# OP Bancorp (OPBK) FY 2024 MD&A Verbatim Item 7 Management's Discussion and Analysis from OP Bancorp's 10-K for fiscal year 2024. SEC filing source: https://www.sec.gov/Archives/edgar/data/1722010/000162828025015428/opbk-20241231.htm Accession: 0001628280-25-015428 Filing date: 2025-03-28 Report date: 2024-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/OPBK/ All MD&A years: /company/OPBK/mda/ Previous year: /company/OPBK/mda/fy2023/ (FY 2023) Next year: /company/OPBK/mda/fy2025/ (FY 2025) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained in this Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Part II, Item 1A. Risk Factors” for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. OVERVIEW We are a bank holding company headquartered in Los Angeles, California. Substantially all of our business activities consist of commercial community banking activities, which are conducted through Open Bank, our wholly owned banking subsidiary. We offer commercial banking services to small and medium-sized businesses, their owners and retail customers primarily in the Korean-American communities within our primary market areas. We currently operate eight branches in Los Angeles and Orange Counties in California, one branch in Santa Clara, California, one branch in Carrollton, Texas and one branch near Las Vegas, Nevada. We have five loan production offices in Pleasanton, California, Atlanta, Georgia, Aurora, Colorado, Lynnwood, Washington, and Fairfax, Virginia. Our results of operations depend primarily on our net interest income. We drive our income from interest received on our loan portfolio, the fee income we receive in connection with our deposits, and the sale and service of SBA loans. Our major operating expenses are the interest we pay on deposits and other borrowings, the salaries and related benefits we pay our management and staff, and the rent we pay on our leased properties. We rely primarily on locally-generated deposits, mostly from the Korean-American market within California, to fund our loan activities. Banking Economy and Recent Developments In recent periods, our earnings have been affected by a series of fluctuations in the “discount rate” for short-term borrowings updated by the Federal Reserve Board Open Markets Committee in response to perceived inflationary pressures. These fluctuations have included both negative and positive adjustments, but speaking generally, these rates are substantially higher than in years prior to 2022. Financial institutions and markets have struggled to keep pace with the effects of these adjustments, which have affected interest rate pricing on both loans and deposits. While such adjustments are commonplace and tend to affect the banking industry as a whole, the pace and degree of these adjustments have been nearly unprecedented, resulting in banks, including the Bank, experiencing substantial pressure on multiple fronts. In particular, banks have been forced to increase interest rates paid on deposits in order to meet competitive pressures from other financial institutions, as well as experiencing rapid and significant fluctuations in the value of treasury securities and other investments. Increases in market interest rates have significantly increased the Bank’s cost of funds and have exerted downward pressure on our net interest margins, and the expected reductions in rates anticipated for late 2024 and early 2025 have not materialized. Further, as interest rates increased rapidly, and remain at unexpectedly elevated levels, the values of our investment portfolios have suffered as securities issued at what are now below-market interest rates have lost value. Hedging these risks in the face of such unpredictability has likewise proven challenging and costly. The fluctuations in market interest rates also affected loan pricing, which had multiple effects, including a reduction in borrowing (and thus a reduction in interest paid to banks) as rates increased and remain elevated, by customers that have the ability to avoid or defer additional indebtedness, a decline in the origination of new loans, and an increase in credit risk as borrowers who faced rising interest rates, especially on variable-rate loans, found it more difficult to comply with their loan obligations. The combination of these factors also has exerted downward pressure on our fee income, the volume of our interest-earning assets and our net interest income. We believe we have adapted well to these shifts in the banking economy, and our success in weathering the challenges to date owes to the loyalty of our customers and the dedication of our employees and management. We also believe we are well-positioned to continue to weather these challenges and unpredictability as the economic and geopolitical conditions remain relatively volatile. At the same time, these conditions have forced us to redirect our efforts toward liquidity and capital management, thus limiting our growth and our near-term profitability. 52 The following significant items are of note as of or for the periods presented: As of December 31, 2024 compared to as of December 31, 2023 •Total assets were $2.37 billion, an increase of $218.3 million, or 10.2%, from $2.15 billion. •Gross loans were $1.96 billion, an increase of $191.0 million, or 10.8%, from $1.77 billion. •Total deposits were $2.03 billion, an increase of $219.7 million, or 12.2%, from $1.81 billion. •Shareholders’ equity was $205.0 million, an increase of $12.4 million, or 6.4%, from $192.6 million. For the year ended December 31, 2024 compared to 2023 •Net interest income decreased to $65.6 million, a decrease of $3.1 million, or 4.5%, from $68.7 million. •Net income was $21.1 million or $1.39 per diluted common share, a decrease of $2.8 million, or 11.9%, from $23.9 million or $1.55 per diluted common share. For the year ended December 31, 2023 compared to 2022 •Net interest income decreased to $68.7 million, a decrease of $8.2 million, or 10.7%, from $76.9 million. •Net income was $23.9 million or $1.55 per diluted common share, a decrease of $9.4 million, or 28.2%, from $33.3 million or $2.14 per diluted common share. 53 SELECTED FINANCIAL DATA [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["($ in thousands, except share and per share data)","","2024","","2023","","2022"],["Income Statement Data:"],["Interest income","","$","137,620","","","$","121,665","","","$","88,212"],["Interest expense","","72,012","","","52,978","","","11,301"],["Net interest income","","65,608","","","68,687","","","76,911"],["Provision for credit losses","","2,757","","","1,651","","","2,976"],["Noninterest income","","16,427","","","14,181","","","17,619"],["Noninterest expense","","50,199","","","47,726","","","44,830"],["Income before income taxes","","29,079","","","33,491","","","46,724"],["Income tax expense","","8,010","","","9,573","","","13,414"],["Net income","","21,069","","","23,918","","","33,310"],["Per Share Data:"],["Basic income per share","","$","1.39","","","$","1.55","","","$","2.15"],["Diluted income per share","","1.39","","","1.55","","","2.14"],["Book value per share","","13.83","","","12.84","","","11.59"],["Shares of common stock outstanding","","14,819,866","","","15,000,436","","","15,270,344"],["Performance Ratios:"],["Return on average assets","","0.92","%","","1.13","%","","1.74","%"],["Return on average equity","","10.68","","","13.05","","","19.57"],["Yield on total loans","","6.63","","","6.33","","","5.25"],["Yield on average interest-earning assets","","6.26","","","5.96","","","4.79"],["Cost of average interest-bearing liabilities","","4.74","","","4.10","","","1.22"],["Cost of deposits","","3.48","","","2.70","","","0.65"],["Net interest margin","","2.99","","","3.37","","","4.18"],["Efficiency ratio(1)","","61.19","","","57.59","","","47.42"]] [[/GREPCENT_TABLE]] (1)    Represent noninterest expense divided by the sum of net interest income and noninterest income. 54 [[GREPCENT_TABLE]] [["","","As of December 31,"],["($ in thousands)","","2024","","2023"],["Balance Sheet Data:"],["Gross loans","","$","1,956,852","","","$","1,765,845"],["Loans held for sale","","4,581","","","1,795"],["Allowance for credit losses","","24,796","","","21,993"],["Total assets","","2,366,013","","","2,147,730"],["Total deposits","","2,027,285","","","1,807,558"],["Shareholders\u2019 equity","","204,993","","","192,626"],["Asset Quality Data:"],["Nonperforming loans to gross loans","","0.40","%","","0.34","%"],["Allowance for credit losses to nonperforming loans","","317","","","362"],["Allowance for credit losses to gross loans","","1.27","","","1.25"],["Balance Sheet and Capital Ratios:"],["Gross loans to deposits","","96.53","%","","97.69","%"],["Noninterest-bearing deposits to deposits","","24.91","","","28.92"],["Average equity to average total assets","","8.63","","","8.62"],["Leverage ratio","","9.27","","","9.57"],["Common equity tier 1 ratio","","11.35","","","12.52"],["Tier 1 risk-based capital ratio","","11.35","","","12.52"],["Total risk-based capital ratio","","12.60","","","13.77"]] [[/GREPCENT_TABLE]] Critical Accounting Policies and Estimates Our accounting and reporting policies conform to accounting principles generally accepted in GAAP and conform to general practices within the industry in which we operate. To prepare financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statement. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements. The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments. Additional information about these policies can be found in the “Notes to Consolidated Financial Statements, Note 1. Business and Summary of Significant Accounting Policies.” Allowance for Credit Losses We employ a modeled approach that takes into account current and future economic conditions to estimate lifetime expected losses on a collective basis. With the adoption of CECL, we elected not to consider accrued interest receivable in our estimated credit losses because we write off uncollectible accrued interest receivable in a timely manner. We consider writing off accrued interest amounts once the amounts become 90 days past due to be considered within a timely manner. We have elected to write off accrued interest receivable by reversing interest income. We use transition matrices to develop the Probability of Default ("PD") and Loss Given Default ("LGD") approach, incorporating quantitative factors and qualitative considerations in the calculation of the allowance for credit losses for collectively assessed loans. The model provides forecasts of PD and LGD based on national unemployment rates using regression analysis. We incorporate future economic conditions using a weighted multiple scenario approach: baseline and adverse. We apply a reasonable and supportable period of one year for the baseline scenario and two years for the adverse scenario, after which loss assumptions revert to historical loss information through a one-year reversion period for the baseline scenario and a two-year reversion period for the adverse scenario. We make critical accounting estimates, including the 55 judgments made in the application of significant accounting policies, sensitivity to change, and the likelihood of materially different reported results if different assumptions were used. As part of our allowance for credit losses process, sensitivity analyses are performed to assess the impact of how changing certain key assumptions could impact our estimated allowance for credit losses as of December 31, 2024. We calculated alternative values for the allowance for credit losses by severely changing key assumptions, such as macroeconomic inputs from the economic forecasts, prepayment rates, historical loss factors, among others, and the calculated allowance for the quantitative component would have been between $5.8 million and $12.4 million higher than our estimate for the allowance as of December 31, 2024, depending on the forecast scenario. These sensitivity analyses provide approximations of possible outcomes under hypothetically severe conditions and assist management in making informed decisions on key assumptions. These analyses, however, are not intended to estimate changes in the overall allowance for credit losses as they do not capture all the potentially unknown variables that could arise in the forecast period, and do not represent management's view of expected credit losses as of December 31, 2024. Management believes that the estimate for the allowance for credit losses was reasonable and appropriate as of December 31, 2024. In order to quantify the credit risk impact of other trends and changes within the loan portfolio, we utilize qualitative adjustments to the modeled estimated loss approaches. The parameters for making adjustments are established under a Credit Risk Matrix that provides different possible scenarios for each of the factors listed below. The Credit Risk Matrix and the possible scenarios enable the Bank to qualitatively adjust the loss rates. This matrix considers the following nine factors, which are patterned after the guidelines provided under the Federal Financial Institutions Examination Council Interagency Policy Statement on the Allowance for Credit Losses, updated to reflect the adoption of CECL: •    Changes in lending policies and procedures, including changes in underwriting standards and practices for collection, charge-offs, and recoveries; •    Actual and expected changes in national and local economic and business conditions and developments in which the institution operates that affect the collectivity of loans; •    Changes in the nature and volume of the loan portfolio; •    Changes in the experience, ability, and depth of lending management and staff; •    Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified loans; •    Changes in the quality of the credit review function; •    Changes in the value of the underlying collateral for loans that are not collateral-dependent; •    The existence, growth, and effect of any concentrations of credit, and •    The effect of other external factors, such as the regulatory, legal and technological environments; competition; and events such as natural disasters. RESULTS OF OPERATIONS Net Income We reported net income for the year ended December 31, 2024 of $21.1 million, a decrease of $2.8 million, or 11.9%, compared to net income of $23.9 million for the same period of 2023. The decrease, driven primarily by the ongoing economic uncertainties and the related unpredictability of market interest rates, was primarily due to a $3.1 million decrease in net interest income and a $2.5 million increase in noninterest expense, offset by a $2.2 million increase in noninterest income and a $1.6 million decrease in income tax expense. We reported net income for the year ended December 31, 2023 of $23.9 million, a decrease of $9.4 million, or 28.2%, compared to net income of $33.3 million for the same period of 2022. The decrease was primarily due to a $8.2 million decrease in net interest income, a $3.4 million decrease in noninterest income and a $2.9 million increase in noninterest expense, offset by a $3.8 million decrease income tax expense and a $1.3 million decrease in provision for credit losses. 56 [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["($ in thousands)","","2024","","2023","","2022","","$ Change 2024 vs. 2023","","$ Change 2023 vs. 2022"],["Interest income","","$","137,620","","","$","121,665","","","$","88,212","","","$","15,955","","","$","33,453"],["Interest expense","","72,012","","","52,978","","","11,301","","","19,034","","","41,677"],["Net interest income","","65,608","","","68,687","","","76,911","","","(3,079)","","","(8,224)"],["Provision for credit losses","","2,757","","","1,651","","","2,976","","","1,106","","","(1,325)"],["Noninterest income","","16,427","","","14,181","","","17,619","","","2,246","","","(3,438)"],["Noninterest expense","","50,199","","","47,726","","","44,830","","","2,473","","","2,896"],["Income before income tax expense","","29,079","","","33,491","","","46,724","","","(4,412)","","","(13,233)"],["Income tax expense","","8,010","","","9,573","","","13,414","","","(1,563)","","","(3,841)"],["Net income","","$","21,069","","","$","23,918","","","$","33,310","","","$","(2,849)","","","$","(9,392)"]] [[/GREPCENT_TABLE]] Net Interest Income The management of interest income and expense is fundamental to our financial performance. Net interest income, the difference between interest income and interest expense, is the largest component of our total revenue. Management closely monitors both total net interest income and the net interest margin (net interest income divided by average earning assets). We seek to maximize net interest income without exposing us to excessive interest rate risk through our asset and liability policies. Interest rate risk is managed by monitoring the pricing, maturity and repricing options of all classes of interest-bearing assets and liabilities. Our net interest margin is also adversely impacted by the reversal of interest on nonaccrual loans and the reinvestment of loan payoffs into lower yielding investment securities and other short-term investments. The following table presents, for the periods indicated, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields, (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates, (iii) net interest income, (iv) the interest rate spread, and (v) the net interest margin. 57 [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["","","2024","","2023"],["($ in thousands)","","Average Balance","","Interest and Fees","","Yield / Rate","","Average Balance","","Interest and Fees","","Yield / Rate"],["Interest-earning assets:"],["Interest-bearing deposits in other banks","","$","109,579","","","$","5,766","","","5.26","%","","$","78,676","","","$","4,040","","","5.14","%"],["Federal funds sold and other investments(1)","","16,371","","","1,266","","","7.74","","","14,963","","","1,031","","","6.89"],["Available-for-sale debt securities","","194,969","","","6,227","","","3.19","","","202,167","","","6,131","","","3.03"],["Commercial real estate loans","","929,890","","","56,883","","","6.12","","","857,124","","","48,312","","","5.64"],["SBA loans","","263,442","","","27,978","","","10.62","","","260,507","","","28,514","","","10.95"],["Commercial and industrial loans","","178,533","","","13,765","","","7.71","","","119,135","","","9,189","","","7.71"],["Home mortgage loans","","504,030","","","25,648","","","5.09","","","507,125","","","24,384","","","4.81"],["Consumer & other loans","","835","","","87","","","10.32","","","987","","","64","","","6.51"],["Loans(2)","","1,876,730","","","124,361","","","6.63","","","1,744,878","","","110,463","","","6.33"],["Total interest-earning assets","","2,197,649","","","137,620","","","6.26","","","2,040,684","","","121,665","","","5.96"],["Noninterest-earning assets","","87,745","","","","","","","84,757"],["Total assets","","$","2,285,394","","","","","","","$","2,125,441"],["Interest-bearing liabilities:"],["Money market deposits and others","","$","346,104","","","$","14,135","","","4.08","%","","$","374,116","","","$","13,830","","","3.70","%"],["Time deposits","","1,084,107","","","53,986","","","4.98","","","841,804","","","35,605","","","4.23"],["Total interest-bearing deposits","","1,430,211","","","68,121","","","4.76","","","1,215,920","","","49,435","","","4.07"],["Borrowings","","88,186","","","3,891","","","4.41","","","77,114","","","3,543","","","4.59"],["Total interest-bearing liabilities","","1,518,397","","","72,012","","","4.74","","","1,293,034","","","52,978","","","4.10"],["Noninterest-bearing liabilities:"],["Noninterest-bearing deposits","","528,877","","","","","","","613,797"],["Other noninterest-bearing liabilities","","40,839","","","","","","","35,377"],["Total noninterest-bearing liabilities","","569,716","","","","","","","649,174"],["Shareholders\u2019 equity","","197,281","","","","","","","183,233"],["Total liabilities and shareholders\u2019 equity","","$","2,285,394","","","","","","","$","2,125,441"],["Net interest income / interest rate spreads","","","","$","65,608","","","1.52","%","","","","$","68,687","","","1.86","%"],["Net interest margin","","","","","","2.99","%","","","","","","3.37","%"],["Cost of deposits","","","","","","3.48","%","","","","","","2.70","%"],["Cost of funds","","","","","","3.52","%","","","","","","2.78","%"]] [[/GREPCENT_TABLE]] (1)Includes income and average balances for Federal Home Loan Bank (“FHLB”) and Pacific Coast Bankers Bank stock, CRA qualified mutual fund, term federal funds, interest-earning time deposits and other miscellaneous interest-earning assets. (2)Average loan balances include non-accrual loans and loans held for sale. 58 [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["","","2023","","2022"],["($ in thousands)","","Average Balance","","Interest and Fees","","Yield / Rate","","Average Balance","","Interest and Fees","","Yield / Rate"],["Interest-earning assets:"],["Interest-bearing deposits in other banks","","$","78,676","","","$","4,040","","","5.14","%","","$","79,482","","","$","1,399","","","1.76","%"],["Federal funds sold and other investments(1)","","14,963","","","1,031","","","6.89","","","11,810","","","598","","","5.06"],["Available-for-sale debt securities","","202,167","","","6,131","","","3.03","","","170,479","","","3,351","","","1.97"],["Commercial real estate loans","","857,124","","","48,312","","","5.64","","","777,776","","","37,861","","","4.87"],["SBA loans","","260,507","","","28,514","","","10.95","","","321,757","","","24,073","","","7.48"],["Commercial and industrial loans","","119,135","","","9,189","","","7.71","","","142,630","","","7,217","","","5.06"],["Home mortgage loans","","507,125","","","24,384","","","4.81","","","334,984","","","13,660","","","4.08"],["Consumer & other loans","","987","","","64","","","6.51","","","1,071","","","53","","","4.95"],["Loans(2)","","1,744,878","","","110,463","","","6.33","","","1,578,218","","","82,864","","","5.25"],["Total interest-earning assets","","2,040,684","","","121,665","","","5.96","","","1,839,989","","","88,212","","","4.79"],["Noninterest-earning assets","","84,757","","","","","","","76,883"],["Total assets","","$","2,125,441","","","","","","","$","1,916,872"],["Interest-bearing liabilities:"],["Money market deposits and others","","$","374,116","","","$","13,830","","","3.70","%","","$","475,414","","","$","5,305","","","1.12","%"],["Time deposits","","841,804","","","35,605","","","4.23","","","445,169","","","5,905","","","1.33"],["Total interest-bearing deposits","","1,215,920","","","49,435","","","4.07","","","920,583","","","11,210","","","1.22"],["Borrowings","","77,114","","","3,543","","","4.59","","","2,089","","","91","","","4.36"],["Total interest-bearing liabilities","","1,293,034","","","52,978","","","4.10","","","922,672","","","11,301","","","1.22"],["Noninterest-bearing liabilities:"],["Noninterest-bearing deposits","","613,797","","","","","","","796,175"],["Other noninterest-bearing liabilities","","35,377","","","","","","","27,829"],["Total noninterest-bearing liabilities","","649,174","","","","","","","824,004"],["Shareholders\u2019 equity","","183,233","","","","","","","170,196"],["Total liabilities and shareholders\u2019 equity","","$","2,125,441","","","","","","","$","1,916,872"],["Net interest income / interest rate spreads","","","","$","68,687","","","1.86","%","","","","$","76,911","","","3.57","%"],["Net interest margin","","","","","","3.37","%","","","","","","4.18","%"],["Cost of deposits","","","","","","2.70","%","","","","","","0.65","%"],["Cost of funds","","","","","","2.78","%","","","","","","0.66","%"]] [[/GREPCENT_TABLE]] (1)Includes income and average balances for Federal Home Loan Bank (“FHLB”) and Pacific Coast Bankers Bank stock, CRA qualified mutual fund, term federal funds, interest-earning time deposits and other miscellaneous interest-earning assets. (2)Average loan balances include non-accrual loans and loans held for sale. Changes in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following tables set forth the effects of changing rates and volumes on our net interest income during the period shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change applicable to both volume and rate have been allocated to volume and rate ratably. 59 [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["","","2024 vs 2023"],["","","Increases (Decreases) Due to Change in"],["($ in thousands)","","Volume","","Rate","","Total"],["Interest-earning assets:"],["Interest-bearing deposits in other banks","","$","1,607","","","$","119","","","$","1,726"],["Federal funds sold and other investments","","112","","","123","","","235"],["Available-for-sale debt securities","","(167)","","","263","","","96"],["Commercial real estate loans","","4,232","","","4,339","","","8,571"],["SBA loans","","423","","","(959)","","","(536)"],["Commercial and industrial loans","","4,704","","","(128)","","","4,576"],["Home mortgage loans","","3","","","1,261","","","1,264"],["Consumer & other loans","","(12)","","","35","","","23"],["Total loans","","9,350","","","4,548","","","13,898"],["Total interest-earning assets","","10,902","","","5,053","","","15,955"],["Interest-bearing liabilities:"],["Money market deposits and others","","(2,098)","","","2,403","","","305"],["Time deposits","","11,283","","","7,098","","","18,381"],["Total interest-bearing deposits","","9,185","","","9,501","","","18,686"],["Borrowings","","499","","","(151)","","","348"],["Total interest-bearing liabilities","","9,684","","","9,350","","","19,034"],["Net interest income","","$","1,218","","","$","(4,297)","","","$","(3,079)"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["","","2023 vs 2022"],["","","Increases (Decreases) Due to Change in"],["($ in thousands)","","Volume","","Rate","","Total"],["Interest-earning assets:"],["Interest-bearing deposits in other banks","","$","(28)","","","$","2,669","","","$","2,641"],["Federal funds sold and other investments","","238","","","195","","","433"],["Available-for-sale debt securities","","803","","","1,977","","","2,780"],["Commercial real estate loans","","4,167","","","6,284","","","10,451"],["SBA loans","","(5,493)","","","9,934","","","4,441"],["Commercial and industrial loans","","(1,716)","","","3,688","","","1,972"],["Home mortgage loans","","7,937","","","2,787","","","10,724"],["Consumer & other loans","","(5)","","","16","","","11"],["Total loans","","4,890","","","22,709","","","27,599"],["Total interest-earning assets","","5,903","","","27,550","","","33,453"],["Interest-bearing liabilities:"],["Money market deposits and others","","(1,527)","","","10,052","","","8,525"],["Time deposits","","11,914","","","17,786","","","29,700"],["Total interest-bearing deposits","","10,387","","","27,838","","","38,225"],["Borrowings","","3,349","","","103","","","3,452"],["Total interest-bearing liabilities","","13,736","","","27,941","","","41,677"],["Net interest income","","$","(7,833)","","","$","(391)","","","$","(8,224)"]] [[/GREPCENT_TABLE]] 60 2024 Compared to 2023 Net interest income decreased $3.1 million, or 4.5%, to $65.6 million for the year ended December 31, 2024 from $68.7 million for the same period of 2023, primarily due to higher interest expense on interest-bearing deposits, partially offset by higher interest income on loans and higher interest income on interest-bearing deposits in other banks as our deposit costs repriced quicker than our interest-earning asset yields following the Federal Reserve’s rate increases. Interest expense on interest-bearing deposits increased $18.7 million to $68.1 million for the year ended December 31, 2024, compared with $49.4 million for the same period of 2023. The increase was primarily due to a $214.3 million, or 17.6%, increase in average balance of interest-bearing deposits and a 69 basis point increase in average cost of interest-bearing deposits driven by the Federal Reserve's rate increases. Interest income on loans increased $13.9 million to $124.4 million for the year ended December 31, 2024, compared with $110.5 million for the same period of 2023, primarily due to a $131.9 million, or 7.6%, increase in average balance of loans and a 30 basis point increase in average yield on loans as a result of the Federal Reserve's rate increase. Interest income on interest-bearing deposits in other banks increased $1.7 million, or 42.7%, to $5.8 million for the year ended December 31, 2024, compared with $4.0 million for the same period of 2023. The increase was primarily due to a $30.9 million, or 39.3%, increase in average balance of interest-bearing deposits in other banks and a 12 basis point increase in average yield of interest-bearing deposits in other banks. Net interest margin was 2.99% for the year ended December 31, 2024, a 38 basis point decrease from 3.37% for the same period of 2023, primarily due to a 34 basis point decrease in net interest spread from the higher increase in average cost of interest-bearing deposits compared to the increase in average yield on loans. 2023 Compared to 2022 Net interest income decreased $8.2 million, or 10.7%, to $68.7 million for the year ended December 31, 2023 from $76.9 million for the same period of 2022, primarily due to higher interest expense on deposits, partially offset by higher interest income on loans and investments. Interest expense on deposits increased $38.2 million to $49.4 million for the year 2023, compared with $11.2 million for the same period of 2022. The increase was primarily due to a 32.1% increase in average balance of interest-bearing deposits and a 285 basis point increase in average cost of interest-bearing deposits driven by the Federal Reserve's rate increases. Average balance of interest-bearing deposits increased $295 million or 32.1% compared with the same period of 2022 because a $167 million increase in average balance of loans and a $182 million decrease in noninterest-bearing deposits for the year 2023 were primarily funded through the increase in interest-bearing deposits. Average cost of interest-bearing deposits increased a 285 basis point to 4.1% for the year ended December 31, 2023, from 1.2% for the same period of 2022, primarily due to the Federal Reserve’s rate increases. Interest income on total investments, including interest-bearing deposits in other banks and available-for-sale debt securities, increased $5.9 million primarily due to a 175 basis point increase in average yield on total investments to 3.79% for the year 2023 from 2.04% for the same period of 2022 driven by the Federal Reserve’s rate increases and higher yields on securities purchased in 2023. Interest income on loans increased $27.6 million to $110.5 million for the year 2023 compared with $82.9 million for the year 2022, primarily due to a $167 million increase in average balance of loans and a 108 basis point increase in average yield on loans. Net interest margin was 3.37% for the year ended December 31, 2023, a 81 basis point decrease from 4.18% for the same period of 2022, primarily due to a 171 basis point decrease in net interest spread from the higher increase in average cost of interest-bearing deposits compared to the increase in average yield on loans and investments. Provision for Credit Losses Credit risk is inherent in the business of making loans. We establish an allowance for credit losses both on loans and off-balance sheet commitments through charges to earnings, which are shown in the statements of operations as the 61 provision for credit losses. Specifically identifiable and quantifiable known losses are promptly charged off against the allowance. The provision for credit losses is determined by conducting a quarterly evaluation of the adequacy of our allowance for credit losses and charging the shortfall or excess, if any, to the current quarter’s expense. This has the effect of creating variability in the amount and frequency of charges to earnings. The provision for credit losses and level of allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, management’s assessment of the quality of the loan portfolio, the valuation of problem loans and the general economic conditions in our market area. 2024 Compared to 2023 The provision for credit losses was $2.8 million for the year ended December 31, 2024, an increase of $1.1 million, compared to $1.7 million for the same period of 2023, reflecting an ongoing period of relatively elevated interest rates and the related impacts on our customers and on the values of the collateral securing our loans. The provision for credit losses on loans increased $2.9 million, and provision for credit losses on off-balance sheet exposure decreased $156 thousand. The provision for credit losses on loans of $2.9 million for the year ended December 31, 2024 was primarily due to a $3.2 million increase in the quantitative general reserve driven by changes in historical loss factors and increases in loan balances and a $889 thousand increase in specific reserves from two SBA relationships, partially offset by a $1.4 million decrease in the qualitative reserve resulted from net improvements in asset quality metrics and economic conditions compared to those as of December 31, 2023. Reversal of credit losses on off-balance sheet exposure of $156 thousand was primarily due to a change in calculation method for revolving accounts using expected funding amount instead of unfunded commitment amount. 2023 Compared to 2022 The provision for credit losses was $1.7 million for the year ended December 31, 2023, compared to $3.0 million for the same period of 2022. The $1.7 million in the provision for credit losses was mainly composed of a $735 thousand increase in qualitative reserves and a $754 thousand increase in net charge-offs for the year 2023. The qualitative reserves were primarily due to upward adjustments to qualitative factors based on deteriorating economic and business conditions in 2023 compared to 2022 and an increasing trend in nonperforming and classified loans in our loan portfolio. There was no change in quantitative reserves in 2023 as a $450 thousand increase in reserves from loan growth in 2023 was offset by an equivalent release of reserves from decreases in historical loss factors. Noninterest Income While interest income remains the largest single component of total revenues, noninterest income is also an important component. A portion of our noninterest income is associated with SBA lending activity, consisting of gains on the sale of loans sold in the secondary market and servicing income from loans sold with servicing retained. Other sources of noninterest income include service charges on deposit. 2024 Compared to 2023 The following table sets forth the various components of our noninterest income for the years ended December 31, 2024 and 2023: [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["($ in thousands)","","2024","","2023","","$ Change","","% Change"],["Noninterest income:"],["Service charges on deposits","","$","3,261","","","$","2,123","","","$","1,138","","","53.6","%"],["Loan servicing fees, net of amortization","","2,898","","","2,449","","","449","","","18.3"],["Gain on sale of loans","","8,313","","","7,843","","","470","","","6.0"],["Other income","","1,955","","","1,766","","","189","","","10.7"],["Total noninterest income","","$","16,427","","","$","14,181","","","$","2,246","","","15.8","%"]] [[/GREPCENT_TABLE]] 62 Noninterest income for the year ended December 31, 2024 was $16.4 million, an increase of $2.2 million, or 15.8%, compared to $14.2 million for the same period of 2023, primarily due to increases in service charge on deposits, gain on sale of loans and loan servicing fees. Service charges on deposits was $3.3 million for the year ended December 31, 2024, compared to $2.1 million for the same period of 2023, an increase of $1.1 million, or 53.6%, primarily due to an increase in deposit analysis fees from an increase in the number of analysis accounts. Gain on sale of loans was $8.3 million for the year ended December 31, 2024, compared to $7.8 million for the same period of 2023, an increase of $470 thousand, or 6.0%. The increase was primarily due to a higher average sales premium rate, primarily offset by a lower sold amount in SBA loans. We sold $127.2 million of SBA loans with an average premium of 7.97% for the year ended December 31, 2024, compared to a sale of $145.0 million of SBA loans with an average premium of 6.65% in the same period of 2023. Loan servicing fees was $2.9 million for the year ended December 31, 2024, compared to $2.4 million for the same period of 2023, an increase of $449 thousand, or 18.3%, primarily due to a decrease in servicing fee amortization driven by lower loan payoffs in loan servicing portfolio. 2023 Compared to 2022 The following table sets forth the various components of our noninterest income for the years ended December 31, 2023 and 2022: [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["($ in thousands)","","2023","","2022","","$ Change","","% Change"],["Noninterest income:"],["Service charges on deposits","","$","2,123","","","$","1,675","","","$","448","","","26.7","%"],["Loan servicing fees, net of amortization","","2,449","","","2,416","","","33","","","1.4"],["Gain on sale of loans","","7,843","","","12,285","","","(4,442)","","","(36.2)"],["Other income","","1,766","","","1,243","","","523","","","42.1"],["Total noninterest income","","$","14,181","","","$","17,619","","","$","(3,438)","","","(19.5)","%"]] [[/GREPCENT_TABLE]] Noninterest income for the year ended December 31, 2023 was $14.2 million, a decrease of $3.4 million, or 19.5%, compared to $17.6 million for the same period of 2022, primarily due to a decrease in gain on sale of loans, partially offset by increased in other income and service charges on deposits. Gain on sale of loans was $7.8 million for the year ended December 31, 2023, compared to $12.3 million for the same period of 2022, a decrease of $4.4 million or 36.2%. The decrease was primarily due to a lower sold amount in SBA loans and a lower average sales premium. We sold $145.0 million of SBA loans with an average premium of 6.65% for the year ended December 31, 2023, compared to a sale of $181.9 million of SBA loans with an average premium of 7.45% in the same period of 2022. Other income was $1.8 million for the year ended December 31, 2023, compared to $1.2 million, an increase of $523 thousand or 42.1%, primarily due to a $479 thousand increase in a holding gain on our equity in equity investments. Equity investments had an unrealized holding gain of $48 thousand as of December 31, 2023 compared to an unrealized holding loss of $431 thousand as of December 31, 2022. Service charges on deposit was $2.1 million for the year ended December 31, 2023, compared to $1.7 million for the same period of 2022, an increase of $448 thousand or 26.7%, primarily due to an increase in deposit analysis fees from an increase in the number of analysis accounts. 63 Noninterest Expense 2024 Compared to 2023 The following table sets forth the major components of our noninterest expense for the years ended December 31, 2024 and 2023: [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["($ in thousands)","","2024","","2023","","$ Change","","% Change"],["Noninterest expense:"],["Salaries and employee benefits","","$","31,717","","","$","29,593","","","$","2,124","","","7.2","%"],["Occupancy and equipment","","6,673","","","6,490","","","183","","","2.8"],["Data processing and communication","","2,245","","","2,109","","","136","","","6.4"],["Professional fees","","1,535","","","1,571","","","(36)","","","(2.3)"],["FDIC insurance and regulatory assessments","","1,672","","","1,457","","","215","","","14.8"],["Promotion and advertising","","533","","","614","","","(81)","","","(13.2)"],["Directors' fees","","640","","","680","","","(40)","","","(5.9)"],["Foundation donation and other contributions","","2,108","","","2,400","","","(292)","","","(12.2)"],["Other expenses","","3,076","","","2,812","","","264","","","9.4"],["Total noninterest expense","","$","50,199","","","$","47,726","","","$","2,473","","","5.2","%"]] [[/GREPCENT_TABLE]] Noninterest expense for the year ended December 31, 2024 was $50.2 million, an increase of $2.5 million, or 5.2%, compared to $47.7 million for the same period of 2023, primarily due to increases in salaries and employee benefits expense, other expenses, and FDIC insurance and regulatory assessments, partially offset by a decrease in foundation donation and other contributions. Salaries and employee benefits for the year ended December 31, 2024 was $31.7 million, an increase of $2.1 million, or 7.2%, compared with $29.6 million for the same period of 2023. The increase was primarily due to an increase in the number of employees to support our growth, an increase from employee salary adjustments in 2024, and an increase in employee marketing incentives. Other expenses for the year ended December 31, 2024 was $3.1 million, an increase of $264 thousand, or 9.4%, compared with $2.8 million for the same period of 2023. The increase was primarily due to an increase in customer services expenses related to the increase in the number of analysis accounts. FDIC insurance and regulatory assessments for the year ended December 31, 2024 was $1.7 million, an increase of $215 thousand, or 14.8%, compared with $1.5 million for the same period of 2023. The increase was primarily due to increases in assessment base and rate from our balance sheet growth and increased reliance on brokered deposits. Foundation donations and other contributions for the year ended December 31, 2024 was $2.1 million, a decrease of $292 thousand, or 12.2%, compared with $2.4 million for the same period of 2023. The decrease was primarily due to lower donation accruals for Open Stewardship Foundation as a result of lower net income. 2023 Compared 2022 The following table sets forth the major components of our noninterest expense for the years ended December 31, 2023 and 2022: 64 [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["($ in thousands)","","2023","","2022","","$ Change","","% Change"],["Noninterest expense:"],["Salaries and employee benefits","","$","29,593","","","$","27,189","","","$","2,404","","","8.8","%"],["Occupancy and equipment","","6,490","","","5,964","","","526","","","8.8"],["Data processing and communication","","2,109","","","2,085","","","24","","","1.2"],["Professional fees","","1,571","","","1,620","","","(49)","","","(3.0)"],["FDIC insurance and regulatory assessments","","1,457","","","813","","","644","","","79.2"],["Promotion and advertising","","614","","","543","","","71","","","13.1"],["Directors' fees","","680","","","682","","","(2)","","","(0.3)"],["Foundation donation and other contributions","","2,400","","","3,393","","","(993)","","","(29.3)"],["Other expenses","","2,812","","","2,541","","","271","","","10.7"],["Total noninterest expense","","$","47,726","","","$","44,830","","","$","2,896","","","6.5","%"]] [[/GREPCENT_TABLE]] Noninterest expense for the year ended December 31, 2023 was $47.7 million, compared with $44.8 million for the same period of 2022, an increase of $2.9 million or 6.5%. Salaries and employee benefits for the year ended December 31, 2023 was $29.6 million, compared to $27.2 million for the same period of 2022, an increase of $2.4 million, or 8.8%. The increase was primarily due to a $1.0 million increase from a 17.2 increase in average number of full-time employees to 224.4 in 2023 from 207.2 in 2022, and a $850 thousand decrease in loan origination costs as a result of lower loan originations in 2023. Occupancy and equipment for the year ended December 31, 2023 was $6.5 million, compared to $6.0 million for the same period of 2022, an increase of $526 thousand, or 8.8%. The increase was primarily due to the opening of Spring Mountain Office in Las Vegas, Nevada and two renewed leases for branches in California. FDIC insurance and regulatory assessments for the year ended December 31, 2023 was $1.5 million, compared to $813 thousand, an increase of $644 thousand, or 79.2%. The increase was primarily due to our deposit growth from the same period of 2022 and an increase in FDIC assessment fees in 2023. Foundation donations and other contributions for the year ended December 31, 2023 was $2.4 million, compared to $3.4 million, a decrease of $993 thousand, or 29.3%. The decrease was primarily due to lower donation accruals for Open Stewardship Foundation as a result of lower net income. Income Tax Expense Income tax expense was $8.0 million for the year ended December 31, 2024, compared to $9.6 million for the same period of 2023, primarily due to a $4.4 million, or 13.2%, decrease in income before income tax to $29.1 million for the year ended December 31, 2024 from $33.5 million for the same period of 2023. Effective tax rates were 27.5% and 28.6% for the years ended December 31, 2024 and 2023, respectively. Income tax expense was $9.6 million for the year ended December 31, 2023, compared to $13.4 million for the same period of 2022, primarily due to a $13.2 million or 28.3% decrease in income before income tax to $33.5 million in 2023 from $46.7 million for 2022. Effective tax rates were 28.6% and 28.7% for the years ended December 31, 2023 and 2022, respectively. Realization of deferred tax assets is primarily dependent upon us generating sufficient future taxable income to obtain benefit from the reversal of net deductible temporary differences, along with the utilization of tax credit carry forwards and the net operating loss carry forwards for Federal and California state income tax purposes. The amount of deferred tax assets considered realizable is subject to adjustment in future periods based on estimates of future taxable income. Under GAAP a valuation allowance is required to be recognized if it is “more likely than not” that the deferred tax assets will not be realized. The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management’s evaluation of both positive and negative evidence, including forecasts 65 of future income, cumulative losses, applicable tax planning strategies, and assessments of current and future economic and business conditions. We recognized net deferred tax assets of $14.9 million and $13.3 million as of December 31, 2024 and 2023, respectively. After consideration of the matters in the preceding paragraph, we have determined that it is more likely than not that net deferred tax assets as of December 31, 2024 will be fully realized in future years. FINANCIAL CONDITION Investment Portfolio The securities portfolio is the second largest component of our interest earning assets, and the structure and composition of this portfolio is important to an analysis of our financial condition. The portfolio serves the following purposes: (i) it provides a source of pledged assets for securing certain deposits and borrowed funds, as may be required by law or by specific agreement with a depositor or lender; (ii) it provides liquidity to even out cash flows from the loan and deposit activities of customers; (iii) it can be used as an interest rate risk management tool, because it provides a large base of assets, the maturity and interest rate characteristics of which can be changed more readily than the loan portfolio to better match changes in the deposit base and our other funding sources; and (iv) it is an alternative interest-earning use of funds when loan demand is weak or when deposits grow more rapidly than loans. We classify our securities as either available-for-sale or held-to-maturity at the time of purchase. Accounting guidance requires available-for-sale securities to be marked to fair value with an offset to accumulated other comprehensive income (loss), a component of shareholders’ equity. Monthly adjustments are made to reflect changes in the fair value of our available-for-sale securities. All securities in our investment portfolio were classified as available-for-sale as of December 31, 2024. There were no held-to-maturity or trading securities in our investment portfolio as of December 31, 2024. All available-for-sale securities are carried at fair value and consist of U.S. government agencies or sponsored agency securities and tax-exempt municipal securities. The following table summarizes the fair value of the available-for-sale securities portfolio as of the dates presented: [[GREPCENT_TABLE]] [["","","December 31, 2024","","December 31, 2023"],["($ in thousands)","","AmortizedCost","","Fair Value","","Unrealized Loss","","AmortizedCost","","Fair Value","","Unrealized Loss"],["U.S. Government agencies or sponsored agency securities:"],["Residential mortgage-backed securities","","$","41,521","","","$","37,076","","","$","(4,445)","","","$","48,318","","","$","43,877","","","$","(4,441)"],["Residential collateralized mortgage obligations","","160,187","","","143,041","","","(17,146)","","","162,142","","","144,459","","","(17,683)"],["Municipal securities - tax exempt","","5,830","","","5,792","","","(38)","","","5,726","","","5,914","","","188"],["Total available-for-sale debt securities","","$","207,538","","","$","185,909","","","$","(21,629)","","","$","216,186","","","$","194,250","","","$","(21,936)"]] [[/GREPCENT_TABLE]] Available-for-sale debt securities decreased $8.3 million, or 4.3%, to $185.9 million as of December 31, 2024 from $194.3 million as of December 31, 2023, primarily due to principal paydowns and maturity of $27.7 million, partially offset by security purchases of $19.1 million for the year ended December 31, 2024. No issuer of the available-for-sale securities, other than U.S. Government and its agencies, comprised more than ten percent of our shareholders’ equity as of December 31, 2024 and 2023. Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. The unrealized losses were primarily attributable to interest rate movement, not credit quality. These securities (Fannie Mae, Ginnie Mae, and Freddie Mac) are guaranteed or sponsored by agencies of the U.S. government, and the issuers of the securities are of high credit quality. We believe that the net unrealized losses presented in the previous tables are temporary 66 and no credit losses are expected, particularly because we generally hold these securities as interest-earning assets rather than selling them at times when market conditions mitigate against that investment decision. As a result, we expect full collection of the carrying amount of these securities, do not intend to sell the securities in an unrealized loss position, and believe it is more-likely-than-not we will not have to sell these securities prior to recovery of amortized cost. Accordingly, for available-for-sale debt securities, we did not have allowance for credit losses as of December 31, 2024 and 2023. The following table sets forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of the dates presented. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. [[GREPCENT_TABLE]] [["","","December 31, 2024"],["","","Due in One Year or Less","","Due after One Year Through Five Years","","Due after Five Years Through Ten Years","","Due after Ten Years"],["($ in thousands)","","AmortizedCost","","Weighted Average Yield","","Amortized Cost","","Weighted Average Yield","","Amortized Cost","","Weighted Average Yield","","Amortized Cost","","Weighted Average Yield"],["U.S. Government agencies or sponsored agency securities:"],["Residential mortgage-backed securities","","$","22","","","2.37","%","","$","1,034","","","2.22","%","","$","785","","","2.33","%","","$","39,680","","","2.21","%"],["Residential collateralized mortgage obligations","","\u2014","","","\u2014","","","138","","","1.87","","","2,032","","","1.34","","","158,017","","","3.07"],["Municipal securities - tax exempt","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","5,830","","","5.20"],["Total available-for-sale debt securities","","$","22","","","2.37","%","","$","1,172","","","2.18","%","","$","2,817","","","1.62","%","","$","203,527","","","2.96","%"]] [[/GREPCENT_TABLE]] We have not used interest rate swaps or other derivative instruments to hedge fixed rate loans or securities to otherwise mitigate interest rate risk. Loans Our loans represent the largest portion of our earning assets, substantially greater than the securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important consideration when reviewing our financial condition. The loan distribution table that follows sets forth our gross loans outstanding, and the percentage distribution in each category as of the dates indicated: [[GREPCENT_TABLE]] [["","","December 31, 2024","","December 31, 2023"],["($ in thousands)","","Amount","","% of Total","","Amount","","% of Total"],["Commercial real estate","","$","980,247","","","50.1","%","","$","885,585","","","50.2","%"],["SBA\u2014real estate","","231,962","","","11.9","","","224,695","","","12.7"],["SBA\u2014non-real estate","","21,748","","","1.1","","","14,997","","","0.8"],["Commercial and industrial","","213,097","","","10.9","","","120,970","","","6.9"],["Home mortgage","","509,524","","","26.0","","","518,024","","","29.3"],["Consumer","","274","","","\u2014","","","1,574","","","0.1"],["Gross loans receivable","","1,956,852","","","100.0","%","","1,765,845","","","100.0","%"],["Allowance for credit losses","","(24,796)","","","","","(21,993)"],["Loans receivable, net(1)","","$","1,932,056","","","","","$","1,743,852"]] [[/GREPCENT_TABLE]] (1)     Includes net deferred loan costs (fees) and unamortized premiums (unaccreted discounts) of $(702) thousand and $140 thousand as of December 31, 2024 and 2023, respectively. Gross loans increased $191.0 million, or 10.8%, to $1.96 billion as of December 31, 2024, compared to $1.77 billion as of December 31, 2023. The increase was primarily attributable to new loan production of $502.8 million, partially offset by loan payoffs and paydowns of $188.2 million and loan sales of $130.0 million. 67 The following tables presents the contractual loan maturities by loan category and the contractual distribution of loans to changes in interest rates as of December 31, 2024 and 2023: [[GREPCENT_TABLE]] [["","","December 31, 2024"],["","","Due in One Year or Less","","Due after One Year Through Five Years","","Due after Five Years"],["($ in thousands)","","Fixed Rate","","Adjustable Rate","","Fixed Rate","","Adjustable Rate","","Fixed Rate","","Adjustable Rate","","Total"],["Commercial real estate","","$","77,086","","","$","59,061","","","$","477,801","","","$","107,076","","","$","191,553","","","$","67,670","","","$","980,247"],["SBA\u2014real estate","","\u2014","","","\u2014","","","\u2014","","","58","","","\u2014","","","231,904","","","231,962"],["SBA\u2014non- real estate","","\u2014","","","136","","","\u2014","","","3,017","","","\u2014","","","18,595","","","21,748"],["Commercial and industrial","","87,899","","","48,147","","","8,924","","","27,069","","","20,224","","","20,834","","","213,097"],["Home mortgage","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","509,524","","","\u2014","","","509,524"],["Consumer","","27","","","247","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","274"],["Gross loans","","$","165,012","","","$","107,591","","","$","486,725","","","$","137,220","","","$","721,301","","","$","339,003","","","$","1,956,852"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","","December 31, 2023"],["","","Due in One Year or Less","","Due after One Year Through Five Years","","Due after Five Years"],["($ in thousands)","","Fixed Rate","","Adjustable Rate","","Fixed Rate","","Adjustable Rate","","Fixed Rate","","Adjustable Rate","","Total"],["Commercial real estate","","$","66,776","","","$","84,427","","","$","414,863","","","$","79,933","","","$","192,074","","","$","47,512","","","$","885,585"],["SBA\u2014real estate","","\u2014","","","\u2014","","","\u2014","","","25","","","\u2014","","","224,670","","","224,695"],["SBA\u2014non- real estate","","\u2014","","","116","","","1","","","3,535","","","\u2014","","","11,345","","","14,997"],["Commercial and industrial","","18,478","","","30,172","","","7,996","","","27,154","","","23,644","","","13,526","","","120,970"],["Home mortgage","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","495,425","","","22,599","","","518,024"],["Consumer","","\u2014","","","1,574","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","1,574"],["Gross loans","","$","85,254","","","$","116,289","","","$","422,860","","","$","110,647","","","$","711,143","","","$","319,652","","","$","1,765,845"]] [[/GREPCENT_TABLE]] Our loan portfolio is concentrated in commercial real estate, which includes unguaranteed balances in SBA loans, home mortgage and commercial (primarily manufacturing, wholesale, and services oriented entities). We do not have any material concentrations by industry or group of industries in the loan portfolio. However, 88.0% of our gross loans were secured by real property as of December 31, 2024, compared to 92.2% as of December 31, 2023. Loans — Commercial Real Estate: We have established concentration limits in our loan portfolio for commercial real estate loans, commercial and industrial loans, and unsecured lending, among others. All loan types are within established limits. We use underwriting guidelines to assess the borrowers’ historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending agreements to allow us to react to a borrower’s deteriorating financial condition, should that occur. Commercial real estate loans include owner-occupied and non-occupied commercial real estate. We originate both fixed and adjustable rate loans. Adjustable rate loans are based on the Wall Street Journal prime rate. Our commercial real estate loan portfolio totaled $980.2 million as of December 31, 2024 compared to $885.6 million as of December 31, 2023. During the year ended December 31, 2024, we originated $219.9 million of commercial real estate loans. As of December 31, 2024, approximately 76.1% of the commercial real estate portfolio consisted of fixed-rate loans. Our policy maximum loan-to-value, or LTV, is 70% for commercial real estate loans. As of December 31, 2024, our average loan to value for commercial real estate loans was 54.0%. Loans — SBA: We are designated as an SBA Preferred Lender under the SBA Preferred Lender Program. We offer mostly SBA 7(a) variable-rate loans. We generally sell the 75% guaranteed portion of the SBA loans that we originate. Our SBA loans are typically made to small-sized manufacturing, wholesale, retail, hotel/motel and service businesses for working capital needs or business expansions. SBA loans have maturities up to 25 years. Typically, non-real estate secured loans mature in less than 10 years. Collateral may also include inventory, accounts receivable and equipment, and may include personal guarantees. Our unguaranteed SBA loans collateralized by real estate are monitored by collateral type and included in our commercial real estate Concentration Guidance. 68 As of December 31, 2024, our SBA portfolio totaled $253.7 million, compared to $239.7 million as of December 31, 2023. We originated $159.6 million for the year ended December 31, 2024. We sold SBA loans of $127.2 million with a 7.97% average premium during the year ended December 31, 2024. From our total SBA loan portfolio, $232.0 million is secured by real estate and $21.7 million is unsecured or secured by business assets as of December 31, 2024. Loans — Commercial and Industrial: Commercial and industrial loans totaled $213.1 million as of December 31, 2024, compared to $121.0 million as of December 31, 2023. We originated $78.9 million for the year ended December 31, 2024. Loans - Home Mortgage: We originate mainly non-qualified, alternative documentation single-family home mortgage loans (“home mortgage”) primarily through our retail branch network and our correspondent lender network. The primary loan product is a five-year or seven-year hybrid adjustable rate mortgage, which reprices after five years to a selected SOFR plus certain spreads. We also purchase residential mortgage loans from third party mortgage originators based on the review of their underwriting and file quality as opportunities arise. Home mortgage loans totaled $509.5 million as of December 31, 2024, compared to $518.0 million as of December 31, 2023. For the year ended December 31, 2024, we originated $44.2 million of home mortgage loans. There was no home mortgage loan purchase from third party mortgage originators for the same period. Loan Servicing As of December 31, 2024 and 2023, we serviced $700.9 million and $707.4 million, respectively, of SBA loans for others. Activity for loan servicing rights was as follows: [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["($ in thousands)","","2024","","2023","","2022"],["Beginning balance","","$","11,741","","","$","12,759","","","$","12,720"],["Additions from loans sold with servicing retained","","2,841","","","3,400","","","4,424"],["Amortized to expense","","(3,748)","","","(4,418)","","","(4,385)"],["Ending balance","","$","10,834","","","$","11,741","","","$","12,759"]] [[/GREPCENT_TABLE]] Loan servicing rights are reported on our Consolidated Balance Sheets and reported net of amortization. Allowance for Credit Losses We adopted ASU 2016-13 using a modified retrospective approach on January 1, 2023 without electing the fair value option on eligible financial instruments under ASU 2019-05. We replaced the current incurred loss accounting model with the Current Expected Credit Losses ("CECL") approach for financial instruments measured at amortized cost and other commitments to extend credit. CECL requires the immediate recognition of estimated credit losses expected to occur over the estimated remaining life of the asset. The forward-looking concept of CECL requires loss estimates to consider historical experience, current conditions and reasonable and supportable forecasts. The adoption of this ASU increased the allowance for credit losses by $1.9 million and allowance for off-balance sheet commitments by $184 thousand. We also recorded a deferred tax assets of $624 thousand and a decrease to opening retained earnings of $1.5 million on January 1, 2023. The increase to allowance for credit losses was primarily longer duration of home mortgage loans, offset primarily by shorter duration of commercial and industrial loans. We did not record an allowance for credit losses on our available-for-sale debt securities as a result of this adoption. Disclosures for periods after January 1, 2023 are presented in accordance with ASC 326 while prior period amounts continue to be reported in accordance with previously applicable standards and the accounting policies. The allowance for credit losses was $24.8 million as of December 31, 2024, compared to $22.0 million as of December 31, 2023. Provision of credit losses of $2.8 million was recorded for the year ended December 31, 2024, compared to $1.7 million for the same period in 2023. 69 Analysis of the Allowance for Credit Losses The following table provides an analysis of the allowance for credit losses, provision for credit losses and net charge-offs, by category, for the years ended December 31, 2024, 2023 and 2022: [[GREPCENT_TABLE]] [["","","As of and for the Year Ended December 31, 2024"],["($ in thousands)","","Beginning","","Provision (Reversal)","","Net (Charge-offs) Recoveries","","Ending"],["Commercial real estate","","$","7,915","","","$","1,375","","","$","\u2014","","","$","9,290"],["SBA\u2014real estate","","1,657","","","3,966","","","(66)","","","5,557"],["SBA\u2014non- real estate","","147","","","271","","","\u2014","","","418"],["Commercial and industrial","","1,215","","","673","","","(44)","","","1,844"],["Home mortgage","","11,045","","","(3,361)","","","\u2014","","","7,684"],["Consumer","","14","","","$","(11)","","","\u2014","","","3"],["Total","","$","21,993","","","$","2,913","","","$","(110)","","","$","24,796"],["Gross loans(1)","","","","","","","","$","1,956,852"],["Allowance for credit losses to gross loans","","","","","","","","1.27","%"],["Average loans(1)","","","","","","","","$","1,863,731"],["Net (charge-offs) recoveries to average gross loans","","","","","","","","(0.01)","%"]] [[/GREPCENT_TABLE]] (1)    Excludes loans held for sale. [[GREPCENT_TABLE]] [["","","As of and for the Year Ended December 31, 2023"],["($ in thousands)","","Beginning","","Impact of CECL Adoption","","Provision (Reversal)","","Net (Charge-offs) Recoveries","","Ending"],["Commercial real estate","","$","6,951","","","$","875","","","$","723","","","$","(634)","","","$","7,915"],["SBA\u2014real estate","","1,607","","","(238)","","","321","","","(33)","","","1,657"],["SBA\u2014non- real estate","","207","","","(142)","","","73","","","9","","","147"],["Commercial and industrial","","1,643","","","(320)","","","(11)","","","(97)","","","1,215"],["Home mortgage","","8,826","","","1,753","","","466","","","\u2014","","","11,045"],["Consumer","","7","","","$","(4)","","","10","","","1","","","14"],["Total","","$","19,241","","","$","1,924","","","$","1,582","","","$","(754)","","","$","21,993"],["Gross loans(1)","","","","","","","","","","$","1,765,845"],["Allowance for loan losses to gross loans","","","","","","","","","","1.25","%"],["Average loans(1)","","","","","","","","","","$","1,744,878"],["Net (charge-off) recoveries to average gross loans","","","","","","","","","","(0.04)","%"]] [[/GREPCENT_TABLE]] (1)    Excludes loans held for sale. 70 [[GREPCENT_TABLE]] [["","","As of and for the Year Ended December 31, 2022"],["($ in thousands)","","Beginning","","Provision (Reversal)","","Net (Charge-offs) Recoveries","","Ending"],["Commercial real estate","","$","8,150","","","$","(1,199)","","","$","\u2014","","","$","6,951"],["SBA\u2014real estate","","2,022","","","(409)","","","(6)","","","1,607"],["SBA\u2014non- real estate","","199","","","66","","","(58)","","","207"],["Commercial and industrial","","2,848","","","(1,205)","","","\u2014","","","1,643"],["Home mortgage","","2,891","","","5,935","","","\u2014","","","8,826"],["Consumer","","13","","","$","(7)","","","1","","","7"],["Total","","$","16,123","","","$","3,181","","","$","(63)","","","$","19,241"],["Gross loans(1)","","","","","","","","$","1,678,292"],["Allowance for loan losses to gross loans","","","","","","","","1.15","%"],["Average loans(1)","","","","","","","","$","1,509,067"],["Net (charge-off) recoveries to average gross loans","","","","","","","","\u2014","%"]] [[/GREPCENT_TABLE]] (1)    Excludes loans held for sale. The following table presents an allocation of the allowance for credit losses by portfolio as of December 31, 2024 and 2023: [[GREPCENT_TABLE]] [["","","December 31, 2024","","December 31, 2023"],["($ in thousands)","","Amount","","% to Total","","Amount","","% to Total"],["Commercial real estate","","$","9,290","","","37.5","%","","$","7,915","","","36.0","%"],["SBA\u2014real estate","","5,557","","","22.4","","","1,657","","","7.5"],["SBA\u2014non- real estate","","418","","","1.7","","","147","","","0.7"],["Commercial and industrial","","1,844","","","7.4","","","1,215","","","5.5"],["Home mortgage","","7,684","","","31.0","","","11,045","","","50.2"],["Consumer","","3","","","\u2014","","","14","","","0.1"],["Total","","$","24,796","","","100.0","%","","$","21,993","","","100.0","%"]] [[/GREPCENT_TABLE]] Nonperforming Assets Loans are considered delinquent when principal or interest payments are past due 30 days or more. Delinquent loans may remain on accrual status between 30 days and 90 days past due. Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Typically, the accrual of interest on loans is discontinued when principal or interest payments are 90 days past due or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business. When loans are placed on non-accrual status, all interest previously accrued, but not collected, is reversed against current period interest income. Income on non-accrual loans is subsequently recognized only to the extent that cash is received, and the loan’s principal balance is deemed collectible. Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal and interest is probable. Nonperforming loans include loans that are 90 days past due and still accruing, loans accounted for on a non-accrual basis, and accruing restructured loans. Nonperforming assets consist of nonperforming loans plus other real estate owned ("OREO"). Nonperforming loans were $7.8 million as of December 31, 2024, compared to $6.1 million as of December 31, 2023. Nonperforming loans excluded the guaranteed portion of SBA loans of $16.3 million and $2.0 million as of December 31, 2024 and 2023, respectively. 71 Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as OREO until being sold, and is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. As of December 31, 2024, OREO totaled $1.2 million, which is secured by a mix-use property in Los Angeles with 90% guaranteed by SBA. There was no OREO as of December 31, 2023. The following table sets forth the allocation of our nonperforming assets among our different asset categories as of the dates indicated. Nonperforming loans include non-accrual loans, loans past due 90 days or more and still accruing interest, and loans modified under troubled debt restructurings. [[GREPCENT_TABLE]] [["($ in thousands)","","December 31, 2024","","December 31, 2023"],["Nonaccrual loans","","$","7,820","","","$","6,082"],["Past due loans 90 days or more and still accruing","","\u2014","","","\u2014"],["Total nonperforming loans(1)","","7,820","","","6,082"],["Other real estate owned","","1,237","","","\u2014"],["Total nonperforming assets","","$","9,057","","","$","6,082"],["Nonperforming loans to gross loans","","0.40","%","","0.34","%"],["Nonperforming assets to total assets","","0.38","","","0.28"],["Allowance for credit losses to nonperforming loans","","317","","","362"]] [[/GREPCENT_TABLE]] (1)Excludes guaranteed portion of SBA loans of $16.3 million and $2.0 million as of December 31, 2024 and 2023, respectively. Deposits and Other Sources of Funds We gather deposits primarily through our branch locations. We offer a variety of deposit products including demand deposits accounts, interest-bearing products, savings accounts and certificate of deposits. We dedicate continuing effort into gathering noninterest demand deposits accounts through marketing to our existing and new loan customers, customer referrals, our marketing staff and various involvement with community networks. The following table show the composition of deposits by type as of the dates presented: [[GREPCENT_TABLE]] [["","","December 31, 2024","","December 31, 2023"],["($ in thousands)","","Amount","","Percent","","Amount","","Percent"],["Noninterest-bearing demand","","$","504,928","","","24.9","%","","$","522,751","","","28.9","%"],["Interest-bearing:"],["Money market and others","","329,095","","","16.2","","","399,018","","","22.1"],["Time deposits (greater than $250)","","565,813","","","27.9","","","433,892","","","24.0"],["Time deposits ($250 or less)","","627,449","","","31.0","","","451,897","","","25.0"],["Total interest-bearing","","1,522,357","","","75.1","","","1,284,807","","","71.1"],["Total deposits","","$","2,027,285","","","100.0","%","","$","1,807,558","","","100.0","%"]] [[/GREPCENT_TABLE]] The following tables set forth the maturity of time deposits as of December 31, 2024: [[GREPCENT_TABLE]] [["","","Maturity Within:"],["($ in thousands)","","Three Months","","Three to Six Months","","Six to Twelve Months","","After Twelve Months","","Total"],["Time deposits (greater than $250)","","$","206,324","","","$","149,639","","","$","209,399","","","$","451","","","$","565,813"],["Time deposits ($250 or less)","","202,931","","","123,639","","","281,308","","","19,571","","","627,449"],["Total time deposits","","$","409,255","","","$","273,278","","","$","490,707","","","$","20,022","","","$","1,193,262"]] [[/GREPCENT_TABLE]] 72 Other than deposits, we also utilized FHLB advances as a supplementary funding source to finance our operations. The advances from the FHLB are collateralized by residential and commercial real estate loans. As of December 31, 2024 and 2023, we had maximum borrowing capacity from the FHLB of $677.0 million and $655.9 million, respectively. We had borrowings from FHLB of $95.0 million and $105.0 million as of December 31, 2024 and 2023, respectively. We had estimated uninsured deposits of $961.7 million, or 47.4% of total deposits, and $781.0 million, or 43.2% of total deposits, as of December 31, 2024 and 2023, respectively. Liquidity and Capital Resources Liquidity refers to our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, while effectively balancing the related costs. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements. Our primarily objective concerning liquidity is to manage our position to meet our customers' daily cash flow needs, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders. We strive to meet our short-term and long-term liquidity requirements through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, and increases in customer deposits. We expect that other alternative sources of funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis. Deposits are the primary funding source for the Bank. Deposits provide a stable source of funding and reduce our reliance on the wholesale funding markets. The following table presents the loan and deposit balances, the loans-to-deposit ratios, and deposits as a percentage of total liabilities as of December 31, 2024 and 2023: [[GREPCENT_TABLE]] [["($ in thousands)","","December 31, 2024","","December 31, 2023"],["Deposits","","$","2,027,285","","","$","1,807,558"],["Deposits as a % of total liabilities","","93.8","%","","92.5","%"],["Loans, net","","$","1,932,056","","","$","1,743,852"],["Loans-to-deposits ratio","","95.3","%","","96.5","%"]] [[/GREPCENT_TABLE]] In addition to deposits, we have access to various sources of wholesale funding, as well as borrowing capacity at the FHLB, Federal Reserve, and correspondent banks to sustain an adequate liquid asset portfolio, meet daily cash demands and allow management flexibility to execute the business strategy. Economic conditions and the stability of capital markets impact the access to and the cost of wholesale funding. The access to capital markets is also affected by the ratings received from various credit rating agencies. We had $100.0 million of unsecured federal funds lines with no amounts advanced as of December 31, 2024 and 2023. In addition, on such dates we had lines of credit from the Federal Reserve discount window of $215.1 million and $183.0 million, respectively. The Federal Reserve discount window lines were collateralized by a pool of commercial real estate loans and commercial and industrial loans totaling $278.9 million and $251.0 million as of December 31, 2024 and 2023, respectively. We did not have any borrowings outstanding with the Federal Reserve as of December 31, 2024 or 2023, and our borrowing capacity is limited only by eligible collateral. Based on the values of loans pledged as collateral, we had $401.9 million of additional borrowing availability with the FHLB as of December 31, 2024. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts. We maintain access to additional liquidity that we believe is more than adequate, including highly liquid assets on our balance sheet and available unused borrowings from other financial institutions. The following table presents our liquid assets and available borrowings as of December 31, 2024 and 2023: 73 [[GREPCENT_TABLE]] [["($ in thousands)","","December 31, 2024","","December 31, 2023","","% Change"],["Liquid assets:"],["Cash and cash equivalents","","$","134,943","","","$","91,216","","","47.9","%"],["AFS debt securities","","185,909","","","194,250","","","(4.3)"],["Liquid assets","","$","320,852","","","$","285,466","","","12.4","%"],["Liquid assets to total deposits","","15.8","%","","15.8","%"],["Available borrowings:"],["FHLB","","$","401,900","","","$","363,615","","","10.5","%"],["Federal Reserve Bank","","215,115","","","182,989","","","17.6"],["Pacific Coast Bankers Bank","","50,000","","","50,000","","","\u2014"],["Zions Bank","","25,000","","","25,000","","","\u2014"],["First Horizon Bank","","25,000","","","25,000","","","\u2014"],["Total available borrowings","","$","717,015","","","$","646,604","","","10.9","%"],["Total available borrowings to total deposits","","35.4","%","","35.8","%","","(0.4)","%"],["Liquid assets and available borrowings to total deposits","","51.2","%","","51.6","%","","(0.4)","%"]] [[/GREPCENT_TABLE]] The following tables summarizes short- and long-term material cash requirements as of December 31, 2024, which we believe that we will be able to fund these obligations through cash generated from our operations and available alternative sources of funds: [[GREPCENT_TABLE]] [["","","Material Cash Requirements"],["($ in thousands)","","Within One Year","","One to Three Years","","Three to Five Years","","After Five Years","","Indeterminable maturity(1)","","Total"],["Deposits(1)","","$","1,173,240","","","$","19,501","","","$","521","","","$","\u2014","","","$","834,023","","","$","2,027,285"],["Operating lease commitments","","1,999","","","4,569","","","3,233","","","546","","","\u2014","","","10,347"],["Advances from FHLB(2)","","95,000","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","95,000"],["Commitments to fund investment for Low Income Housing Tax Credit","","5,568","","","1,590","","","104","","","360","","","\u2014","","","7,622"],["Total contractual obligations","","$","1,275,807","","","$","25,660","","","$","3,858","","","$","906","","","$","834,023","","","$","2,140,254"]] [[/GREPCENT_TABLE]] (1)Includes deposits with no defined maturity, such as noninterest-bearing demand, savings and money market. (2)Excludes accrued interest. In addition to contractual obligations, other commitments of us impact liquidity. These include unused commitments to extend credit, standby letters of credit and commercial letters of credit. Since many of these commitments expire without being drawn upon, and each customer must continue to meet the conditions established in the contract, the total amount of these commercial commitments does not necessarily represent the future cash requirements of us. Our liquidity sources have been, and are expected to be, sufficient to meet the cash requirements of our lending activities. Information about our loan commitments, standby letters of credit and commercial letters of credit is provided in Note 9. Commitments and Contingencies to the unaudited consolidated financial statements in this Report. Capital Requirements We are subject to various regulatory capital requirements administered by the federal and state banking regulators, although, as a “smaller bank holding company,” we are not subject to most of these standards at the holding company level. These standards are, however, applicable to the Bank, and failure to meet regulatory capital requirements may result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for “prompt corrective action”, the Bank must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies. The capital amounts and classifications are subject to qualitative judgments by the federal banking regulators regarding components, 74 risk weightings and other factors. Qualitative measures established by regulation to ensure capital adequacy required us to maintain minimum amounts and various ratios of CET1 capital, Tier 1 capital and total capital to risk-weighted assets and of Tier 1 capital to average consolidated assets, referred to as the “leverage ratio.” The table below also summarizes the capital requirements applicable to us and the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as our and the Bank’s capital ratios as of December 31, 2024 and 2023. The Bank exceeded all regulatory capital requirements under the Basel III Capital Rules and were considered to be “well-capitalized” as of the dates reflected in the table below. As of December 31, 2024, the FDIC categorized us as well-capitalized under the prompt corrective action framework. There have been no conditions or events since December 31, 2024 that management believes would change this classification. [[GREPCENT_TABLE]] [["As of December 31, 2024","","Actual(1)","","Regulatory Capital Ratio Requirements","","Minimum to be Considered \"Well Capitalized\"","","Regulatory Capital Ratio Requirements, including fully phased in Capital Conservation Buffer"],["($ in thousands)","","Amount","","Ratio","","Amount","","Ratio","","Amount","","Ratio","","Amount","","Ratio"],["Total capital (to risk-weighted assets)"],["Consolidated","","$","244,659","","","12.60","%","","N/A","","N/A","","N/A","","N/A","","N/A","","N/A"],["Bank","","242,966","","","12.50","","","$","155,463","","","8.00","%","","$","194,328","","","10.00","%","","$","204,053","","","10.50","%"],["Tier 1 capital (to risk-weighted assets)"],["Consolidated","","220,390","","","11.35","","","N/A","","N/A","","N/A","","N/A","","N/A","","N/A"],["Bank","","218,675","","","11.25","","","116,597","","","6.00","","","155,463","","","8.00","","","165,186","","","8.50"],["CET1 capital (to risk-weighted assets)"],["Consolidated","","220,390","","","11.35","","","N/A","","N/A","","N/A","","N/A","","N/A","","N/A"],["Bank","","218,675","","","11.25","","","87,448","","","4.50","","","126,313","","","6.50","","","136,035","","","7.00"],["Tier 1 leverage (to average assets)"],["Consolidated","","220,390","","","9.27","","","N/A","","N/A","","N/A","","N/A","","N/A","","N/A"],["Bank","","218,675","","","9.20","","","95,055","","","4.00","","","118,819","","","5.00","","","95,055","","","4.00"]] [[/GREPCENT_TABLE]] (1)    The capital requirements are only applicable to the Bank, and our ratios are included for comparison purpose. 75 [[GREPCENT_TABLE]] [["As of December 31, 2023","","Actual(1)","","Regulatory Capital Ratio Requirements","","Minimum to be Considered \"Well Capitalized\"","","Regulatory Capital Ratio Requirements, including fully phased in Capital Conservation Buffer"],["($ in thousands)","","Amount","","Ratio","","Amount","","Ratio","","Amount","","Ratio","","Amount","","Ratio"],["Total capital (to risk-weighted assets)"],["Consolidated","","$","229,544","","","13.77","%","","N/A","","N/A","","N/A","","N/A","","N/A","","N/A"],["Bank","","227,773","","","13.66","","","$","133,353","","","8.00","%","","$","166,691","","","10.00","%","","$","175,025","","","10.50","%"],["Tier 1 capital (to risk-weighted assets)"],["Consolidated","","208,707","","","12.52","","","N/A","","N/A","","N/A","","N/A","","N/A","","N/A"],["Bank","","206,936","","","12.41","","","100,014","","","6.00","","","133,353","","","8.00","","","141,687","","","8.50"],["CET1 capital (to risk-weighted assets)"],["Consolidated","","208,707","","","12.52","","","N/A","","N/A","","N/A","","N/A","","N/A","","N/A"],["Bank","","206,936","","","12.41","","","75,011","","","4.50","","","108,349","","","6.50","","","116,684","","","7.00"],["Tier 1 leverage (to average assets)"],["Consolidated","","208,707","","","9.57","","","N/A","","N/A","","N/A","","N/A","","N/A","","N/A"],["Bank","","206,936","","","9.49","","","87,207","","","4.00","","","109,008","","","5.00","","","87,207","","","4.00"]] [[/GREPCENT_TABLE]] (1)    The capital requirements are only applicable to the Bank, and our ratios are included for comparison purpose.