What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2025-02-28 compared with 2024-02-29 · 118 added, 109 removed, 711 unchanged (24% of the section changed)

26 unchanged sentences

Issuer Purchases of Equity Securities

On May 26th, 2022, the Board of Directors approved a stock repurchase program to buyback up to $125.0 million of the Company’s common stock.

On May 28th, 2024, the Company announced a new stock repurchase program to buy back up to $125.0 million of the Company's common stock.

The previous $125.0 million share repurchase program announced on May 26, 2022, was completed on February 21, 2023, with the repurchase of 2,897,628 shares at an average cost of $43.14.

Through December 31, 2024, the Company repurchased 2,028,581 shares of common stock for a total of $83.9 million, at an average cost of $41.37 per share under the May 2024 buyback program.

The Company completed its May 2022 stock buyback program by repurchasing 375,090 shares at an average cost of $44.20 for a total of $16.6 million during the first quarter of 2023.

Issuer Purchases of Equity Securities

(a) Total Number of Shares (or Units) Purchased

(b) Average Price Paid per Share (or Unit)

(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs

October 1, 2024 - October 31, 2024

57,661,375.00

November 1, 2024 - November 30, 2024

53,605,625.00

December 1, 2024 - December 31, 2024

41,069,402.00

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

4 unchanged sentences

See “Forward-Looking Statements” and “Risk Factors Summary.” Actual results could differ materially because of various factors, including but not limited to those discussed in “Risk Factors,” under Part I, Item 1A of this Annual Report.

The Bank offers a wide range of financial services.

As of the filing date of this report, the Bank operates 24 branches in Southern California, 19 branches in Northern California, 9 branches in New York State, four branches in Washington State, two branches in Illinois, two branches in Texas, one branch in each of Maryland, Massachusetts, Nevada, and New Jersey, one branch in Hong Kong, and a representative office in Beijing, in Shanghai, and in Taipei.

The Bank is a commercial bank, servicing primarily individuals, professionals, and small to medium-sized businesses in the local markets in which its branches are located.

The financial information presented herein includes the accounts of the Bancorp, its subsidiaries, including the Bank, and the Bank’s consolidated subsidiaries.

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For the year ended December 31, 2024, we reported net income of $286.0 million, or $3.95 per diluted share, compared to net income of $354.1 million, or $4.86 per diluted share, in 2023, and net income of $360.6 million, or $4.83 per diluted share, in 2022.

The $6.5 million decrease in net income from 2022 to 2023 was primarily the result of increases in non-interest expense, and provision for credit losses, partially offset by increases in net interest income and non-interest income.

The $68.1 million decrease in net income from 2023 to 2024 was primarily the result of decreases in net-interest income, and non-interest income and increase in provision for credit losses, partially offset by decreases in non-interest expense.

The return on average assets in 2024 was 1.22%, compared to 1.56% in 2023, and to 1.69% in 2022.

The return on average stockholders’ equity was 10.18% in 2024, compared to 13.56% in 2023, and to 14.70% in 2022.

Diluted earnings per share for the year increased to $4.86.

Total loans increased $1.3 billion, or 7.1%, to $19.55 billion in 2023.

Total average assets increased $663.2 million to $23.37 billion in 2024.

Total loans, excluding loans held for sale, decreased $172.2 million, or 0.9%, to $19.38 billion in 2024.

Total deposits increased $360.8 million, or 1.9%, to $19.69 billion in 2024.

1 unchanged sentence

Year Ended December 31,

(In thousands, except per share data)

(In thousands, except per share and ratio data)

Basic earnings per common share

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Comparison of 2024 with 2023

Net interest income increased $8.0 million, or 1.1%, from $733.7 million in 2022 to $741.7 million in 2023.

The increase in net interest income was due primarily to the increase in interest income from loans offset by an increase in interest expense from time deposits.

Average loans for 2023 were $18.76 billion, a $1.13 billion, or a 6.4% increase from $17.63 billion in 2022.

Net interest income decreased $67.7 million, or 9.1%, from $741.7 million in 2023 to $674.1 million in 2024.

The decrease in net interest income was due primarily to the increase in interest expense from time deposits offset by an increase in interest income from loans.

Average loans for 2024 were $19.43 billion, a $671.3 million, or a 3.6% increase from $18.76 billion in 2023.

Compared with 2023, average commercial real estate loans increased $675.2 million, or 7.3%, average residential mortgage loans increased $246.2 million, or 4.4%, average equity lines decreased $41.3 million, or 14.9% and average construction loans decreased $162.9 million, or 31.3%.

1 unchanged sentence

Average interest-bearing cash on deposits with financial institutions decreased $43.2 million, or 3.8%, to $1.10 billion in 2024 from $1.14 billion in 2023.

Average interest-bearing deposits were $15.47 billion in 2023, an increase of $1.58 billion, or 11.4%, from $13.89 billion in 2022, primarily due to an increase of $3.45 billion, or 63.9%, in time deposits offset by decreases of $1.74 billion, or 35.4% in money market accounts, $83.2 million, or 3.4%, in interest bearing demand deposits, and $48.6 million, or 4.3%, in savings accounts.

Interest income increased $390.9 million, or 45.9%, from $851.3 million in 2022 to $1.24 billion in 2023 primarily due to increases in loan rates:

Average interest-bearing deposits were $16.53 billion in 2024, an increase of $1.05 billion, or 6.8%, from $15.47 billion in 2023, primarily due to an increase of $1.17 billion, or 13.3%, in time deposits, and $81.0 million, or 7.6%, in savings accounts offset by a decreases of $201.4 million, or 8.4%, in interest bearing demand deposits.

Interest income increased $92.8 million, or 7.5%, from $1.24 billion in 2023 to $1.33 billion in 2024 primarily due to increases in loan rates:

Changes in volume:

Average interest-earning assets increased $1.25 billion, or 6.2%, to $21.48 billion in 2023, compared with average interest-earning assets of $20.23 billion in 2022.

Average loans increased $1.13 billion and average investment securities increased $237.5 million in 2023.

Average interest-earning assets increased $690.8 million, or 3.2%, to $22.17 billion in 2024, compared with average interest-earning assets of $21.48 billion in 2023.

Average loans increased $671.3 million and average investment securities increased $62.6 million in 2024.

Offsetting the above increases was a decrease of $43.2 million in average interest-bearing deposits with other financial institutions.

The changes in volume contributed to interest income increase of $58.0 million.

The changes in volume contributed to an interest income increase of $41.1 million.

Changes in rate:

The average yield of interest-bearing assets increased to 6.02% in 2024 from 5.78% in 2023.

The increase in rate on loans resulted in an increase of $274.0 million in interest income, the increase in rate on investment securities resulted in an increase of $17.7 million in interest income, and the increase in rate on deposits with other financial institutions resulted in an increase of $41.0 million in interest income.

The increase in rate on loans resulted in an increase of $45.7 million in interest income, the increase in rate on investment securities resulted in an increase of $5.5 million in interest income, and the increase in interest from FHLB resulted in an increase of $0.3 million in interest income.

The changes in rate contributed to an interest income increase of $51.6 million.

1 unchanged sentence

Average gross loans, which generally have a higher yield than other types of investments, comprised 87.7% of total average interest-earning assets in 2024, an increase from 87.3% in 2023.

Average investment securities comprised 7.3% of total average interest-bearing assets in 2023, an increase from 6.5% in 2022.

Interest expense increased by $382.9 million, or 325.6%, to $500.5 million in 2023, compared with $117.6 million in 2022, primarily due to increased average interest-bearing deposits, and FHLB advances.

The overall increase in interest expense was primarily due to increases in rates on interest bearing deposits, and volume and rate increases in other borrowings as discussed below:

Average investment securities comprised 7.3% of total average interest-bearing assets in 2024, which represented no change from 7.3% in 2023.

Interest expense increased by $160.4 million, or 32.1%, to $660.9 million in 2024, compared with $500.5 million in 2023, primarily due to increased average interest-bearing deposits.

The overall increase in interest expense was primarily due to increases in rates on interest bearing deposits, and rate increases in other borrowings and long term debt as discussed below:

Changes in volume:

Average interest-bearing deposits increased $1.58 billion, or 11.4%, and average FHLB advances and other borrowings increased $257.9 million, or 104.3%.

Average interest-bearing deposits increased $1.05 billion, or 6.8%, and average FHLB advances and other borrowings decreased $190.1 million, or 37.63%.

The changes in volume caused an increase in interest expense of $34.8 million.

Changes in rate:

The average costs of interest-bearing deposits, FHLB advances and other borrowings, increased to 3.02% and 5.15% in 2023 from 0.76%, and 2.73% in 2022, respectively.

The average costs of interest-bearing deposits, and FHLB advances and other borrowings, combined, increased to 3.85% and 5.24% in 2024 from 3.02%, and 5.15% in 2023, respectively.

The changes in rate caused interest expense to increase by $125.6 million.

Change in the mix of interest-bearing liabilities:

Average interest-bearing deposits of $15.47 billion decreased to 96.1% of total interest-bearing liabilities in 2023 compared to 97.4% in 2022.

Average FHLB advances and other borrowings of $505.2 million increased to 3.1% of total interest-bearing liabilities.

Average interest-bearing deposits of $16.53 billion increased to 97.4% of total interest-bearing liabilities in 2024 compared to 96.1% in 2023.

Average FHLB advances and other borrowings of $315.1 million decreased to 1.9% of total interest-bearing liabilities.

Average long-term debt of $119.1 million decreased to 0.7% of total interest-bearing liabilities in 2024 compared to 0.7% in 2023.

4 unchanged sentences

Average loans for 2023 were $18.76 billion, a $1.13 billion, or an 6.4% increase from $17.63 billion in 2022.

Compared with 2021, average residential mortgage loans increased $825.8 million, or 20.1%, average commercial real estate loans increased $786.9 million, or 10.2%, and average commercial loans increased $307.3 million, or 10.6%.

Compared with 2022, average commercial real estate loans increased $715.6 million, or 8.4%, average residential mortgage loans increased $597.3 million, or 12.1%, average equity lines decreased $97.9 million, or 26.1% and average construction loans decreased $84.1 million, or 13.9%.

Average investment securities were $1.56 billion in 2023, an increase of $237.5 million, or 18.0%, from 2022.

Average interest-bearing cash on deposits with financial institutions decreased $120.2 million, or 9.5%, to $1.14 billion in 2023 from $1.26 billion in 2022.

Average interest-bearing deposits were $13.9 billion in 2022, an increase of $933.1 million, or 7.2%, from $13.0 billion in 2021, primarily due to increases of $868.1 million, or 21.5%, in money market accounts, $424.1 million, or 20.7%, in interest bearing demand deposits, and $221.3 million, or 24.7%, in savings accounts, offset by decreases of $580.4 million, or 9.7%, in time deposits.

Interest income increased $184.8 million, or 27.7%, from $666.5 million in 2021 to $851.3 million in 2022 primarily due to increases in loan rates:

Interest income increased $390.9 million, or 45.9%, from $851.3 million in 2022 to $1.24 billion in 2023 primarily due to increases in loan rates:

Changes in volume:

5 unchanged sentences

The average yield of interest-bearing assets increased to 5.78% in 2023 from 4.21% in 2022.

The increase in rate on loans resulted from an increase of $74.6 million in interest income, the increase in rate on investment securities resulted from an increase of $9.7 million in interest income, and the increase in rate on deposits with other financial institutions resulted from an increase of $18.4 million in interest income.

The changes in rate contributed to an interest income increase of $333.0 million.

2 unchanged sentences

Average investment securities comprised 7.3% of total average interest-bearing assets in 2023, an increase from 6.5% in 2022.

Interest expense increased by $48.8 million, or 71.0%, to $117.6 million in 2022, compared with $68.8 million in 2021, primarily due to increased average interest-bearing deposits, and FHLB advances.

The overall increase in interest expense was primarily due to increases in rates on interest bearing deposits, and volume and rate increases in other borrowings as discussed below:

Interest expense increased by $382.9 million, or 325.6%, to $500.5 million in 2023, compared with $117.6 million in 2022, primarily due to increases in interest rates on average interest-bearing deposits.

The overall increase in interest expense was primarily due to increases in rates on interest-bearing deposits, and rate increases in other borrowings as discussed below:

Changes in volume:

Average interest-bearing deposits increased $933.1 million, or 7.2%, and average FHLB advances and other borrowings increased $171.8 million, or 227.5%.

Average interest-bearing deposits increased $1.58 billion, or 11.4%, and average FHLB advances and other borrowings increased $257.9 million, or 104.3%.

The changes in volume caused an increase in interest expense of $46.1 million.

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The provision for credit losses represents the charge against current earnings that is determined by management, through a credit review process, as the amount needed to maintain an allowance for loan losses and an allowance for off-balance sheet unfunded credit commitments that management believes to be sufficient to absorb credit losses inherent in the Bank’s loan portfolio and credit commitments.

The Bank recorded a provision for credit losses of $26.0 million in 2023 compared with a provision for credit losses of $14.5 million in 2022, and a reversal for credit losses of $16.0 million in 2021.

The Bank recorded a provision for credit losses of $37.5 million in 2024 compared with a provision for credit losses of $26.0 million in 2023, and a provision for credit losses of $14.5 million in 2022.

Net charge-offs for 2024 were $29.7 million, or 0.15% of average loans, compared to net charge-offs of $17.6 million for 2023, or 0.09% of average loans, and net charge-offs of $2.6 million for 2022, or 0.01% of average loans.

Non-interest Income

Non-interest income increased $11.5 million, or 20.2%, to $68.3 million for 2023, from $56.8 million in 2022, compared to $54.6 million in 2021.

Non-interest income decreased $12.6 million, or 18.5%, to $55.7 million for 2024, from $68.3 million in 2023, compared to $56.8 million in 2022.

Non-interest income includes depository service fees, letters of credit commissions, securities gains (losses), gains (losses) from loan sales, gains from sale of premises and equipment, gains on acquisition, and other sources of fee income.

1 unchanged sentence

Comparison of 2024 with 2023

The increase in non-interest income from 2022 to 2023 was primarily due to a $17.9 million increase in unrealized gain on equity securities, and a $1.1 million increase in wealth management fees, offset, in part, by a $3.0 million increase in securities losses, a $3.2 million decrease in derivative fees and a $1.7 million decrease in BOLI death benefit.

The decrease in non-interest income from 2023 to 2024 was primarily due to a $25.8 million increase in unrealized loss on equity securities, offset, in part, by a $6.5 million increase in wealth management fees, a $4.1 million increase in securities gains, and a $1.0 million increase in derivative fees.

Comparison of 2023 with 2022

The increase in non-interest income from 2021 to 2022 was primarily due to a $1.4 million increase in wealth management fees, and a $1.8 million decrease in loss on equity securities.

Non-interest Expense

2 unchanged sentences

Non-interest expense totaled $374.7 million in 2024 compared to $380.5 million in 2023.

The decrease of $5.8 million, or 1.5%, in non-interest expense in 2024 compared to 2023 was primarily due to a combination of the following:

Salaries and employee benefits increased $13.2 million, or 8.6%

Computer/equipment increased $2.7 million, or 15.2% .

Other real estate owned expense increased $1.9 million, or 254.7%.

Amortization of investments in affordable housing and alternative energy partnerships decreased $14.0 million, or 16.1%.

FDIC and State assessments decreased $9.3 million, or 39.5%.

Professional Services decreased $1.5 million, or 4.6%.

The efficiency ratio, defined as non-interest expense divided by the sum of net interest income before provision for loan losses plus non-interest income, increased to 51.35% in 2024 compared to 46.97% in 2023 due primarily to lower net interest income offset by a decrease in non-interest expense as explained above.

Comparison of 2023 with 2022

Non-interest expense totaled $380.5 million in 2023 compared to $303.4 million in 2022.

The increase of $77.1 million, or 25.4%, in non-interest expense in 2023 compared to 2022 was primarily due to a combination of the following:

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The efficiency ratio, defined as non-interest expense divided by the sum of net interest income before provision for loan losses plus non-interest income, increased to 46.97% in 2023 compared to 38.38% in 2022 due primarily to higher net interest income offset by an increase in non-interest expense as explained above.

Comparison of 2022 with 2021

Non-interest expense totaled $303.4 million in 2022 compared to $286.5 million in 2021.

The increase of $16.9 million, or 5.9%, in non-interest expense in 2022 compared to 2021 was primarily due to a combination of the following:

Salaries and employee benefits increased $9.8 million, or 7.3%.

Professional Service increased $4.6 million, or 19.4%.

Occupancy expenses increased $2.5 million, or 12.3%.

Amortization of core deposit intangibles increased $1.2 million, or 175.4%.

Amortization of investments in affordable housing and alternative energy partnerships decreased $3.4 million, or 7.4%.

The efficiency ratio, defined as non-interest expense divided by the sum of net interest income before provision for loan losses plus non-interest income, decreased to 38.38% in 2022 compared to 43.92% in 2021 due primarily to higher net interest income offset by an increase in non-interest expense as explained above.

Income Tax Expense

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Financial Condition

Total assets were $23.08 billion at December 31, 2023, an increase of $1.13 billion, or 5.1%, from $21.95 billion at December 31, 2022, primarily due to an increase of $1.28 billion in net loans, an increase of $131.2 million in investment securities offset by a decrease of $312.1 million in short-term investments and interest-bearing deposits.

Total assets were $23.05 billion at December 31, 2024, a decrease of $26.9 million, or 0.1%, from $23.08 billion at December 31, 2023, primarily due to a decrease of $179.2 million in net loans, a decrease of $57.4 million in investment securities and a decrease of $26.1 million in affordable housing investments and alternative energy partnerships offset by an increase of $227.5 million in short-term investments and interest-bearing deposits.

Investment Securities

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(In thousands)

Securities Available-for-Sale:

Securities AFS:

treasury securities

government agency entities

government sponsored entities

Mortgage-backed securities

4 unchanged sentences

Other equity securities

Effective January 1, 2021, upon the adoption of ASU 2016-13, Financial Instruments - Credit Losses, debt securities available-for-sale are measured at fair value and subject to impairment testing.

Upon the adoption of ASU 2016-13, Financial Instruments - Credit Losses, debt securities available-for-sale ("AFS") are measured at fair value and subject to impairment testing.

When an available-for-sale debt security is considered impaired, the Company must determine if the decline in fair value has resulted from a credit-related loss or other factors and then, (1) recognize an allowance for credit losses by a charge to earnings for the credit-related component (if any) of the decline in fair value, and (2) recognize in other comprehensive income (loss) any non-credit related components of the fair value change.

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(In thousands)

Securities Available-for-Sale

treasury securities

Securities AFS

government agency entities

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12 months or longer

Gross Unrealized

(In thousands)

Securities Available-for-Sale

Securities AFS

treasury securities

8 unchanged sentences

Maturity Distribution:

Securities Available-for-Sale:

Securities AFS:

treasury securities

4 unchanged sentences

Weighted-Average Yield:

Securities Available-for-Sale:

Securities AFS:

treasury securities

5 unchanged sentences

Equity Securities

For the year ended December 31, 2023, the Company recognized a net gain of $18.2 million due to the increase in fair value of equity investments with readily determinable fair values during the year, compared to a net gain of $392 thousand in 2022.

For the year ended December 31, 2024, the Company recognized a net loss of $7.5 million due to the decrease in fair value of equity investments with readily determinable fair values, compared to a net gain of $18.2 million in 2023.

Equity securities were $34.4 million as of December 31, 2024, compared to $40.4 million as of December 31, 2023.

Loans represented 87.4% of average interest-earning assets during 2024, compared with 91.0% during 2023.

Gross loans increased by $1.30 billion, or 7.1%, to $19.55 billion at December 31, 2023, compared with $18.25 billion at December 31, 2022.

The increase in gross loans was primarily attributable to the following:

Total residential mortgage loans increased by $585.8 million, or 11.2%, to $5.84 billion at December 31, 2023, compared to $5.25 billion at December 31, 2022.

Gross loans decreased by $172.2 million, or 0.9%, to $19.38 billion at December 31, 2024, compared with $19.55 billion at December 31, 2023.

The decrease in gross loans was primarily attributable to the following:

Total residential mortgage loans decreased by $149.7 million, or 2.6%, to $5.69 billion at December 31, 2024, compared to $5.84 billion at December 31, 2023.

Commercial real estate loans increased $304.2 million, or 3.1%, to $10.03 billion at December 31, 2024, compared to $9.73 billion at December 31, 2023.

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Brokered-deposits totaled $1.06 billion, or 5.4%, of total deposits, at December 31, 2024, compared to $1.52 billion, or 7.9%, at December 31, 2023.

The Bank’s total deposits increased $820.2 million, or 4.4%, to $19.33 billion at December 31, 2023, from $18.51 billion at December 31, 2022, primarily due to a $2.32 billion, or 33.1%, increase in time deposits offset, in part, by a $763.0 million, or 20.0% decrease in money market deposits, and a $640.0 million, or 15.4%, decrease in Non-interest-bearing demand deposits.

The Bank’s total deposits increased $360.8 million, or 1.9%, to $19.69 billion at December 31, 2024, from $19.33 billion at December 31, 2023, primarily due to a $323.0 million, or 10.6% increase in money market deposits, a $233.8 million, or 2.5%, increase in time deposits and a $213.6 million , or 20.6% increase in saving deposits offset, in part, by a $244.7 million, or 6.9%, decrease in non-interest-bearing demand deposits and a $165.0 million, or 7.0%, decrease in NOW deposits.

The following table displays the deposit mix balances as of the end of the past three years:

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Time Deposits by Maturity

At December 31, 2023

As of December 31, 2024

Time Deposits -under $250,000

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No banking organizations with total assets under $5 billion will pay a special assessment, based on data for the December 31, 2022, reporting period.

Currently, the FDIC estimates that of the total cost of the failures of Silicon Valley Bank and Signature Bank, approximately $16.3 billion was attributable to the protection of uninsured depositors.

The FDIC initial estimates of the total cost of the failures of Silicon Valley Bank and Signature Bank were approximately $16.3 billion and was attributable to the protection of uninsured depositors.

The FDIC has subsequently updated its estimate of the DIF’s losses that are recoverable through the special assessment, which as of June 2024 totaled $19.2 billion.

These loss estimates will be periodically adjusted as assets are sold, liabilities are satisfied, and receivership expenses are incurred.

The special assessment will be collected at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly assessment periods.

Because the estimated loss pursuant to the systemic risk determination will be periodically adjusted, the FDIC retains the ability to cease collection early, impose an extended special assessment collection period after the initial eight-quarter collection period to collect the difference between losses and the amounts collected, and impose a one-time final shortfall special assessment after both receiverships terminate.

The special assessment will be collected beginning with the first quarterly assessment period of 2024 (i.e., January 1 through March 31, 2024) with an invoice payment date of June 28, 2024.

The special assessment initially would be collected at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly assessment periods.

Given the update to the loss estimates and the increase in the aggregate special assessment base resulting from amendments to the reported amount of estimated uninsured deposits, the FDIC currently projects that the special assessment will be collected for an additional two quarters beyond the initial eight-quarter collection period, at a lower rate.

Because the estimated loss pursuant to the systemic risk determination will continue to be periodically adjusted, the FDIC retains the ability to cease collection early, impose an extended special assessment collection period after the initial eight-quarter collection period to collect the difference between losses and the amounts collected, and impose a one-time final shortfall special assessment after both receiverships terminate.

The extent to which any such additional future assessments will impact our future deposit insurance expense is currently uncertain.

Each institution should account for the special assessment in accordance with U.S.

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Therefore, an institution will recognize in the Call Report and other financial statements the accrual of a liability and estimated loss (i.e., expense) from a loss contingency for the special assessment when the institution determines that the conditions for accrual under GAAP have been met.

In addition, the General Instructions to the Call Report provide guidance on ASC Topic 855, Subsequent Events, which may be applicable.

Similarly, each institution should account for any shortfall special assessment in accordance with FASB ASC Topic 450 when the conditions for accrual under GAAP have been met.

As a result, the Company recorded an $11.3 million special assessment fee in the fourth quarter of 2023.

Each institution should account for any shortfall special assessment in accordance with FASB ASC Topic 450 when the conditions for accrual under GAAP have been met.

As a result, the Company recorded an $11.3 million special assessment fee in the fourth quarter of 2023 and an additional $1.8 million in 2024.

Long-term Debt

54 unchanged sentences

Such loans are placed under closer supervision with consideration given to placing the loan on non-accrual status, the need for an additional allowance for loan losses, and (if appropriate) partial or full charge-off.

Total non-performing portfolio assets increased $8.8 million, or 10.4%, to $93.3 million at December 31, 2023, compared to $84.5 million at December 31, 2022, primarily due to an increase of $15.4 million in Other real estate owned, offset by decrease of $6.6 million in total non-performing loans.

Total non-performing portfolio assets increased $103.0 million, or 110.4%, to $196.3 million at December 31, 2024, compared to $93.3 million at December 31, 2023, primarily due to an increase of $102.5 million in total non-accrual loans and $3.6 million in other real estate owned, offset by decrease of $3.1 million in loans 90 days or more past due.

As a percentage of gross loans, excluding loans held for sale, plus OREO, our non-performing assets increased to 1.01% at December 31, 2024, from 0.48% at December 31, 2023.

The non-performing portfolio loan, excluding loans held for sale, coverage ratio, defined as the allowance for credit losses to non-performing loans, excluding loans held for sale, increased to 221.6% at December 31, 2023, from 193.0% at December 31, 2022.

The non-performing portfolio loan, excluding loans held for sale, coverage ratio, defined as the allowance for credit losses to non-performing loans, excluding loans held for sale, decreased to 98.98% at December 31, 2024, from 221.58% at December 31, 2023.

The following table presents the breakdown of total non-accrual, past due, and restructured loans for the past five years:

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Total non-performing assets

Accruing loan modifications to borrowers experiencing financial difficulties (1)

Accruing modifications to borrowers experiencing financial difficulties

Accruing troubled debt restructurings (TDRs)

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Allowance for credit losses as a percentage of non-performing loans

(1) Current period modifications to borrowers experiencing financial difficulties are reported in accordance with the new guidance under ASU 2022-02.

The effect of non-accrual loans on interest income for the past five years is presented below:

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Non-accrual Loans

Total non-accrual portfolio loans were $66.7 million at December 31, 2023, decreased $2.2 million, or 3.2%, from $68.9 million at December 31, 2022.

Total non-accrual portfolio loans were $169.2 million at December 31, 2024, increased $102.5 million, or 153.7%, from $66.7 million at December 31, 2023.

The allowance for the collateral-dependent loans is calculated based on the difference between the outstanding loan balance and the value of the collateral as determined by recent appraisals, sales contracts, or other available market price information, less cost to sell.

9 unchanged sentences

Personal property (UCC)

(1) Real estate includes commercial real estate loans, real estate construction loans, and residential mortgage loans, equity lines and installment & other loans.

(1) Real estate includes commercial real estate loans, construction loans, residential mortgage loans, equity lines and installment & other loans.

December 31, 2024

6 unchanged sentences

Import/Export

(1) Real estate includes commercial real estate loans, real estate construction loans, and residential mortgage loans, equity lines and installment & other loans.

(1) Real estate includes commercial real estate loans, construction loans, residential mortgage loans, equity lines and installment & other loans.

As of December 31, 2024, recorded investment in non-accrual loans was $169.2 million compared to $66.7 million as of December 31, 2023.

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The Bank generally seeks to obtain current appraisals, sales contracts, or other available market price information intended to provide updated factors in evaluating potential loss.

The allowance for loan losses to non-performing loans was 209.3% at December 31, 2023, compared to 182.1% at December 31, 2022, primarily due to a decrease in non-performing loans.

Non-accrual loans also include those modifications to borrowers experiencing financial difficulties (TDR's in 2022) that do not qualify for accrual status.

The allowance for loan losses to non-performing loans was 93.39% at December 31, 2024, compared to 209.33% at December 31, 2023, primarily due to an increase in non-performing loans.

Non-accrual loans also include those modifications to borrowers experiencing financial difficulties that do not qualify for accrual status.

The following table presents non-accrual loans and the related allowance as of December 31, 2024, and 2023:

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Commercial loans

Construction loans

Commercial real estate loans

Residential mortgage and equity lines

Installment and other loans

With allocated allowance:

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Commercial loans

Construction loans

Commercial real estate loans

Residential mortgage and equity lines

Installment and other loans

With allocated allowance:

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Commercial real estate loans

Residential mortgage and equity lines

Total non-accrual loans

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As of December 31, 2024, construction loans of $227.9 million were disbursed with pre-established interest reserves of $31.3 million compared to $220.6 million of such loans disbursed with pre-established interest reserves of $41.3 million at December 31, 2023.

The balance for construction loans with interest reserves which have been extended was $6.4 million with pre-established interest reserves of $0.5 million at December 31, 2023, compared to $34.4 million with pre-established interest reserves of $1.0 million at December 31, 2022.

Land loans of $12.9 million were disbursed with pre-established interest reserves of $0.4 million at December 31, 2023, compared to $48.6 million of land loans disbursed with pre-established interest reserves of $1.6 million at December 31, 2022.

There were no land loans with interest reserves which have been extended at December 31, 2023, compared to $0.9 million with pre-established interest reserves of $58 thousand at December 31, 2022.

The balance for construction loans with interest reserves which have been extended was $4.2 million with pre-established interest reserves of $53 thousand at December 31, 2024, compared to $6.4 million with pre-established interest reserves of $0.5 million at December 31, 2023.

There were no land loans disbursed with pre-established interest reserves at December 31, 2024, compared to $12.9 million of land loans disbursed with pre-established interest reserves of $0.4 million at December 31, 2023.

There were no land loans with interest reserves which have been extended at December 31, 2024, and December 31, 2023.

At December 31, 2024, and December 31, 2023, the Bank had no loans on non-accrual status with available interest reserves.

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Most of our CREC loan property types had a low weighted-average LTV ratio.

Approximately 83% of total CREC loans had an LTV ratio of 60% or lower as of December 31, 2023 and 2022, respectively.

Approximately 85% and 83% of total CREC loans had an LTV ratio of 60% or lower as of December 31, 2024, and 2023, respectively.

The following tables provide a summary of the Company’s CREC, multifamily residential, and construction and land loans by geography as of December 31, 2024, and 2023.

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Interest rates on CRE loans may be fixed, variable or hybrid.

As of December 31, 2023, 63% of our CRE portfolio was variable rate.

In comparison, as of December 31, 2022, 68% of our CRE portfolio was variable rate.

As of December 31, 2024, 25% and 37% of our CRE portfolio were variable rate and hybrid loans in their fixed period, respectively.

In comparison, as of December 31, 2023, 25% and 40% of our CRE portfolio were variable rate and hybrid loans in their fixed period, respectively.

Loans are underwritten with conservative standards for cash flows, debt service coverage and LTV.

Owner-occupied properties comprised 23% of the CRE loans as of December 31, 2023 and 2022, respectively.

Owner-occupied properties comprised 24% and 23% of the CRE loans as of December 31, 2024, and 2023, respectively.

The remainder were non-owner-occupied properties, where 50% or more of the debt service for the loan is typically provided by rental income from an unaffiliated third party.

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The Company offers a variety of first lien mortgages, including fixed- and variable-rate loans.

As of December 31, 2023, 60% of our multifamily residential loan portfolio was variable rate.

In comparison, as of December 31, 2022, 74% of our multifamily residential loan portfolio was variable rate.

As of December 31, 2024, 18% and 41% of our multifamily residential loan portfolio were variable rate and hybrid loans in their fixed period, respectively.

In comparison, as of December 31, 2023, 20% and 40% of our multifamily residential loan portfolio were variable rate and hybrid loans in their fixed period, respectively.

Commercial — Construction and Land Loans .

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We identify critical policies and estimates as those that require management to make particularly difficult, subjective, and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions.

We have identified the policy and estimate related to the allowance for credit losses on loans as a critical accounting policy.

We have identified the policy and estimates related to the allowance for credit losses on loans as a critical accounting policy.

Our critical accounting policies and estimates are described in Item 7.

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The allowance for loan losses is reported as a reduction of the amortized cost basis of loans, while the reserve for unfunded loan commitments is included within "Other liabilities" on the Consolidated Balance Sheets.

The amortized cost basis of loans does not include interest receivable shown separately on the Consolidated Balance Sheets.

The amortized cost basis of loans does not include interest receivable, which is included in "Other assets" on the Consolidated Balance Sheets.

The "Provision for credit losses" on the Consolidated Statement of Operations and Comprehensive Income is a combination of the provision for loan losses and the provision for unfunded loan commitments.

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Thus, the CECL methodology incorporates a broad range of information in developing credit loss estimates.

For further information regarding the calculation of the allowance for credit losses on loans held for investment using the CECL methodology effective January 1, 2021, see Notes 1 and 5 to the Consolidated Financial Statements contained in “Item 8.

For further information regarding the calculation of the allowance for credit losses on loans held for investment using the CECL methodology, see Notes 1 and 4 to the Consolidated Financial Statements contained in “Item 8.

Financial Statements and Supplementary Data.”

In calculating our allowance for credit losses for the year ended 2024, the change in Moody’s forecast of future GDP, unemployment rates, CRE and home price indexes, did not result in a significant impact to the allowance for credit losses.

Our methodology and framework along with the 8-quarter reasonable and supportable forecast period and the 4-quarter reversion period have remained consistent since the implementation of CECL on January 1, 2021.

Our methodology and framework along with the 8-quarter reasonable and supportable forecast period and the 4-quarter reversion period have remained consistent since the implementation of CECL.

Certain management assumptions are reassessed every quarter based on current expectations for credit losses, while other assumptions are assessed and updated on at least an annual basis.

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and other CRE loans.

We estimate the probability of default during the reasonable and supportable forecast period using separate econometric regression models developed to correlate macroeconomic variables, (GDP, unemployment, CRE prices and residential mortgage prices) to historical credit performance for each of the six loan portfolios from the fourth quarter of 2007 to the fourth quarter of 2022.

Loss given default rates are computed based on the net charge-offs recognized divided by the exposure at default of defaulted loans starting with the fourth quarter of 2007 through the fourth quarter of 2022.

Loss given default rates are computed based on the net charge-offs recognized and then applied to the expected exposure at default of defaulted loans starting with the fourth quarter of 2007 through the fourth quarter of 2022.

The probability of default and the loss given default rates are applied to the expected amount at default at the loan level based on contractual scheduled payments and estimated prepayments.

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Generally speaking, the blended scenario approach would include the Baseline, the Alternative Scenario 1 – Upside – 10th Percentile and the Alternative Scenario 3 – Downside – 90th Percentile forecasts.

After the R&S period, the Company reverts linearly for the four-quarter reversion period to the long-term loss rates for each of the six portfolios of loans.

After the R&S period, the Company will revert to straight-line for the four-quarter reversion period to the long-term loss rates for each of the six portfolios of loans.

The contractual term excludes renewals and modifications but includes pre-approved extensions and prepayment assumptions where applicable.

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Our macroeconomic forecasts used in determining the December 31, 2024, allowance for credit losses consisted of three scenarios as provided by an outside forecaster.

As of December 31, 2022, since the baseline scenario did not forecast a recession in the R&S period, we increased the weighting of the downside scenario to mirror the consensus among economists and reflect our expectations that a recession in the forecast period was more likely than not.

During the fourth quarter of 2023, in light of the continued strength of the economy, we maintained the weighting established in the third quarter of 2023 which slightly reduced the weight given to the most severe scenario.

The baseline scenario reflects modest ongoing GDP growth and a modest increase in the unemployment rate peaking at 4.1% in the first quarter of 2025.

Relative to the baseline scenario, the upside scenario reflects higher GDP growth and lower unemployment rates with the stronger economy resulting in slightly higher inflation, though the Federal Reserve is projected to cut the Fed funds rate starting in the third quarter of 2024.

The downside scenario contemplates a recession due to the weakening economy as concerns about inflation keep the Fed funds rate elevated, decreasing to 4.7% in the second quarter of 2024, resulting in negative GDP growth for three quarters peaking at -3.5% in the second quarter of 2024, rising unemployment that peaks at 7.7% in the first quarter of 2025, and a decline in CRE prices of 20.8% and decline in residential home prices of 14.8% during the forecast period.

As of December 31, 2023, we placed the same weight on our downside and base scenario, with a small weighting on the upside scenario.

After increasing the weighting of the downside scenario in 2022 to reflect our expectations that a recession was more likely than not we reduced the weighting of the severe scenario slightly during the third quarter of 2023, in light of the continued strength of the economy.

With the economy continuing to expand at a solid pace, the downside scenario weighting was once again reduced while giving greater weight to the baseline scenario.

The baseline scenario reflects modest ongoing GDP growth and a steady decline in the unemployment rate starting from 4.15% in the first quarter of 2025 to 4.09% by the end of the R&S period.

The upside scenario reflects higher GDP growth and lower unemployment rates with the stronger economy resulting in inflation, and interest rates a bit higher than in the baseline scenario, though the Federal Reserve is projected to continue to cut the fed funds rate in the first quarter of 2025.

The downside scenario contemplates a recession and rising inflation prompts the Federal Reserve to initially raise the fed funds rate before lowering again below the baseline in the third quarter of 2025, resulting in negative GDP growth for three quarters peaking at 3.9% in the third quarter of 2025, rising unemployment that peaks at 8.3% in the first quarter of 2026, a decline in CRE prices of 18.9% and a decline in residential home prices of 11.3% during the forecast period.

As of December 31, 2024, we slightly decreased the weighting on our downside scenario while placing greater weight on the base scenario, with a small weighting on the upside scenario.

Keeping all other factors constant, we estimate that if we had applied 100% weighting to the downside scenario, the allowance for credit losses as of December 31, 2024, would have been approximately $79.8 million higher.

This estimate is intended to reflect the sensitivity of the allowance for credit losses to changes in our scenario weights and is not intended to be indicative of future changes in the allowance for credit losses.

Management believes the allowance for credit losses is appropriate for the current expected credit losses in our loan portfolio and associated unfunded commitments, and the credit risk ratings and loss rates currently assigned are reasonable and appropriate as of the reporting date.

Management believes the allowance for credit losses is appropriate for the current expected credit losses in our loan portfolio and associated unfunded commitments, and the credit risk ratings and inherent loss rates currently assigned are reasonable and appropriate as of the reporting date.

It is possible that others, given the same information, may at any point in time reach different conclusions that could result in a significant impact to the Company's financial statements.

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Provision/(reversal) for credit losses

Charge-offs :

Commercial loans

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The allowance allocated to commercial loans was $57.8 million at December 31, 2024, compared to $53.8 million at December 31, 2023.

The increase was primarily due to a reserve for a borrower in the health care industry.

The increase was primarily due to an increase in non-accrual loans.

The allowance allocated to residential mortgage loans and equity lines was $16.2 million at December 31, 2024, compared to $18.1 million at December 31, 2023.

The decrease was primarily due to a decrease in residential mortgage loans.

The allowance allocated to commercial real estate loans was $79.6 million at December 31, 2024, compared to $74.4 million at December 31, 2023.

The increase is due primarily to an increase in commercial real estate loans.

The allowance allocated for construction loans decreased to $8.2 million at December 31, 2023, from $10.4 million at December 31, 2022.

The decrease is due primarily to a decrease in construction loans and a decrease in non-accrual construction loans.

The allowance allocated for construction loans remained the same of $8.2 million at December 31, 2024, and December 31, 2023.

Please also see Part I — Item 1A — “Risk Factors” for additional factors that could cause actual results to differ materially from forward-looking statements or historical performance.

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See Note 9 to the Consolidated Financial Statements.

At December 31, 2023, the Bank pledged $387.6 thousand of its commercial loans to the Federal Reserve Bank’s Discount Window under the Borrower-in-Custody program.

At December 31, 2024, the Bank pledged $474.8 million of its commercial loans to the Federal Reserve Bank’s Discount Window under the Borrower-in-Custody program.

The Bank had borrowing capacity of $395.1 million from the Federal Reserve Bank Discount Window at December 31, 2024.

Liquidity can also be provided through the sale of liquid assets, which consist of federal funds sold, securities purchased under agreements to resell, securities available-for-sale.

Liquidity can also be provided through the sale of liquid assets, which consist of federal funds sold, securities purchased under agreements to resell, securities available-for-sale ("AFS").

At December 31, 2024, investment securities totaled $1.55 billion, with $17.8 million pledged as collateral for borrowings and other commitments.

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Approximately 99.8% of our time deposits mature within one year or less as of December 31, 2024.

Management anticipates that these deposits will reprice higher as a result of the increases in the target Fed funds rate that started in early 2022.

Management anticipates that these deposits will reprice lower as a result of the decreases in the target Fed funds rate that started in late 2023.

Management anticipates that there may be some outflow of these deposits upon maturity due to the keen competition in the Bank’s marketplace.

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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-K

Item 5. Market for Registrant’s Common Equity