What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-08 compared with 2024-08-08 · 254 added, 201 removed, 942 unchanged (33% of the section changed)

3 unchanged sentences

(in thousands, except share data;

unaudited) June 30, 2024 December 31, 2023

unaudited) September 30, 2024 December 31, 2023

Cash, cash equivalents and restricted cash $ 229,172 $ 30,453

Investment securities:

Held-to-maturity, at amortized cost (net of zero allowance for credit losses at June 30, 2024 and December 31, 2023)

Held-to-maturity, at amortized cost (net of zero allowance for credit losses at September 30, 2024 and December 31, 2023)

888,804 925,198

Available-for-sale, at fair value (net of zero allowance for credit losses at June 30, 2024 and December 31, 2023)

Available-for-sale, at fair value (net of zero allowance for credit losses at September 30, 2024 and December 31, 2023)

368,188 552,028

29 unchanged sentences

Authorized - 30,000,000 shares;

issued and outstanding - 16,278,260 and 16,158,413 at June 30, 2024 and December 31, 2023, respectively

issued and outstanding - 16,082,881 and 16,158,413 at September 30, 2024 and December 31, 2023, respectively

215,465 217,498

5 unchanged sentences

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Three months ended Six months ended

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three months ended Nine months ended

(in thousands, except per share amounts;

unaudited) June 30, 2024 March 31, 2024 June 30, 2023 June 30, 2024 June 30, 2023

unaudited) September 30, 2024 June 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Interest income

21 unchanged sentences

Merchant interchange fees, net 67 10 117 244 377

Losses on sale of investment securities ( 32,542 ) — — ( 32,542 ) —

Gains (losses) on sale of investment securities 1 ( 32,542 ) 14 ( 32,541 ) 14

Other income 357 420 293 1,062 923

10 unchanged sentences

Directors' expense 293 306 272 916 893

Charitable contributions 604 13 638 617 687

Amortization of core deposit intangible 241 246 335 738 1,020

Charitable contributions 30 604 20 647 707

Other real estate owned — — — — 48

1 unchanged sentence

Total non-interest expense 20,417 21,894 19,747 63,480 60,192

(Loss) income before (benefit from) provision for income taxes ( 34,382 ) 3,929 5,872 ( 30,453 ) 18,750

(Benefit from) provision for income taxes ( 12,480 ) 1,007 1,321 ( 11,473 ) 4,759

Net (loss) income $ ( 21,902 ) $ 2,922 $ 4,551 $ ( 18,980 ) $ 13,991

Net (loss) income per common share:

Income (loss) before provision for (benefit from) income taxes 6,973 ( 34,382 ) 6,895 ( 23,480 ) 25,644

Provision for (benefit from) income taxes 2,403 ( 12,480 ) 1,600 ( 9,070 ) 6,359

Net income (loss) $ 4,570 $ ( 21,902 ) $ 5,295 $ ( 14,410 ) $ 19,285

Net income (loss) per common share

Basic $ 0.28 $ ( 1.36 ) $ 0.33 $ ( 0.90 ) $ 1.21

3 unchanged sentences

Diluted 16,066 16,108 16,036 16,076 16,017

Comprehensive income:

Net (loss) income $ ( 21,902 ) $ 2,922 $ 4,551 $ ( 18,980 ) $ 13,991

Comprehensive income (loss):

Net income (loss) $ 4,570 $ ( 21,902 ) $ 5,295 $ ( 14,410 ) $ 19,285

Other comprehensive income (loss):

Change in net unrealized gains or losses on available-for-sale securities 8,041 559 ( 13,792 ) 4,032 ( 8,507 )

Reclassification adjustment for realized losses on available-for-sale securities in net income 32,542 — — 32,542 —

Reclassification adjustment for realized (gains) losses on available-for-sale securities in net income ( 1 ) 32,542 2,793 32,541 2,793

Reclassification adjustment for gains or losses on fair value hedges ( 1,584 ) 282 367 ( 85 ) 367

7 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the three months ended June 30, 2024 and 2023

For the three months ended September 30, 2024 and 2023

(in thousands, except share data;

4 unchanged sentences

Shares Amount

Three months ended June 30, 2024

Balance at April 1, 2024 16,285,786 $ 218,342 $ 273,450 $ ( 55,112 ) $ 436,680

Net loss — — ( 21,902 ) — ( 21,902 )

Three months ended September 30, 2024

Balance at July 1, 2024 16,278,260 $ 218,773 $ 247,477 $ ( 31,307 ) $ 434,943

— — 4,570 — 4,570

Other comprehensive income, net of tax — — — 4,819 4,819

Stock issued under employee stock purchase plan 439 8 — — 8

Stock issued under employee stock ownership plan 30,000 561 — — 561

Restricted stock surrendered for tax withholdings upon vesting ( 294 ) ( 6 ) — — ( 6 )

4 unchanged sentences

— — ( 4,064 ) — ( 4,064 )

Balance at June 30, 2024 16,278,260 $ 218,773 $ 247,477 $ ( 31,307 ) $ 434,943

Three months ended June 30, 2023

Balance at April 1, 2023 16,107,210 $ 215,965 $ 276,209 $ ( 62,000 ) $ 430,174

Stock issued in payment of director fees 15,477 255 — — 255

Stock repurchased

( 220,000 ) ( 4,234 ) — — ( 4,234 )

Balance at September 30, 2024 16,082,881 $ 215,465 $ 247,983 $ ( 26,488 ) $ 436,960

Three months ended September 30, 2023

Balance at July 1, 2023 16,107,192 $ 216,589 $ 276,732 $ ( 69,380 ) $ 423,941

Net income — — 5,295 — 5,295

2 unchanged sentences

Stock issued under employee stock ownership plan 5,800 120 — — 120

Restricted stock surrendered for tax withholdings upon vesting ( 285 ) ( 4 ) — — ( 4 )

Restricted stock granted 12,550 — — — —

Restricted stock forfeited / cancelled ( 850 ) — — — —

3 unchanged sentences

— — ( 4,031 ) — ( 4,031 )

Balance at June 30, 2023 16,107,192 $ 216,589 $ 276,732 $ ( 69,380 ) $ 423,941

Stock issued in payment of director fees 13,750 248 — — 248

Balance at September 30, 2023 16,139,321 $ 217,202 $ 277,996 $ ( 76,580 ) $ 418,618

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the six months ended June 30, 2024 and 2023

For the nine months ended September 30, 2024 and 2023

(in thousands, except share data;

4 unchanged sentences

Shares Amount

Six months ended June 30, 2024

Nine months ended September 30, 2024

Balance at January 1, 2024 16,158,413 $ 217,498 $ 274,570 $ ( 53,006 ) $ 439,062

11 unchanged sentences

Stock issued in payment of director fees 27,287 513 — — 513

Balance at June 30, 2024

Stock repurchased

( 220,000 ) ( 4,234 ) — — ( 4,234 )

Six months ended June 30, 2023

Balance at September 30, 2024

16,082,881 $ 215,465 $ 247,983 $ ( 26,488 ) $ 436,960

Nine months ended September 30, 2023

Balance at January 1, 2023 16,029,138 $ 215,057 $ 270,781 $ ( 73,746 ) $ 412,092

Net income — — 19,285 — 19,285

Other comprehensive income, net of tax — — — 4,366 4,366

Other comprehensive loss, net of tax

— — — ( 2,834 ) ( 2,834 )

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 11,530 230 — — 230

9 unchanged sentences

Stock issued in payment of director fees 18,362 398 — — 398

Balance at June 30, 2023

Balance at September 30, 2023

16,139,321 $ 217,202 $ 277,996 $ ( 76,580 ) $ 418,618

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended June 30, 2024 and 2023

For the nine months ended September 30, 2024 and 2023

(in thousands;

13 unchanged sentences

Write-down of other real estate owned — 40

Loss on sale of investment securities 32,542 —

Loss (gain) on sale of investment securities

32,541 ( 14 )

Depreciation and amortization 1,125 1,705

Loss on disposal of premises and equipment 21 —

Earnings on bank-owned life insurance policies ( 1,282 ) ( 1,438 )

8 unchanged sentences

Proceeds from paydowns/maturities of available-for-sale securities 26,409 50,749

Proceeds from sale of Visa Inc.

Class B restricted common stock — 2,807

Decrease in loans receivable, net 19,508 6,634

Purchase of loans

Purchase of bank-owned life insurance policies ( 1,211 ) —

1 unchanged sentence

Purchase of premises and equipment ( 356 ) ( 1,737 )

Proceeds from sale of premises and equipment 21 —

Proceeds from sale of other real estate owned — 420

Cash paid for low income housing tax credit investment ( 1 ) ( 39 )

1 unchanged sentence

Cash Flows from Financing Activities:

Net decrease in deposits ( 76,298 ) ( 248,136 )

Net increase (decrease) in deposits

19,174 ( 129,664 )

(Repayment of) proceeds from short-term borrowings, net ( 26,000 ) 8,000

3 unchanged sentences

Cash dividends paid on common stock ( 12,177 ) ( 12,070 )

Stock repurchased

Proceeds from stock issued under employee and director stock purchase plans 30 36

9 unchanged sentences

Amortization of net unrealized loss on available-for-sale securities transferred to held-to-maturity $ 1,149 $ 1,325

Stock issued to employee stock ownership plan $ 986 $ 967

Restricted cash 1

24 unchanged sentences

Under the two-class method, the difference in EPS is nominal for these participating securities.

Three months ended Six months ended

(in thousands, except per share data) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Three months ended Nine months ended

(in thousands, except per share data) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Weighted average basic common shares outstanding 16,038 16,028 16,076 16,002

3 unchanged sentences

Weighted average diluted common shares outstanding 16,066 16,036 16,076 16,017

Net (loss) income

Net income (loss)

$ 4,570 $ 5,295 $ ( 14,410 ) $ 19,285

Basic (loss) earnings per common share

Basic earnings (loss) per common share

$ 0.28 $ 0.33 $ ( 0.90 ) $ 1.21

Diluted (loss) earnings per common share 1

Diluted earnings (loss) per common share 1

$ 0.28 $ 0.33 $ ( 0.90 ) $ 1.20

Weighted average anti-dilutive common shares not included in the calculation of diluted EPS 296 362 392 368

1 Because Bancorp was in a net loss position for the three and six months ended June 30, 2024, diluted net loss per share is the same as basic net loss per share, as the inclusion of potentially dilutive common shares would have been anti-dilutive.

1 Because Bancorp was in a net loss position for the nine months ended September 30, 2024, diluted net loss per share is the same as basic net loss per share, as the inclusion of potentially dilutive common shares would have been anti-dilutive.

Recently Adopted and Issued Accounting Standards

10 unchanged sentences

Class B restricted common stock.

As a result of the sale, this update had no impact our financial condition, results of operations or disclosures.

As a result of the sale, this update had no impact on our financial condition, results of operations or disclosures.

In March 2023, the FASB issued ASU No.

19 unchanged sentences

Early adoption is permitted.

We currently have only one reportable segment and are evaluating the impact the amendments will have on our financial statement disclosures upon adoption.

Since this ASU only requires additional disclosure, adoption of this ASU will not have an impact on our financial condition, results of operations or cash flows.

In December 2023, the FASB issued ASU No.

5 unchanged sentences

We are currently evaluating the impact of the amendments on our financial statement disclosures upon adoption.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses .

The amendments are intended to improve income statement expense disclosure requirements, primarily through enhanced disclosures about certain costs and expenses included in income statement expense captions.

The amendments are effective for annual reporting periods beginning after December 15, 2026 (i.e., 2027 Form 10-K) and interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

We are currently evaluating the impact of the amendments on our financial statement disclosures upon adoption.

Fair Value of Assets and Liabilities

15 unchanged sentences

Changes in Fair Value Recorded In 1

June 30, 2024

September 30, 2024

Securities available-for-sale:

Mortgage-backed securities and collateralized mortgage obligations issued by U.S.

government-sponsored agencies $ 144,976 $ — $ 144,976 $ — OCI

Commercial mortgage-backed securities, mortgage-backed securities and collateralized mortgage obligations issued by U.S.

government-sponsored agencies

$ 257,458 $ — $ 257,458 $ — OCI

SBA-backed securities $ 314 $ — $ 314 $ — OCI

4 unchanged sentences

Derivative financial assets (interest rate contracts) $ 181 $ — $ 181 $ — NI

Derivative financial liabilities (interest rate contracts) $ 1,466 $ — $ 1,466 $ — NI

December 31, 2023

Securities available-for-sale:

Mortgage-backed securities and collateralized mortgage obligations issued by U.S.

government-sponsored agencies $ 352,472 $ — $ 352,472 $ — OCI

Commercial mortgage-backed securities, mortgage-backed securities and collateralized mortgage obligations issued by U.S.

government-sponsored agencies

$ 352,472 $ — $ 352,472 $ — OCI

SBA-backed securities $ 19,471 $ — $ 19,471 $ — OCI

10 unchanged sentences

Treasury securities.

If quoted market prices are not available, we obtain pricing information from a reputable third-party service provider, who may utilize valuation techniques that use current market-based or independently sourced parameters, such as bid/ask prices, dealer-quoted prices, interest rates, benchmark yield curves, prepayment speeds, probability of default, loss severity and credit spreads (Level 2).

prepayment speeds, probability of default, loss severity and credit spreads (Level 2).

Level 2 securities include obligations of state and political subdivisions, U.S.

agencies or government-sponsored agencies' debt securities, mortgage-backed securities, government agency-issued securities, and corporate bonds.

As of June 30, 2024 and December 31, 2023, there were no Level 3 securities.

As of September 30, 2024 and December 31, 2023, there were no Level 3 securities.

Held-to-maturity securities may be subject to an allowance for credit losses as a result of our evaluation of expected losses due to credit quality factors.

We did not record any credit loss expense on held-to-maturity securities during the six months ended June 30, 2024 or June 30, 2023.

We did not record any credit loss expense on held-to-maturity securities during the nine months ended September 30, 2024 or September 30, 2023.

Fair value of held-to-maturity securities is determined using the same techniques discussed above for available-for-sale securities.

16 unchanged sentences

Disclosures about Fair Value of Financial Instruments

The table below is a summary of fair value estimates for financial instruments as of June 30, 2024 and December 31, 2023, excluding financial instruments recorded at fair value on a recurring basis (summarized in the first table in this note).

The table below is a summary of fair value estimates for financial instruments as of September 30, 2024 and December 31, 2023, excluding financial instruments recorded at fair value on a recurring basis (summarized in the first table in this note).

The carrying amounts in the following table are recorded in the consolidated statements of condition under the indicated captions.

Further, we have not disclosed the fair value of financial instruments specifically excluded from disclosure requirements such as bank-owned life insurance policies ("BOLI"), lease obligations and non-maturity deposit liabilities.

Additionally, we held shares of Federal Home Loan Bank ("FHLB") of San Francisco stock at cost as of June 30, 2024 and March 31, 2024.

There were no impairments or changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same issuer as of June 30, 2024 or December 31, 2023.

Additionally, we held shares of Federal Home Loan Bank ("FHLB") of San Francisco stock at cost as of September 30, 2024 and December 31, 2023.

There were no impairments or changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same issuer as of September 30, 2024 or December 31, 2023.

See further discussion on values within Note 4, Investment Securities.

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(in thousands) Carrying Amounts Fair Value Fair Value Hierarchy Carrying Amounts Fair Value Fair Value Hierarchy

13 unchanged sentences

The value of off-balance-sheet financial instruments is estimated based on the fee income associated with the commitments, which in the absence of credit exposure, is considered to approximate their settlement value.

The fair value of commitment fees was not material as of June 30, 2024 or December 31, 2023.

The fair value of commitment fees was not material as of September 30, 2024 or December 31, 2023.

Investment Securities

3 unchanged sentences

government-sponsored enterprises ("GSEs"), such as the Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Farm Credit Banks Funding Corporation and FHLB, and U.S.

Corporations.

and foreign corporations.

We also invest in residential and commercial mortgage-backed securities (“MBS”/"CMBS") and collateralized mortgage obligations (“CMOs”) issued or guaranteed by the GSEs, as reflected in the following table.

A summary of the amortized cost, fair value and allowance for credit losses related to securities held-to-maturity as of June 30, 2024 and December 31, 2023 is presented below.

A summary of the amortized cost, fair value and allowance for credit losses related to securities held-to-maturity as of September 30, 2024 and December 31, 2023 is presented below.

Held-to-maturity:

2 unchanged sentences

(in thousands) Gains (Losses)

June 30, 2024

September 30, 2024

Securities of U.S.

government-sponsored enterprises:

CMBS issued by FHLMC, FNMA and GNMA $ 243,622 $ — $ 243,622 $ — $ ( 28,231 ) $ 215,391

CMOs issued by FHLMC, FNMA and GNMA 214,385 — 214,385 97 ( 12,732 ) 201,750

MBS pass-through securities issued by FHLMC, FNMA and GNMA 196,247 — 196,247 24 ( 23,301 ) 172,970

CMOs issued by FHLMC 222,619 — 222,619 — ( 27,340 ) 195,279

CMOs issued by FNMA 95,887 — 95,887 — ( 6,307 ) 89,580

CMOs issued by GNMA 50,437 — 50,437 — ( 5,680 ) 44,757

SBA-backed securities 1,514 — 1,514 — ( 43 ) 1,471

6 unchanged sentences

government-sponsored enterprises:

CMBS issued by FHLMC, FNMA and GNMA $ 247,441 $ — $ 247,441 $ — $ ( 35,071 ) $ 212,370

CMOs issued by FHLMC, FNMA and GNMA 228,761 — 228,761 28 ( 16,882 ) 211,907

MBS pass-through securities issued by FHLMC, FNMA and GNMA 208,983 — 208,983 — ( 27,326 ) 181,657

CMOs issued by FHLMC

226,416 — 226,416 28 ( 24,869 ) 201,575

CMOs issued by FNMA 101,502 — 101,502 — ( 4,779 ) 96,723

CMOs issued by GNMA 51,006 — 51,006 — ( 5,235 ) 45,771

SBA-backed securities 1,853 — 1,853 — ( 90 ) 1,763

3 unchanged sentences

Total held-to-maturity $ 925,198 $ — $ 925,198 $ 75 $ ( 110,443 ) $ 814,830

1 Amortized cost and fair values exclude accrued interest receivable of $ 3.5 million and $ 3.6 million at June 30, 2024 and December 31, 2023, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

1 Amortized cost and fair values exclude accrued interest receivable of $ 2.5 million and $ 3.6 million at September 30, 2024 and December 31, 2023, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

Management measures expected credit losses on held-to-maturity securities collectively by major security type with each type sharing similar risk characteristics and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

With regard to MBSs and CMOs issued or guaranteed by the GSEs, and SBA-backed securities, we expect to receive all the contractual principal and interest on these securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S.

With regard to MBS, CMBS and CMOs issued or guaranteed by the GSEs, and SBA-backed securities, we expect to receive all the contractual principal and interest on these securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S.

Accordingly, no allowance for credit losses has been recorded for these securities.

With regard to securities issued by states and political subdivisions and corporate bonds, management considers:

(i) issuer and/or guarantor credit ratings, (ii) historical probability of default and loss given default rates for given bond ratings and remaining maturity, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal credit review of the financial information, and (v) whether or not such securities have credit enhancements such as guarantees, contain a defeasance clause, or are pre-refunded by the issuers.

(i) issuer and/or

guarantor credit ratings, (ii) historical probability of default and loss given default rates for given bond ratings and remaining maturity, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal credit review of the financial information, and (v) whether or not such securities have credit enhancements such as guarantees, contain a defeasance clause, or are pre-refunded by the issuers.

Based on the comprehensive anal ysis, no cred it losses are expected.

The following table summarizes the amortized cost of our portfolio of held-to-maturity securities issued by states and political subdivisions and corporate bonds by Moody's and/or Standard & Poor's bond ratings as of June 30, 2024 and December 31, 2023.

Obligations of state and political subdivisions Corporate bonds

(in thousands) June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023 September 30, 2024 December 31, 2023

Aaa / AAA $ 42,265 $ 42,577 $ — $ —

2 unchanged sentences

Total $ 61,679 $ 62,034 $ 30,000 $ 30,000

A summary of the amortized cost, fair value and allowance for credit losses related to securities available-for-sale as of June 30, 2024 and December 31, 2023 is presented below.

A summary of the amortized cost, fair value and allowance for credit losses related to securities available-for-sale as of September 30, 2024 and December 31, 2023 is presented below.

Available-for-sale:

2 unchanged sentences

(in thousands) Gains (Losses)

June 30, 2024

September 30, 2024

Securities of U.S.

government-sponsored enterprises:

CMBS issued by FHLMC, FNMA and GNMA $ 194,316 $ 404 $ ( 3,942 ) $ — $ 190,778

CMOs issued by FHLMC, FNMA and GNMA 44,208 20 ( 5,248 ) — 38,980

MBS pass-through securities issued by FHLMC, FNMA and GNMA 31,520 3 ( 3,823 ) — 27,700

CMOs issued by FHLMC 96,956 6 ( 8,551 ) — 88,411

CMOs issued by FNMA 4,520 — ( 654 ) — 3,866

CMOs issued by GNMA 14,300 — ( 2,756 ) — 11,544

SBA-backed securities 332 — ( 18 ) — 314

7 unchanged sentences

government-sponsored enterprises:

CMBS issued by FHLMC, FNMA and GNMA $ 160,968 $ — $ ( 13,279 ) $ — 147,689

CMOs issued by FHLMC, FNMA and GNMA 153,689 — ( 17,420 ) — 136,269

MBS pass-through securities issued by FHLMC, FNMA and GNMA 77,680 2 ( 9,168 ) $ — 68,514

CMOs issued by FHLMC 266,407 — ( 24,758 ) — 241,649

CMOs issued by FNMA 23,987 — ( 2,715 ) — 21,272

CMOs issued by GNMA 20,006 — ( 2,878 ) — 17,128

SBA-backed securities 21,126 — ( 1,655 ) — 19,471

4 unchanged sentences

Total available-for-sale $ 613,479 $ 3 $ ( 61,454 ) $ — $ 552,028

1 Amortized cost and fair value exclude accrued interest receivable of $ 1.3 million and $ 2.3 million at June 30, 2024 and December 31, 2023, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

The amortized cost a nd fair value of investment debt securities by contractual maturity at June 30, 2024 and December 31, 2023 are shown below.

1 Amortized cost and fair value exclude accrued interest receivable of $ 1.6 million and $ 2.3 million at September 30, 2024 and December 31, 2023, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

The amortized cost a nd fair value of investment debt securities by contractual maturity at September 30, 2024 and December 31, 2023 are shown below.

Expected maturities may differ from contractual maturities if the issuers of the securities have the right to call or prepay obligations with or without call or prepayment penalties.

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Held-to-Maturity Available-for-Sale Held-to-Maturity Available-for-Sale

6 unchanged sentences

Sales of investment securities and gross gains and losses are shown in the following table:

Three months ended Six months ended

(in thousands) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Three months ended Nine months ended

(in thousands) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Available-for-sale:

2 unchanged sentences

Gross realized losses — ( 2,798 ) ( 32,541 ) ( 2,798 )

Sale of equity securities:

Sales proceeds — 2,807 — 2,807

Gross realized gain — 2,807 — 2,807

1 Refer to VISA Inc.

Class B Common Stock section below for more information.

The reported values of pledged investment securities are shown in the following table.

(in thousands) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Pledged to the State of California:

8 unchanged sentences

Total pledged investment securities $ 937,729 $ 938,959

There were 258 and 313 securities in unrealized loss positions at June 30, 2024 and December 31, 2023, respectively.

There were 254 and 313 securities in unrealized loss positions at September 30, 2024 and December 31, 2023, respectively.

Those securities are summarized and classified according to the duration of the loss period in the tables below:

June 30, 2024 < 12 continuous months ≥ 12 continuous months Total securities

September 30, 2024 < 12 continuous months ≥ 12 continuous months Total securities

in a loss position

1 unchanged sentence

Held-to-maturity:

CMBS issued by FHLMC, FNMA and GNMA $ 8,888 $ ( 35 ) $ 206,503 $ ( 28,196 ) $ 215,391 $ ( 28,231 )

CMOs issued by FHLMC, FNMA and GNMA 7,819 ( 1,204 ) 182,278 ( 11,528 ) 190,097 ( 12,732 )

MBS pass-through securities issued by FHLMC, FNMA and GNMA — — 169,133 ( 23,301 ) 169,133 ( 23,301 )

CMOs issued by FHLMC 11,881 ( 196 ) 183,398 ( 27,144 ) 195,279 ( 27,340 )

CMOs issued by FNMA 15,552 ( 669 ) 74,028 ( 5,638 ) 89,580 ( 6,307 )

CMOs issued by GNMA 10,755 ( 363 ) 34,003 ( 5,317 ) 44,758 ( 5,680 )

SBA-backed securities — — 1,471 ( 43 ) 1,471 ( 43 )

4 unchanged sentences

Available-for-sale:

CMBS issued by FHLMC, FNMA and GNMA 76,278 ( 92 ) 60,550 ( 3,850 ) 136,828 ( 3,942 )

CMOs issued by FHLMC, FNMA and GNMA — — 36,052 ( 5,248 ) 36,052 ( 5,248 )

MBS pass-through securities issued by FHLMC, FNMA and GNMA — — 27,535 ( 3,823 ) 27,535 ( 3,823 )

CMOs issued by FHLMC 950 ( 5 ) 78,117 ( 8,546 ) 79,067 ( 8,551 )

CMOs issued by FNMA — — 3,866 ( 654 ) 3,866 ( 654 )

CMOs issued by GNMA — — 11,544 ( 2,756 ) 11,544 ( 2,756 )

SBA-backed securities — — 314 ( 18 ) 314 ( 18 )

9 unchanged sentences

Held-to-maturity:

CMBS issued by FHLMC, FNMA and GNMA $ 10,988 $ ( 244 ) $ 201,383 $ ( 34,826 ) $ 212,371 $ ( 35,070 )

CMOs issued by FHLMC, FNMA and GNMA 51,136 ( 432 ) 156,515 ( 16,451 ) 207,651 ( 16,883 )

MBS pass-through securities issued by FHLMC, FNMA and GNMA — — 181,656 ( 27,326 ) 181,656 ( 27,326 )

CMOs issued by FHLMC 8,662 ( 21 ) 188,657 ( 24,848 ) 197,319 ( 24,869 )

CMOs issued by FNMA 42,474 ( 411 ) 54,249 ( 4,368 ) 96,723 ( 4,779 )

CMOs issued by GNMA 10,988 ( 244 ) 34,783 ( 4,991 ) 45,771 ( 5,235 )

SBA-backed securities — — 1,763 ( 90 ) 1,763 ( 90 )

4 unchanged sentences

Available-for-sale:

CMBS issued by FHLMC, FNMA and GNMA 1,235 ( 7 ) 146,454 ( 13,272 ) 147,689 ( 13,279 )

CMOs issued by FHLMC, FNMA and GNMA — — 136,269 ( 17,420 ) 136,269 ( 17,420 )

MBS pass-through securities issued by FHLMC, FNMA and GNMA — — 68,237 ( 9,168 ) 68,237 ( 9,168 )

CMOs issued by FHLMC 1,235 ( 7 ) 240,414 ( 24,751 ) 241,649 ( 24,758 )

CMOs issued by FNMA — — 21,272 ( 2,715 ) 21,272 ( 2,715 )

CMOs issued by GNMA — — 17,128 ( 2,878 ) 17,128 ( 2,878 )

SBA-backed securities — — 19,471 ( 1,655 ) 19,471 ( 1,655 )

5 unchanged sentences

Total securities at loss position $ 64,025 $ ( 684 ) $ 1,287,979 $ ( 171,213 ) $ 1,352,004 $ ( 171,897 )

As of June 30, 2024, the investment portfolio included 248 investment securities that had been in a continuous loss position for twelve months or more and 10 investment securities that had been in a loss position for less than twelve months.

As of September 30, 2024, the investment portfolio included 245 investment securities that had been in a continuous loss position for twelve months or more and nine investment securities that had been in a loss position for less than twelve months.

Securities issued by government-sponsored agencies, such as FNMA and FHLMC, usually have implicit credit support from the U.S.

5 unchanged sentences

Our investments in obligations of state and political subdivision bonds are deemed creditworthy after our comprehensive analysis of the issuers' latest financial information, credit ratings by major credit agencies, and/or credit enhancements.

No allowances for credit losses have been recognized on available-for-sale securities in an unrealized loss position, as management does not believe any of the securities are impaired due to credit risk factors at either June 30, 2024 or December 31, 2023.

In addition, for any available-for-sale securities in an unrealized loss position at June 30, 2024 and December 31, 2023, the Bank assessed whether it intended to sell the securities, or if it was more likely than not that it would be required to sell the securities before recovery of its amortized cost basis, which would require a write-down to fair value through net income.

In addition, for any available-for-sale securities in an unrealized loss position at September 30, 2024 and December 31, 2023, the Bank assessed whether it intended to sell the securities, or if it was more likely than not that it would be required to sell the securities before recovery of its amortized cost basis, which would require a write-down to fair value through net income.

Because the Bank did not intend to sell those securities that were in an unrealized loss position, and it was not more-likely-than-not that the Bank would be required to sell the securities before recovery of their amortized cost bases, the Bank determined that no write-down was necessary as of the reporting date.

1 unchanged sentence

portfolio against changes in fair value related to changes in the benchmark interest rate.

Subsequent to quarter end, on November 4, 2024, the Bank terminated these contracts resulting in an immaterial loss that will be amortized over the life of the hedged securities.

For additional details, refer to Note 9, Derivative Financial Instruments and Hedging Activities.

4 unchanged sentences

Shares cannot be purchased or sold except between the FHLB and its members at the $ 100 per share par value.

We held $ 16.7 million of FHLB stock included in other assets on the consolidated statements of condition at both June 30, 2024 and December 31, 2023.

We held $ 16.7 million of FHLB stock included in other assets on the consolidated statements of condition at both September 30, 2024 and December 31, 2023.

The carrying amounts of these investments are reasonable estimates of fair value because the securities are restricted to member banks, and they do not have a readily determinable market value.

Based on our analysis of FHLB's financial condition and certain qualitative factors, we determined that the FHLB stock w as not im paired at June 30, 2024 and December 31, 2023.

On July 25, 2024, F HLB announced a cash dividend for the second quarter of 2024 at an annualized dividend rate of 8.75 % to be distributed in mid-August 2024.

Based on our analysis of FHLB's financial condition and certain qualitative factors, we determined that the FHLB stock w as not im paired at September 30, 2024 and December 31, 2023.

On October 24, 2024, FHLB announced a cash dividend for the third quarter of 2024 at an annualized dividend rate of 8.75 % to be distributed in mid-November 2024.

Cash dividends paid on FHLB capital stock are recorded as non-interest income.

1 unchanged sentence

Low Income Housing Tax Credits

We invest in low-income housing tax credit funds as a limited partner, which totaled $ 1.8 million and $ 2.0 million recorded in other assets as of June 30, 2024 and December 31, 2023, respectively.

In the first six months of 2024, we recognized $ 263 thousand of low-income housing tax credits and other tax benefits, offset by $ 219 thousand of amortization expense of low-income housing tax credit investment, as a component of income tax expense.

As of June 30, 2024, our unfunded commitments for these low-income housing tax credit funds totaled $ 343 thousand.

We did not recognize any impairment losses on these low-income housing tax credit investments during the first six months of 2024 or 2023, as the value of the future tax benefits exceeds the carrying value of the investments.

We invest in low-income housing tax credit funds as a limited partner, which totaled $ 1.7 million and $ 2.0 million recorded in other assets as of September 30, 2024 and December 31, 2023, respectively.

In the first nine months of 2024, we recognized $ 394 thousand of low-income housing tax credits and other tax benefits, offset by $ 328 thousand of amortization expense of low-income housing tax credit investment, as a component of income tax expense.

As of September 30, 2024, our unfunded commitments for these low-income housing tax credit funds totaled $ 342 thousand.

We did not recognize any impairment losses on these low-income housing tax credit investments during the first nine months of 2024 or 2023, as the value of the future tax benefits exceeds the carrying value of the investments.

Loans and Allowance for Credit Losses on Loans

The following table presents the amortized cost of loans by portfolio class as of June 30, 2024 and December 31, 2023.

(in thousands) June 30, 2024 December 31, 2023

The following table presents the amortized cost of loans by portfolio class as of September 30, 2024 and December 31, 2023.

(in thousands) September 30, 2024 December 31, 2023

Commercial and industrial $ 160,390 $ 153,750

9 unchanged sentences

Total loans, net of allowance for credit losses on loans $ 2,059,416 $ 2,048,548

1 Amortized cost includes net deferred loan origination costs of $ 2.5 million and $ 2.7 million at June 30, 2024 and December 31, 2023, respectively.

Amounts are also net of unrecognized purchase discounts of $ 1.9 million and $ 2.0 million at June 30, 2024 and December 31, 2023, respectively.

Amortized cost excludes accrued interest, which totaled $ 7.0 million and $ 6.6 million at June 30, 2024 and December 31, 2023, respectively, and is included in interest receivable and other assets in the consolidated statements of condition.

1 Amortized cost includes net deferred loan origination costs of $ 2.5 million and $ 2.7 million at September 30, 2024 and December 31, 2023, respectively.

Amounts are also net of unrecognized purchase discounts of $ 1.1 million and $ 2.0 million at September 30, 2024 and December 31, 2023, respectively.

Amortized cost excludes accrued interest, which totaled $ 6.7 million and $ 6.6 million at September 30, 2024 and December 31, 2023, respectively, and is included in interest receivable and other assets in the consolidated statements of condition.

Lending Risks

1 unchanged sentence

Management examines historical, current, and projected cash flows to determine the ability of the borrower to repay obligations as agreed.

Commercial loans are made based primarily on the identified cash flows

of the borrower and secondarily on the underlying collateral and guarantor support.

Commercial loans are made based primarily on the identified cash flows of the borrower and secondarily on the underlying collateral and guarantor support.

The cash flows of borrowers, however, may not occur as expected, and the collateral securing these loans may fluctuate in value.

6 unchanged sentences

Furthermore, a large majority of our loans are guaranteed by the owners of the properties.

Conditions in the real estate markets or downturn in the general economy may adversely affect our commercial real estate loans.

Conditions in the real estate markets or a downturn in the general economy may adversely affect our commercial real estate loans.

In the event of a vacancy, we expect guarantors to carry the loans until they find a replacement tenant.

22 unchanged sentences

Loans in this category must have an identifiable and stable source of repayment and meet the Bank’s policy regarding debt-service-coverage ratios.

These borrowers are capable of sustaining normal economic, market or operational setbacks without significant financial consequences.

These borrowers are capable of sustaining normal economic, market

or operational setbacks without significant financial consequences.

Negative external industry factors are generally not present.

26 unchanged sentences

We also review loans graded “Watch” or worse, regardless of loan type, no less than quarterly.

The following tables present the loan portfolio by loan portfolio class, origination/renewal year and internal risk rating as of June 30, 2024 and December 31, 2023.

The following tables present the loan portfolio by loan portfolio class, origination/renewal year and internal risk rating as of September 30, 2024 and December 31, 2023.

The current year vintage table reflects gross charge-offs by loan portfolio class and year of origination.

2 unchanged sentences

(in thousands) Term Loans - Amortized Cost by Origination Year Revolving Loans Amortized Cost

June 30, 2024 2024 2023 2022 2021 2020 Prior Total

September 30, 2024 2024 2023 2022 2021 2020 Prior Total

Commercial and industrial:

15 unchanged sentences

(in thousands) Term Loans - Amortized Cost by Origination Year Revolving Loans Amortized Cost

June 30, 2024 2024 2023 2022 2021 2020 Prior Total

September 30, 2024 2024 2023 2022 2021 2020 Prior Total

Construction:

52 unchanged sentences

Totals $ 183,397 $ 291,859 $ 320,078 $ 264,689 $ 239,856 $ 610,122 $ 163,719 $ 2,073,720

The following table shows the amortized cost of loans by portfolio class, payment aging and non-accrual status as of June 30, 2024 and December 31, 2023.

The following table shows the amortized cost of loans by portfolio class, payment aging and non-accrual status as of September 30, 2024 and December 31, 2023.

Loan Aging Analysis by Class

(in thousands) Commercial and industrial Commercial real estate, owner-occupied Commercial real estate, non-owner occupied Construction Home equity Other residential Installment and other consumer Total

June 30, 2024

September 30, 2024

30-59 days past due $ 547 $ 2,270 $ 89 $ — $ 1,152 $ — $ 162 $ 4,220

21 unchanged sentences

Non-accrual loans with no allowance $ 1,311 $ 434 $ 877 $ — $ 469 $ — $ — $ 3,091

1 There was one non-owner occupied commercial real estate loan 90 days past due and accruing interest as of June 30, 2024 that has been in extended renewal negotiations, but it is well-secured and expected to be restored to a current payment status in the near future.

There were no non-performing loans over 90 days past due and accruing interest as of December 31, 2023 .

2 None of the non-accrual loans as of June 30, 2024 or December 31, 2023 were earning interest on a cash or accrual basis.

We reversed $ 266 thousand in accrued interest income for loans that were placed on non-accrual status during the six months ended June 30, 2024.

We reversed accrued interest income of $ 14 thousand for loans that were placed on non-accrual status during the six months ended June 30, 2023.

1 There were no non-performing loans over 90 days past due and accruing interest as of September 30, 2024 or December 31, 2023 .

2 None of the non-accrual loans as of September 30, 2024 or December 31, 2023 were earning interest on a cash or accrual basis.

We reversed $ 257 thousand and $ 523 thousand in accrued interest income for loans that were placed on non-accrual status during the three and nine months ended September 30, 2024, respectively.

We reversed accrued interest income of $ 131 thousand and $ 158 thousand for loans that were placed on non-accrual status during the three and nine months ended September 30, 2023, respectively.

Collateral Dependent Loans

The following table presents the amortized cost basis of individually analyzed collateral-dependent loans, which were all on non-accrual status, by portfolio class at June 30, 2024 and December 31, 2023.

The following table presents the amortized cost basis of individually analyzed collateral-dependent loans, which were all on non-accrual status, by portfolio class at September 30, 2024 and December 31, 2023.

Amortized Cost by Collateral Type

(in thousands) Commercial Real Estate Residential Real Estate Blanket Lien Other Total 1

(in thousands) Commercial Real Estate Residential Real Estate Other Total 1

Allowance for Credit Losses

June 30, 2024

September 30, 2024

Commercial real estate, owner-occupied $ 1,578 $ — $ — $ 1,578 $ —

9 unchanged sentences

Total $ 4,826 $ 469 $ — $ 5,295 $ 408

1 There were no collateral-dependent residential real estate mortgage loans in process of foreclosure or in substance repossessed at June 30, 2024 and December 31, 2023.

The weighted average loan-to-value of real estate secured collateral dependent loans was approximately 130 % ( 82 % net of individual reserves for credit losses) at June 30, 2024 and 70 % ( 62 % net of individual reserves for credit losses) at December 31, 2023.

1 There were no collateral-dependent residential real estate mortgage loans in process of foreclosure or in substance repossessed at September 30, 2024 and December 31, 2023.

The weighted average loan-to-value of real estate secured collateral dependent loans was approximately 120 % ( 84 % net of individual reserves for credit losses) at September 30, 2024 and 70 % ( 62 % net of individual reserves for credit losses) at December 31, 2023.

Loan Modifications to Borrowers Experiencing Financial Difficulty

The following table summarizes the amortized cost of loans as of June 30, 2024 that were modified during the three and six months ended June 30, 2024 by portfolio class and type of modification granted.

There were no modifications of loans during the three and six months ended June 30, 2023 requiring disclosure.

The following table summarizes the amortized cost of loans as of September 30, 2024 that were modified during the nine months ended September 30, 2024 by portfolio class and type of modification granted.

There were no modifications of loans during the three months ended September 30, 2024 requiring disclosure.

(in thousands) Term Extension Total Modifications Percent of Portfolio Class Total

Three months ended June 30, 2024

Nine months ended September 30, 2024

Home equity $ 192 $ 192 0.2 %

Six months ended June 30, 2024

The following table summarizes the amortized cost of loans as of September 30, 2023 that were modified during the three and nine months ended September 30, 2023 by portfolio class and type of modification granted.

(in thousands) Term Extension Total Modifications Percent of Portfolio Class Total

Three months ended September 30, 2023

Commercial and industrial $ 391 $ 391 0.2 %

Home equity 241 241 0.3 %

$ 2,432 $ 2,432

As of June 30, 2024, there were no unfunded loan commitments for loans that were modified during the period presented.

The following table summarizes the financial effect of loan modifications presented in the table above during the three and six months ended June 30, 2024 by portfolio class.

(in thousands) Weighted-Average Term Extension (in years)

Three months ended June 30, 2024

Home equity 1.0

Six months ended June 30, 2024

Commercial owner-occupied 1,056 1,056 0.3 %

Total $ 1,447 $ 1,447

Nine months ended September 30, 2023

Commercial and industrial $ 391 $ 391 0.2 %

Commercial owner-occupied 1,056 1,056 0.3 %

Total $ 1,447 $ 1,447

As of September 30, 2024 and September 30, 2023, there were no unfunded loan commitments for loans that were modified during the periods presented.

The following table summarizes the financial effect of loan modifications presented in the table above during the nine months ended September 30, 2024 by portfolio class.

Weighted-Average Term Extension (in years)

Nine months ended September 30, 2024

Home equity 6.5

The loan modifications did not significantly impact the determination of the allowance for credit losses on loans during the three and six months ended June 30, 2024.

The following table summarizes the financial effect of loan modifications presented in the table above during the three and nine months ended September 30, 2023 by portfolio class.

Weighted-Average Term Extension (in years)

Three months ended September 30, 2023

Commercial and industrial 2.3

Commercial owner-occupied 2.5

Nine months ended September 30, 2023

Commercial and industrial 2.3

Commercial owner-occupied 2.5

The loan modifications did not significantly impact the determination of the allowance for credit losses on loans during the three and nine months ended September 30, 2024 or September 30, 2023.

The Bank closely monitors the performance of the modified loans to understand the effectiveness of its modification efforts.

The following table summarizes the amortized cost and payment status of loans as of June 30, 2024 that were modified during the three and six months ended June 30, 2024 by portfolio class.

The following table summarizes the amortized cost and payment status of loans as of September 30, 2024 that were modified during the nine months ended September 30, 2024 by portfolio class.

(in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Non-Accrual

Three months ended June 30, 2024

Nine months ended September 30, 2024

Home equity $ 192 $ — $ — $ — $ 192 $ 117

$ 159 $ — $ — $ — $ 159 $ 120

Six months ended June 30, 2024

Total $ 192 $ — $ — $ — $ 192 $ 117

The following table summarizes the amortized cost and payment status of loans as of September 30, 2023 that were modified during the three and nine months ended September 30, 2023 by portfolio class.

(in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Non-Accrual

Three months ended September 30, 2023

Commercial and industrial $ 391 $ — $ — $ — $ 391 $ —

Home equity 238 — — — 238 199

$ 238 $ — $ 1,796 $ — $ 2,034 $ 1,995

There were no loans that defaulted (fully or partially charged-off or became 90 days or more past due) that were modified during the three and six months ended June 30, 2024.

Commercial owner-occupied 1,056 — — — 1,056 —

Total $ 1,447 $ — $ — $ — $ 1,447 $ —

Nine months ended September 30, 2023

Commercial and industrial $ 391 $ — $ — $ — $ 391 $ —

Commercial owner-occupied 1,056 — — — 1,056 —

Total $ 1,447 $ — $ — $ — $ 1,447 $ —

There were no loans that defaulted (fully or partially charged-off or became 90 days or more past due) that were modified during the three and nine months ended September 30, 2024 or September 30, 2023.

Allocation of the Allowance for Credit Losses on Loans

The following table presents the details of the allowance for credit losses on loans segregated by loan portfolio class as of June 30, 2024 and December 31, 2023 .

The following table presents the details of the allowance for credit losses on loans segregated by loan portfolio class as of September 30, 2024 and December 31, 2023 .

Allocation of the Allowance for Credit Losses on Loans

June 30, 2024

September 30, 2024

Modeled expected credit losses $ 807 $ 1,238 $ 7,580 $ 49 $ 583 $ 1,143 $ 651 $ — $ 12,051

11 unchanged sentences

Three months ended June 30, 2024

Three months ended September 30, 2024

Beginning balance $ 1,876 $ 2,408 $ 22,165 $ 874 $ 650 $ 769 $ 910 $ 1,023 $ 30,675

Provision (Reversal) 177 ( 92 ) 6,461 ( 408 ) 23 77 ( 12 ) ( 1,026 ) 5,200

(Reversal) Provision ( 158 ) ( 63 ) ( 65 ) ( 214 ) ( 3 ) 376 10 117 —

(Charge-offs) — — — — — — — — —

1 unchanged sentence

Ending balance $ 1,718 $ 2,345 $ 22,100 $ 660 $ 647 $ 1,145 $ 920 $ 1,140 $ 30,675

Three months ended June 30, 2023

Three months ended September 30, 2023

Beginning balance $ 1,831 $ 2,589 $ 13,201 $ 1,942 $ 561 $ 599 $ 940 $ 2,169 $ 23,832

5 unchanged sentences

Six months ended June 30, 2024

Nine months ended September 30, 2024

Beginning balance $ 1,712 $ 2,476 $ 14,933 $ 1,832 $ 552 $ 653 $ 976 $ 2,038 $ 25,172

3 unchanged sentences

Ending balance $ 1,718 $ 2,345 $ 22,100 $ 660 $ 647 $ 1,145 $ 920 $ 1,140 $ 30,675

Six months ended June 30, 2023

Nine months ended September 30, 2023

Beginning balance $ 1,794 $ 2,487 $ 12,676 $ 1,937 $ 558 $ 595 $ 868 $ 2,068 $ 22,983

Provision (Reversal) 36 102 525 ( 12 ) 3 4 91 101 850

Provision 16 43 948 56 7 10 104 91 1,275

(Charge-offs) ( 7 ) — — — — — ( 22 ) — ( 29 )

2 unchanged sentences

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 $ 1.296 billion and $ 1.288 billion at June 30, 2024 and December 31, 2023, respectively.

In addition, we pledge eligible residential loans, which totaled $ 109.4 million and $ 110.4 million at June 30, 2024 and December 31, 2023, respectively, to secure our borrowing capacity with the Federal Reserve Bank ("FRB").

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 $ 1.324 billion and $ 1.288 billion at September 30, 2024 and December 31, 2023, respectively.

In addition, we pledge eligible residential loans, which totaled $ 109.0 million and $ 110.4 million at September 30, 2024 and December 31, 2023, respectively, to secure our borrowing capacity with the Federal Reserve Bank ("FRB").

For additional information, see Note 6, Borrowings.

3 unchanged sentences

Likewise, these transactions do not involve more than the normal risk of collectability or present other unfavorable features.

Related party loans totaled $ 5.7 million and $ 5.8 million as of June 30, 2024 and December 31, 2023, respectively.

In addition, undisbursed commitments to related parties totaled $ 211 thousand and $ 212 thousand as of June 30, 2024 and December 31, 2023, respectively.

Related party loans totaled $ 4.3 million and $ 5.8 million as of September 30, 2024 and December 31, 2023, respectively.

In addition, undisbursed commitments to related parties totaled $ 211 thousand and $ 212 thousand as of September 30, 2024 and December 31, 2023, respectively.

Borrowings and Other Obligations

Federal Home Loan Bank:

The Bank had lines of credit with the FHLB totaling $ 941.7 million and $ 1.009 billion as of June 30, 2024 and December 31, 2023, respectively, based on eligible collateral of certain loans and investment securities.

The Bank had lines of credit with the FHLB totaling $ 923.6 million and $ 1.009 billion as of September 30, 2024 and December 31, 2023, respectively, based on eligible collateral of certain loans and investment securities.

Federal Funds Lines of Credit:

The Bank had unsecured lines of credit with correspondent banks for overnight borrowings totaling $ 125.0 million and $ 135.0 million as of June 30, 2024 and December 31, 2023, respectively.

The Bank had unsecured lines of credit with correspondent banks for overnight borrowings totaling $ 125.0 million and $ 135.0 million as of September 30, 2024 and December 31, 2023, respectively.

In general, interest rates on these lines approximate the federal funds target rate.

Federal Reserve Bank:

The Bank had a line of credit through the Discount Window at the Federal Reserve Bank of San Francisco ("FRBSF") totaling $ 335.4 million as of June 30, 2024, secured by investment securities and residential loans.

The Bank had a line of credit through the Discount Window at the Federal Reserve Bank of San Francisco ("FRBSF") totaling $ 377.8 million as of September 30, 2024, secured by investment securities and residential loans.

As of December 31, 2023, the Bank had a line of credit through the Discount Window totaling $ 64.0 million, secured by residential loans, and a $ 270.2 million line under the Federal Reserve's temporary Bank Term Funding Program ("BTFP") based on the par values of pledged investment securities.

1 unchanged sentence

Other Obligations:

Finance lease liabilities totaling $ 231 thousand and $ 298 thousand as of June 30, 2024 and December 31, 2023, respectively, are included in borrowings and other obligations in the consolidated statements of condition.

Finance lease liabilities totaling $ 193 thousand and $ 298 thousand as of September 30, 2024 and December 31, 2023, respectively, are included in borrowings and other obligations in the consolidated statements of condition.

Refer to Note 8, Commitments and Contingencies, for additional information.

The carrying values and weighted average interest rates on borrowings and other obligations as of June 30, 2024 and December 31, 2023 are summarized in the following table.

June 30, 2024 December 31, 2023

The carrying values and weighted average interest rates on borrowings and other obligations as of September 30, 2024 and December 31, 2023 are summarized in the following table.

September 30, 2024 December 31, 2023

(dollars in thousands) Carrying Value

9 unchanged sentences

Stockholders' Equity

On April 25, 2024, Bancorp approved a $ 0.25 per share cash dividend, paid May 16, 2024 to shareholders of record at the close of business on May 9, 2024.

Subsequent to quarter end on July 25, 2024, Bancorp approved a $ 0.25 per share cash dividend, payable on August 15, 2024 to shareholders of record at the close of business on August 8, 2024.

On July 25, 2024, Bancorp approved a $ 0.25 per share cash dividend, paid August 15, 2024 to shareholders of record at the close of business on August 8, 2024.

Subsequent to quarter end on October 24, 2024, Bancorp approved a $ 0.25 per share cash dividend, payable on November 14, 2024 to shareholders of record at the close of business on November 7, 2024.

Share-Based Payments

18 unchanged sentences

The table below depicts the total number of shares, amount, and weighted average price withheld for cashless exercises for the periods presented.

Six Months Ended

June 30, 2024 June 30, 2023

Nine months ended

September 30, 2024 September 30, 2023

Number of shares withheld 3,798 3,132

3 unchanged sentences

On July 21, 2023, the Board of Directors approved the adoption of Bancorp's new share repurchase program for up to $ 25.0 million and expiring on July 31, 2025.

There were no repurchases through June 30, 2024 or in the 2023

year, however the Bank began repurchasing shares in August 2024 and will continue to assess opportunities to utilize the program.

Bancorp repurchased 220,000 shares totaling $ 4.2 million at an average price of $ 19.21 per share in the three and nine months ended September 30, 2024.

There were no repurchases in 2023.

Bancorp will continue to assess opportunities to utilize the program.

Commitments and Contingent Liabilities

10 unchanged sentences

The contractual amount of unfunded loan commitments and standby letters of credit not reflected in the consolidated statements of condition are as follows:

(in thousands) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Commercial lines of credit $ 222,320 $ 259,989

5 unchanged sentences

We record an allowance for credit losses on unfunded loan commitments at the balance sheet date based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience of the different types of commitments and expected loss rates determined for pooled funded loans.

The allowance for credit losses on unfunded commitments totaled $ 1.1 million at both June 30, 2024 and December 31, 2023, which is included in interest payable and other liabilities in the consolidated statements of condition.

There was no provision for credit losses on unfunded loan commitments in the second quarter of 2024 or six month period ended June 30, 2024.

The $ 168 thousand reversal of the provision for credit losses on unfunded loan commitments in the second quarter of 2023 was due primarily to a $ 39.9 million decrease in total unfunded commitments.

The $ 342 thousand reversal of the provision for credit losses on unfunded loan commitments in the first half of 2023 was due primarily to a $ 77.3 million decrease in total unfunded commitments.

The allowance for credit losses on unfunded commitments totaled $ 894 thousand and $ 1.1 million as of September 30, 2024 and December 31, 2023, respectively, which is included in interest payable and other liabilities in the consolidated statements of condition.

There was a reversal of this allowance of $ 233 thousand in the third quarter and first nine months of 2024, compared to no provision and a reversal of $ 342 thousand in in the third quarter and first nine months of the prior year, respectively.

The reversals were due to decreases in available commitments.

We lease premises under long-term non-cancelable operating leases with remaining terms of 31 days to 17 years, 8 months , most of which include escalation clauses and one or more options to extend the lease term, and some of which contain lease termination clauses.

Lease terms may include certain renewal options that were considered reasonably certain to be exercised.

We lease certain equipment under finance leases with initial terms of 3 years to 5 years.

We lease certain equipment under finance leases with initial terms of three years to five years .

The equipment finance leases do not contain renewal options, bargain purchase options or residual value guarantees.

The following table shows the balances of operating and finance lease right-of-use assets and lease liabilities.

(in thousands) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Operating leases:

9 unchanged sentences

The following table shows supplemental disclosures of noncash investing and financing activities for the periods presented.

Six months ended

(in thousands) June 30, 2024 June 30, 2023

Nine months ended

(in thousands) September 30, 2024 September 30, 2023

Right-of-use assets obtained in exchange for operating lease liabilities

2 unchanged sentences

The following table shows components of operating and finance lease cost.

Three months ended Six months ended

(in thousands) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Three months ended Nine months ended

(in thousands) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Operating lease cost 1

9 unchanged sentences

3 Included in interest on borrowings and other obligations in the consolidated statements of comprehensive income.

The following table shows the future minimum lease payments, weighted average remaining lease terms, and weighted average discount rates under operating and finance lease arrangements as of June 30, 2024.

The discount rates used to calculate the present value of lease liabilities were based on the collateralized FHLB borrowing rates that were commensurate with lease terms and minimum payments on the lease commencement date.

(in thousands) June 30, 2024

(in thousands) September 30, 2024

Year Operating Leases Finance Leases

18 unchanged sentences

Therefore, we are not required to record any contingent liabilities for the indemnification related to the Covered Litigation, as we consider the probability of losses to be remote.

In the third quarter of 2024, the Bank recorded a non-recurring accrual for a legal resolution of a Private Attorneys General Act/putative class action lawsuit of $ 615 thousand, pre-tax, involving alleged violations of wage and hour laws for all non-exempt employees covering any and all claims that were or could have been alleged in the operative complaint through the financial period of December 11, 2019 to October 12, 2024.

The Bank shall pay an "all in" Gross Settlement Amount ("GSA") of $ 615 thousand to settle all of the wage and hour class and PAGA claims, and the named Plaintiff's individual claims.

This amount settles all claims that were or could have been asserted based on the facts alleged in the operative complaint, and the as of yet unasserted individual claims by the named plaintiff, and includes attorneys' fees, costs including the cost of administration, and incentive payments.

The only amount over and above the GSA which the Bank shall pay is its share of payroll taxes on the amount of the net settlement that is allocated as wages.

There has been no finding of wrongdoing and the Bank denies all claims.

The settlement agreement still requires final court approval and notice requirements;

however, the Bank does not anticipate further costs related to this action.

We are not aware of any other similar wage and hour claims at this time.

Derivative Financial Instruments and Hedging Activities

10 unchanged sentences

For fair value designated hedges, the gains or losses on the hedging instruments as well as the offsetting loss or gain on the hedged items, are recognized in current earnings as their fair values change.

Subsequent to quarter end, on November 4, 2024, the Bank terminated these contracts resulting in an immaterial loss that will be amortized over the life of the hedged securities.

In addition, we had three interest rate swap agreements on certain loans with our customers, which are scheduled to mature at various dates ranging from June 2031 to July 2032.

6 unchanged sentences

Asset derivatives Liability derivatives

(in thousands) June 30,

2024 December 31, 2023 June 30,

(in thousands) September 30,

2024 December 31, 2023 September 30,

2024 December 31, 2023

8 unchanged sentences

1 Refer to Note 3, Fair Value of Assets and Liabilities, for valuation methodology.

The following table presents the carrying amount and associated cumulative basis adjustment related to the application of fair value hedge accounting that is included in the carrying amount of hedged assets as of June 30, 2024 and December 31, 2023.

Carrying Amounts of Hedged Assets Cumulative Amounts of Fair Value Hedging Adjustments Included in the Carrying Amounts of the Hedged Assets

(in thousands) June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023 September 30, 2024 December 31, 2023

Available-for-sale securities 1

3 unchanged sentences

1 Carrying value equals the amortized cost basis of the securities underlying the hedge relationship, which is the book value net of the fair value hedge adjustment.

Amortized cost excludes accrued interest totaling $ 221 thousand and $ 222 thousand as of June 30, 2024 and December 31, 2023, respectively.

Amortized cost excludes accrued interest totaling $ 227 thousand and $ 222 thousand as of September 30, 2024 and December 31, 2023, respectively.

2 Carrying value equals the amortized cost basis of the loans underlying the hedge relationship, which is the loan balance net of deferred loan origination fees and cost and the fair value hedge adjustment.

1 unchanged sentence

The following table presents the pretax net gains (losses) recognized in interest income related to our fair value hedges for the years presented.

Three months ended Six months ended

(in thousands) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Three months ended Nine months ended

(in thousands) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Interest on investment securities 1

6 unchanged sentences

Interest and fees on loans 1

Increase in fair value of interest rate swaps hedging loans receivable $ 11 $ 250 $ 126 $ 29

Decrease (increase) in fair value of interest rate swaps hedging loans receivable

$ ( 253 ) $ 223 $ ( 126 ) $ 252

Hedged interest earned 53 74 161 192

Decrease in carrying value included in the hedged loans ( 6 ) ( 243 ) ( 117 ) ( 23 )

Increase (decrease) in carrying value included in the hedged loans

257 ( 211 ) 140 ( 233 )

Decrease in value of yield maintenance agreement ( 2 ) ( 2 ) ( 6 ) ( 7 )

12 unchanged sentences

Instruments Received Net Amount

June 30, 2024

September 30, 2024

$ 181 $ — $ 181 $ — $ — $ 181

10 unchanged sentences

Instruments Pledged

June 30, 2024

September 30, 2024

1,466 — 1,466 ( 181 ) ( 1,180 ) 105

Total $ 1,466 $ — $ 1,466 $ ( 181 ) $ ( 1,180 ) $ 105

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements