously modified loans to borrowers experiencing financial difficulty by type of concession and type of loan, as of the dates indicated, is set forth below:


		Number of		Rate			Term			Rate & term						% of Total
		loans		modification			modification			modification			Total			loans outstanding
September 30, 2025
Commercial and industrial		2		$	—		$	91		$	—		$	91			0.05	%
Construction and land		—			—			—			—			—			—	%
Commercial real estate		2			—			632			—			632			0.04	%
Residential		1			—			710			—			710			0.62	%
Consumer		—			—			—			—			—			—	%
Total		5		$	—		$	1,433		$	—		$	1,433			0.07	%


		Number of		Rate			Term			Rate & term						% of Total
		loans		modification			modification			modification			Total			loans outstanding
December 31, 2024
Commercial and industrial		2		$	—		$	97		$	—		$	97			0.06	%
Construction and land		—			—			—			—			—			—	%
Commercial real estate		3			—			1,846			—			1,846			0.11	%
Residential		1			—			747			—			747			0.68	%
Consumer		—			—			—			—			—			—	%
Total		6		$	—		$	2,690		$	—		$	2,690			0.14	%

For the three and nine months ended September 30, 2025, the Company recorded no charge-offs for modified loans to borrowers experiencing financial difficulty. During the three and nine months ended September 30, 2024, the Company recorded no charge-offs and $1.3 million of charge-offs related to modified loans to borrowers experiencing financial difficulty, respectively.

As of September 30, 2025 and December 31, 2024, individually evaluated modified loans to borrowers experiencing financial difficulty had no related allowance and an allowance of $24,000, respectively. At both dates, none of the modified loans to borrowers experiencing financial difficulty were performing in accordance with their modified terms. All accruing modified loans to borrowers experiencing financial difficulty, if any, are included in the loans individually evaluated in the calculation of the allowance for credit losses.

Risk Rating System

The Company evaluates and assigns a risk grade to each loan based on certain criteria to assess the credit quality of the loan. The assignment of a risk rating is done for each individual loan. Loans are graded from inception and on a continuing basis until the debt is repaid. Any adverse or beneficial trends will trigger a review of the loan risk rating. Each loan is assigned a risk grade based on its characteristics. Loans with low to average credit risk are assigned a lower risk grade than those with higher credit risk as determined by the individual loan characteristics.

The Company’s Pass loans include loans with acceptable business or individual credit risk where the borrower’s operations, cash flow or financial condition provides evidence of low to average levels of risk.

Loans that are assigned higher risk grades are loans that exhibit the following characteristics:

Special Mention loans have potential weaknesses that deserve close attention. If left uncorrected, these potential weaknesses may result in a deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date. Special Mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Special Mention is a temporary rating, pending the occurrence of an event that would cause the risk rating either to improve or to be downgraded.

Loans in this category would be characterized by any of the following situations:

●

Credit that is currently protected but is potentially a weak asset;

●

Credit that is difficult to manage because of an inadequate loan agreement, the condition of and/or control over collateral, failure to obtain proper documentation, or any other deviation from product lending practices; and

●

Adverse financial trends.

Substandard loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged. Loans classified substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. The potential loss does not have to be recognizable in an individual credit for that credit to be risk rated Substandard. A loan can be fully and adequately secured and still be considered Substandard.

Some characteristics of Substandard loans are:

●

Inability to service debt from ordinary and recurring cash flow;

●

Chronic delinquency;

●

Reliance upon alternative sources of repayment;

●

Term loans that are granted on liberal terms because the borrower cannot service normal payments for that type of debt;

●

Repayment dependent upon the liquidation of collateral;

●

Inability to perform as agreed, but adequately protected by collateral;

●

Necessity to renegotiate payments to a non-standard level to ensure performance; and

●

The borrower is bankrupt, or for any other reason, future repayment is dependent on court action.

Doubtful loans have all the weaknesses inherent in loans classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and value, highly questionable and improbable. Doubtful loans have a high probability of loss, yet certain important and reasonably specific pending factors may work toward the strengthening of the credit.

Losses are recognized as charges to the allowance when the loan or portion of the loan is considered uncollectible or at the time of foreclosure. Recoveries on loans previously charged off are credited to the allowance for credit losses.

Revolving loans that are converted to term loans are treated as new originations in the tables below and are presented by year of initial origination. During the nine months ended September 30, 2025, and the year ended December 31, 2024, none and $867,000, respectively, of the Company’s revolving loans were converted to term loans.

The following tables present the internally assigned risk grade by class of loans at the dates indicated:


																				Revolving
			Term loans - amortized cost by origination year																	loans
		2025			2024			2023			2022			2021			Prior			amortized cost			Total
September 30, 2025
Commercial and industrial:
Pass		$	29,078		$	51,084		$	15,667		$	17,741		$	7,973		$	29,228		$	23,984		$	174,755
Special mention			—			—			—			—			—			1,122			—			1,122
Substandard			—			—			154			—			55			878			286			1,373
Total commercial and industrial		$	29,078		$	51,084		$	15,821		$	17,741		$	8,028		$	31,228		$	24,270		$	177,250
YTD gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	193		$	—		$	193
Construction and land:
Pass		$	—		$	4,742		$	—		$	—		$	119		$	263		$	—		$	5,124
Special mention			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			—			—			—
Total construction and land		$	—		$	4,742		$	—		$	—		$	119		$	263		$	—		$	5,124
YTD gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Commercial real estate:
Pass		$	247,443		$	182,898		$	69,954		$	323,265		$	350,993		$	413,211		$	1,866		$	1,589,630
Special mention			—			—			—			31,570			18,793			51,389			—			101,752
Substandard			—			—			5,463			—			14,724			31,699			—			51,886
Total commercial real estate		$	247,443		$	182,898		$	75,417		$	354,835		$	384,510		$	496,299		$	1,866		$	1,743,268
YTD gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	839		$	—		$	839
Residential:
Pass		$	44,227		$	26,603		$	—		$	—		$	32,089		$	6,795		$	4,711		$	114,425
Special mention			—			—			—			—			—			—			13			13
Substandard			—			—			—			—			44			746			64			854
Total residential		$	44,227		$	26,603		$	—		$	—		$	32,133		$	7,541		$	4,788		$	115,292
YTD gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	1		$	—		$	1
Consumer:
Pass		$	316		$	129		$	28		$	21		$	10		$	112		$	133		$	749
Special mention			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			—			—			—
Total consumer		$	316		$	129		$	28		$	21		$	10		$	112		$	133		$	749
YTD gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	7		$	—		$	7
Total loans outstanding
Risk ratings
Pass		$	321,064		$	265,456		$	85,649		$	341,027		$	391,184		$	449,609		$	30,694		$	1,884,683
Special mention			—			—			—			31,570			18,793			52,511			13			102,887
Substandard			—			—			5,617			—			14,823			33,323			350			54,113
Total loans outstanding		$	321,064		$	265,456		$	91,266		$	372,597		$	424,800		$	535,443		$	31,057		$	2,041,683
YTD gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	1,040		$	—		$	1,040


																				Revolving
			Term loans - amortized cost by origination year																	loans
		2024			2023			2022			2021			2020			Prior			amortized cost			Total
December 31, 2024
Commercial and industrial:
Pass		$	54,720		$	20,314		$	20,759		$	11,823		$	13,433		$	28,708		$	19,699		$	169,456
Special mention			—			—			—			56			—			1,969			200			2,225
Substandard			150			154			—			—			1,184			471			308			2,267
Total commercial and industrial		$	54,870		$	20,468		$	20,759		$	11,879		$	14,617		$	31,148		$	20,207		$	173,948
YTD gross charge-offs		$	—		$	—		$	—		$	1,021		$	45		$	324		$	—		$	1,390
Construction and land:
Pass		$	10		$	—		$	—		$	128		$	1,090		$	287		$	—		$	1,515
Special mention			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			—			—			—
Total construction and land		$	10		$	—		$	—		$	128		$	1,090		$	287		$	—		$	1,515
YTD gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Commercial real estate:
Pass		$	196,303		$	88,599		$	371,319		$	432,629		$	97,046		$	370,828		$	1,510		$	1,558,234
Special mention			—			632			6,243			10,462			18,250			44,089			—			79,676
Substandard			—			—			—			9,063			996			19,262			—			29,321
Total commercial real estate		$	196,303		$	89,231		$	377,562		$	452,154		$	116,292		$	434,179		$	1,510		$	1,667,231
YTD gross charge-offs		$	—		$	—		$	—		$	2,413		$	—		$	1,359		$	—		$	3,772
Residential:
Pass		$	31,828		$	—		$	—		$	36,624		$	1,452		$	32,245		$	5,041		$	107,190
Special mention			—			—			—			859			—			410			80			1,349
Substandard			—			—			—			30			—			1,093			—			1,123
Total residential		$	31,828		$	—		$	—		$	37,513		$	1,452		$	33,748		$	5,121		$	109,662
YTD gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Consumer:
Pass		$	153		$	54		$	35		$	10		$	2		$	128		$	3		$	385
Special mention			—			—			—			—			—			2			—			2
Substandard			—			—			—			—			—			4			—			4
Total consumer		$	153		$	54		$	35		$	10		$	2		$	134		$	3		$	391
YTD gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	2		$	1		$	3
Total loans outstanding
Risk ratings
Pass		$	283,014		$	108,967		$	392,113		$	481,214		$	113,023		$	432,196		$	26,253		$	1,836,780
Special mention			—			632			6,243			11,377			18,250			46,470			280			83,252
Substandard			150			154			—			9,093			2,180			20,830			308			32,715
Total loans outstanding		$	283,164		$	109,753		$	398,356		$	501,684		$	133,453		$	499,496		$	26,841		$	1,952,747
YTD gross charge-offs		$	—		$	—		$	—		$	3,434		$	45		$	1,685		$	1		$	5,165

The following tables provide an aging of the Company’s loans receivable as of the dates indicated:


																							Recorded
								90 Days															investments
		30–59 Days			60–89 Days			or more			Total									Total loans			90 days or more past due
		past due			past due			past due			past due			Current			PCD loans			receivable			and still accruing
September 30, 2025
Commercial and industrial		$	513		$	91		$	965		$	1,569		$	175,681		$	—		$	177,250		$	395
Construction and land			—			—			—			—			5,124			—			5,124			—
Commercial real estate			77			1,673			3,676			5,426			1,720,840			17,002			1,743,268			—
Residential			11			7			711			729			114,452			111			115,292			—
Consumer			—			—			—			—			749			—			749			—
Total		$	601		$	1,771		$	5,352		$	7,724		$	2,016,846		$	17,113		$	2,041,683		$	395


																							Recorded
								90 Days															investments
		30–59 Days			60–89 Days			or more			Total									Total loans			90 days or more past due
		past due			past due			past due			past due			Current			PCD loans			receivable			and still accruing
December 31, 2024
Commercial and industrial		$	758		$	87		$	399		$	1,244		$	172,704		$	—		$	173,948		$	220
Construction and land			—			—			—			—			1,509			6			1,515			—
Commercial real estate			4,794			1,527			3,220			9,541			1,635,499			22,191			1,667,231			—
Residential			123			1			747			871			108,538			253			109,662			—
Consumer			6			—			—			6			385			—			391			—
Total		$	5,681		$	1,615		$	4,366		$	11,662		$	1,918,635		$	22,450		$	1,952,747		$	220

Nonaccrual loans totaled $13.5 million and $9.2 million at September 30, 2025 and December 31, 2024, respectively. Nonaccrual loans guaranteed by a government agency, which reduces the Company’s credit exposure, were $946,000 at September 30, 2025 compared to $2.0 million at December 31, 2024. At September 30, 2025, nonaccrual loans included $8,000 of loans 30-89 days past due and $8.4 million of loans less than 30 days past due. At December 31, 2024, nonaccrual loans included $643,000 of loans 30-89 days past due and no loans less than 30 days past due. The increase in nonaccrual loans reflects borrower-specific credit deterioration, primarily within the commercial and industrial and commercial real estate portfolios.

At September 30, 2025, the $8,000 nonaccrual loans 30-89 days past due was comprised of two loans and the $8.4 million of loans less than 30 days past due was comprised of 18 loans. All these loans were placed on nonaccrual due to concerns over the financial condition of the borrowers.

At September 30, 2025 and December 31, 2024, there were two loans and one loan 90 days or more past due and still accruing, with balances of $395,000 and $220,000 at those dates, respectively.

Interest foregone on nonaccrual loans was approximately $257,000 and $896,000 for the three and nine months ended September 30, 2025, compared to $397,000 and $1.1 million for the three and nine months ended September 30, 2024. Interest income recognized on nonaccrual loans was approximately $70,000 and $136,000 for the three and nine months ended September 30, 2025, compared to $7,400 and $93,600 for the three and nine months ended September 30, 2024, respectively.

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 $1.06 billion and $1.04 billion at September 30, 2025 and December 31, 2024, respectively. At September 30, 2025 and December 31, 2024, $79.7 million and $76.7 million of loans were pledged to

the FRB of San Francisco, respectively. For additional information, see “Note 11 - Borrowings” of the Notes to Condensed Consolidated Financial Statements.