What changed in this filing

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Item 1. Financial Statements

2025-05-08 compared with 2024-11-07 · 149 added, 294 removed, 688 unchanged (39% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts) September 30, 2024 December 31, 2023

(in thousands, except share amounts) March 31, 2025 December 31, 2024

Cash and due from financial institutions $ 42,473 $ 33,882

2 unchanged sentences

Time deposits in banks 4,024 4,121

Securities available-for-sale, at fair value, net of allowance for credit losses of $ 0 at September 30, 2024 and December 31, 2023 (amortized cost of $ 118,053 and $ 124,788 at September 30, 2024 and December 31, 2023, respectively)

Securities available-for-sale, at fair value, net of allowance for credit losses of $ 0 at March 31, 2025 and December 31, 2024 (amortized cost of $ 113,642 and $ 115,757 at March 31, 2025 and December 31, 2024, respectively)

97,111 98,194

Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $ 20 at September 30, 2024 and December 31, 2023 (fair value of $ 2,643 and $ 2,913 at September 30, 2024 and December 31, 2023, respectively)

Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $ 20 at March 31, 2025 and December 31, 2024 (fair value of $ 2,275 and $ 2,353 at March 31, 2025 and December 31, 2024, respectively)

Loans held for sale 2,669 3,247

22 unchanged sentences

10,000,000 shares authorized;

zero issued and outstanding at September 30, 2024 and December 31, 2023

zero issued and outstanding at March 31, 2025 and December 31, 2024

Common stock, no par value;

100,000,000 shares authorized;

21,319,583 shares issued and outstanding at September 30, 2024;

21,329,235 shares issued and outstanding at March 31, 2025;

21,319,083 shares issued and outstanding at December 31, 2024

12 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share amounts) 2025 2024

4 unchanged sentences

Interest-bearing deposits in banks

1,657 2,584 6,745 6,969

Total interest and fee income 57,087 47,541

15 unchanged sentences

Earnings on BOLI 161 142

Other 15 74 466 1,467

Total non-interest income 1,359 1,833

13 unchanged sentences

$ 13,111 $ 10,631

$ 10,941 $ 11,045 $ 32,354 $ 36,935

Basic earnings per common share $ 0.62 $ 0.62

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2025 2024

4 unchanged sentences

Income tax expense (benefit) related to items of other comprehensive income (loss)

1,049 ( 1,240 ) 854 ( 1,039 )

Other comprehensive income (loss)

2,500 ( 2,955 ) 2,035 ( 2,477 )

Total comprehensive income

3 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the Three Months Ended September 30, 2024 and 2023

Common Stock Retained Earnings

Accumulated Other Comprehensive Loss

Total Shareholders’ Equity

(in thousands, except per share amounts) Shares Amount

Balance at June 30, 2023 17,257,357 $ 220,021 $ 62,095 $ ( 12,976 ) $ 269,140

Net income — — 11,045 — 11,045

Other comprehensive loss — — — ( 2,955 ) ( 2,955 )

Stock compensation expense — 245 — — 245

Cash dividends paid ($ 0.20 per share)

— — ( 3,451 ) — ( 3,451 )

Balance at September 30, 2023 17,257,357 $ 220,266 $ 69,689 $ ( 15,931 ) $ 274,024

Balance at June 30, 2024 21,319,583 $ 301,968 $ 90,734 $ ( 12,232 ) $ 380,470

Net income — — 10,941 — 10,941

Other comprehensive income — — — 2,500 2,500

Stock compensation expense — 283 — — 283

Cash dividends paid ($ 0.20 per share)

— — ( 4,264 ) — ( 4,264 )

Balance at September 30, 2024 21,319,583 $ 302,251 $ 97,411 $ ( 9,732 ) $ 389,930

See accompanying notes to the unaudited consolidated financial statements.

FIVE STAR BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the Nine Months Ended September 30, 2024 and 2023

For the Three Months Ended March 31, 2025 and 2024

Common Stock Retained Earnings

3 unchanged sentences

Balance at December 31, 2023 17,256,989 $ 220,505 $ 77,036 $ ( 11,767 ) $ 285,774

Cumulative effect of adoption of ASC 326 on retained earnings — — ( 4,491 ) — ( 4,491 )

Net income — — 10,631 — 10,631

5 unchanged sentences

— — ( 3,451 ) — ( 3,451 )

Balance at September 30, 2023 17,257,357 $ 220,266 $ 69,689 $ ( 15,931 ) $ 274,024

Balance at March 31, 2024 17,353,251 $ 220,804 $ 84,216 $ ( 12,440 ) $ 292,580

Balance at December 31, 2024 21,319,083 $ 302,531 $ 106,464 $ ( 12,371 ) $ 396,624

1 unchanged sentence

Other comprehensive income — — — 725 725

Common stock issued 3,967,500 80,870 — — 80,870

Stock issued under stock award plans 10,485 — — — —

3 unchanged sentences

— — ( 4,266 ) — ( 4,266 )

Balance at September 30, 2024 21,319,583 $ 302,251 $ 97,411 $ ( 9,732 ) $ 389,930

See accompanying notes to unaudited consolidated financial statements.

Balance at March 31, 2025 21,329,235 $ 302,788 $ 115,309 $ ( 11,646 ) $ 406,451

See accompanying notes to the unaudited consolidated financial statements.

FIVE STAR BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2025 2024

7 unchanged sentences

Amortization of subordinated note issuance costs 36 36

Amortization of low income housing tax credits 354 —

Stock compensation expense 257 299

14 unchanged sentences

Proceeds received from equity investment — 300

Low income housing tax credits ( 10,559 ) —

Net change in time deposits in banks 97 ( 20 )

1 unchanged sentence

Purchase of premises and equipment ( 100 ) ( 108 )

Purchase of FHLB stock — ( 4,110 )

Purchase of BOLI ( 3,710 ) ( 1,550 )

2 unchanged sentences

Net change in deposits 178,360 ( 71,124 )

Proceeds from issuance of stock, net of issuance costs 80,870 —

Payments on other borrowings ( 170,000 ) ( 10,000 )

Advances (payments) on other borrowings — ( 50,000 )

Cash dividends paid ( 4,266 ) ( 3,451 )

Net cash provided by financing activities 271,974 230,715

Net cash provided by (used in) financing activities 174,094 ( 124,575 )

Net change in cash and cash equivalents 100,228 ( 136,251 )

25 unchanged sentences

All significant intercompany transactions and balances are eliminated in consolidation.

The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results of operations that may be expected for any other interim period or for the year ending December 31, 2024.

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results of operations that may be expected for any other interim period or for the year ending December 31, 2025.

The Company’s accounting and reporting policies conform to GAAP and to general practices within the banking industry.

While the Company’s chief decision-makers monitor the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis.

The Company has one reportable operating segment:

The banking segment derives its revenues through the Bank, which provides a broad range of banking products and services to customers who are predominantly small to medium-sized businesses, professionals, and individuals primarily in Northern California.

The Company manages the business activities on a consolidated basis.

The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who reviews financial information presented on a consolidated basis.

The CODM assesses performance for the operating segment and decides how to allocate resources based on net income that also is reported on the income statement as consolidated net income.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

These financial metrics are used by the CODM to make key operating decisions, such as determination of the rate at which the Company seeks to grow, loan and deposit pricing, and the allocation of budget for non-interest expenses.

Net income is used to monitor budget versus actual results.

Discrete financial information is not available other than on a Company-wide basis.

Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

(d) Emerging Growth Company

The Company qualifies as an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, and, as such, may take advantage of specified reduced reporting requirements and deferred accounting standards adoption dates, and is relieved of other significant requirements that are otherwise generally applicable to other public companies.

The Company qualifies as an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, and, as such, may take advantage of specified reduced reporting requirements and deferred adoption dates for accounting standards, and is relieved of other significant requirements that are otherwise generally applicable to other public companies.

The Company will remain an emerging growth company for five years after its IPO date of May 5, 2021, unless one of the following occurs:

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(ii) the Company issues more than $1.0 billion in non-convertible debt;

or (iii) the Company becomes a large accelerated filer with a public float of more than $0.7 billion.

or (iii) the Company becomes a large accelerated filer with a public float of more than $0.7 billion, as measured at June 30 annually.

(e) Significant Accounting Policies

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The following information reflects recent accounting standards that have been adopted or are pending adoption by the Company.

The Company qualifies as an emerging growth company and, as such, has elected to use the extended transition period for complying with new or revised accounting standards and is not subject to the new or revised accounting standards applicable to public companies during the extended transition period.

The Company qualifies as an emerging growth company and, as such, has elected not to opt out of the extended transition period for complying with new or revised accounting standards and is not subject to the new or revised accounting standards applicable to public companies during the extended transition period.

The accounting standards discussed below indicate effective dates for the Company as an emerging growth company using the extended transition period.

Accounting Standards Adopted in 2025

In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (“ASU 2023-02”).

Under current GAAP, an entity can only elect to apply the proportional amortization method to investments in low income housing tax credit (“LIHTC”) structures.

The amendments in ASU 2023-02 allow entities to elect to account for equity investments made primarily for the purpose of receiving income tax credits using the proportional amortization method, regardless of the tax credit program through which the investment earns income tax credits, if certain conditions are met.

ASU 2023-02 provides amendments to paragraph ASC 323-740-25-1, which sets forth the conditions needed to apply the proportional amortization method.

The amendments make certain limited changes to those conditions to clarify their application to a broader group of tax credit investment programs.

However, the conditions in substance remain consistent with current GAAP.

The amendments in ASU 2023-02 also eliminate certain LIHTC-specific guidance to align the accounting more closely with the accounting for other equity investments in tax credit structures and require that the delayed equity contribution guidance in paragraph ASC 323-740-25-3 apply only to tax equity investments accounted for using the proportional amortization method.

The Company adopted ASU 2023-02 on January 1, 2024, which did not have a significant impact on the Company’s consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

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ASU 2023-06 is not expected to have a significant impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures (“ASU 2023-07”), amending disclosure requirements related to segment reporting primarily through enhanced disclosure about significant segment expenses and by requiring disclosure of segment information on an annual and interim basis.

ASU 2023-07 is effective January 1, 2024 and for interim periods beginning after December 15, 2024.

The key amendments:

(i) require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (the “CODM”) and included within each reported measure of segment profit or loss;

(ii) require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition;

(iii) require that a public entity provide all annual disclosures about a reportable segment’s profit or loss currently required by GAAP in interim periods as well;

(iv) clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, an entity may report one or more of those additional measures of segment profit;

(v) require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the

reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources;

and (vi) require that a public entity that has a single reportable segment provide all the disclosures required by the amendments in the ASU and all existing segment disclosures.

The requirements of this standard for such entities will apply beginning with the Company’s annual report for the year ending December 31, 2024.

The Company has one reportable segment and ASU 2023-07 is not expected to have a significant impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU No.

1 unchanged sentence

ASU 2023-09 will require disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

Entities will also be required to disclose income/(loss) from continuing operations before income tax expense/(benefit) disaggregated between domestic and foreign, as well as income tax expense/(benefit) from continuing operations disaggregated by federal, state, and foreign.

ASU 2023-09 is effective January 1, 2025 and is not expected to have a significant impact on the Company’s consolidated financial statements.

Entities will also be required to disclose income/(loss) from continuing operations before income tax expense/(benefit) disaggregated between domestic and foreign operations, as well as income tax expense/(benefit) from continuing operations disaggregated by federal, state, and foreign operations.

ASU 2023-09 is effective January 1, 2026 for emerging growth companies electing not to opt out of the extended transition period and is not expected to have a significant impact on the Company’s consolidated financial statements.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements (“ASU 2024-02”).

3 unchanged sentences

FASB Concepts Statements are nonauthoritative.

Removing all references to Concepts Statements in the guidance is intended to simplify the ASC and draw a distinction between authoritative and nonauthoritative literature.

ASU 2024-02 is effective January 1, 2025 and is not expected to have a significant impact on the Company’s consolidated financial statements.

(g) Allowance for Credit Losses (“ACL”)

The ACL is a valuation account that offsets the amortized cost basis of loans receivable and certain other financial assets, including unfunded loan commitments and held-to-maturity debt securities.

Under ASC 326, amortized cost basis is the basis on which the ACL is determined.

Amortized cost basis on loans receivable is principal outstanding, net of any purchase premiums and discounts, and net of any deferred loan fees and costs.

Credit losses are charged off when management believes that the collectability of at least some portion of outstanding principal is unlikely.

These charge-offs are recorded as a reversal to, thereby reducing, the allowance for credit losses.

Subsequent recoveries of previously charged-off amounts, if any, are recorded as a provision to, thereby increasing, the allowance for credit losses.

The allowance for credit losses is maintained at a level to absorb expected credit losses over the contractual life, including consideration of prepayments.

Determining the adequacy of the allowance is complex and requires judgments that are inherently subjective, as it requires estimates that are susceptible to revision as additional information becomes available.

While the Company has determined an allowance for credit losses it considers appropriate, there can be no assurance that the allowance will be sufficient to absorb future losses.

The Company’s process for determining expected lifetime credit losses entails a loan-level, model-based approach and considers a broad range of information, including historical loss experience, current conditions, and reasonable and supportable forecasts.

Credit loss is estimated for all loans.

Accordingly, the Company has stratified the full loan population into segments sharing similar characteristics to perform the evaluation of the credit loss collectively.

The Company can also further stratify loans of similar types, risk attributes, and methods for credit risk monitoring.

The Company has determined loan pools based primarily on regulatory reporting codes, as the loans within each pool share similar risk characteristics and there is sufficient historical peer loss data from the FFIEC to provide statistically meaningful support in the models developed.

The Company further stratified the following portfolios as the loans in these pools have different repayment structures and credit risk characteristics:

Multifamily portfolio into traditional Multifamily loans and Manufactured Home Community (“MHC”) loans, CRE Non-Owner Occupied portfolio into traditional CRE Non-Owner Occupied loans and RV Park loans, and C&I portfolio into traditional C&I loans and SBA loans.

The Company also stratified C&I loans and consumer loans that do not require reserves, as the Company has third-party agreements in place to cover credit losses.

The Company has identified the following pools subject to an estimate of credit loss:

(1) 1-4 Family Construction;

(2) Other Construction;

(3) Farmland;

(4) Revolving Secured by 1-4 Family;

(5) Residential Secured by First Liens;

(6) Residential Secured by Junior Liens;

(7) Multifamily;

(8) Multifamily MHC;

(9) CRE Owner Occupied;

(10) CRE Non-Owner Occupied;

(11) CRE Non-Owner Occupied RV Park;

(12) Agriculture;

(14) C&I SBA;

(15) Consumer;

and (16) Municipal.

With the exception of the C&I SBA pool, the Company has determined, given its limited loss experience, that peer data and other external data to support loss history provides the best basis for its assessment of expected credit losses.

The Company believes that the use of peer loss data from March 31, 2004 through December 31, 2019 and January 31, 2022 through March 31, 2024 presents loss histories that appropriately reflect a full economic cycle, reflects asset-specific risk characteristics at each pool level identified, and includes a historical look-back period that is objective and reflective of future expected credit losses.

Loss data from 2020 and beyond was excluded from the data set to exclude pandemic-related data from the model.

During the three months ended September 30, 2024, the Company segregated RV Park loans from the CRE Non-Owner Occupied portfolio, as the Company identified a data source to provide sufficient historical peer loss data specific to RV Park loans.

This segregation now adjusts for differences in the risk characteristics and performance of RV Parks compared to standard CRE Non-Owner Occupied properties.

The Company used calculations of individual probability of default and loss given default on a loan-by-loan basis to derive an estimated loss rate.

This adjustment reduced the required reserves related to the RV Park pool by approximately $ 3.3 million.

The method for determining the estimate of lifetime credit losses includes, among other things, the following main components:

(i) the use of probability of default and loss given default assumptions under a discounted cash flow model;

(ii) a multi-scenario macroeconomic forecast;

(iii) an initial and reasonable and supportable forecast period of one year for all loan segments;

and (iv) a reversion period of one year using a linear transition method to historical loss rates.

Given the inherent limitations of a quantitative-only model, qualitative adjustments are included to factor in data points not captured from a quantitative analysis alone.

Qualitative criteria that can be considered includes, among other things, the following:

• Concentrations – the existence and effect of any concentrations of credit, and changes in the level of such concentrations;

• Volume – changes in the nature and volume of the portfolio and in the terms of the loans;

• Economic – changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments;

• Policy – changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses;

• Quality – changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and severity of adversely classified or graded loans;

• External – the effect of other external factors, such as competition and legal and regulatory requirements on the level of estimated credit losses in the Company’s loan portfolio.

Management reviews current information on a quarterly basis to assess the forecasted future economic impact for purposes of evaluating the adequacy of the ACL.

The forecasted direction and magnitude of change with respect to future economic conditions is then assessed against the estimate in the model.

Any changes resulting from the quarterly assessment are recorded in “Provision for credit losses” in the unaudited consolidated statements of income.

The Audit Committee of the board of directors reviews the adequacy of the allowance at least quarterly.

Accrued interest receivable is excluded from amortized cost of all financial instrument types and included in “Interest receivable and other assets” in the consolidated balance sheets.

Accrued interest receivable is not subject to an estimate for credit loss, as the Company has a policy to charge off accrued interest deemed uncollectible in a timely manner.

When a loan is placed on non-accrual status, which occurs within 90 days of a borrower becoming delinquent, interest previously accrued but not collected is reversed against current period income.

If an individual loan’s characteristics have deteriorated to below a range of the overall pool, the loan would be individually assessed.

Individually assessed loans are measured for credit loss based on one of the following methods:

(i) present value of future expected cash flows, discounted at the loan’s effective interest rate;

(ii) amount by which carrying value of the loan exceeds the loan’s observable market price;

or (iii) the fair value of the collateral, less estimated selling costs, if the loan is collateral dependent.

The Company applies the practical expedient and defines collateral dependent loans as those where the borrower is experiencing financial difficulty and on which payment is expected to be provided substantially through the operation or sale of the collateral.

Removing all references to Concepts Statements in the guidance is intended to

simplify the ASC and draw a distinction between authoritative and nonauthoritative literature.

ASU 2024-02 is effective January 1, 2026 for emerging growth companies electing not to opt out of the extended transition period and is not expected to have a significant impact on the Company’s consolidated financial statements.

On November 4, 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (“Subtopic 220-40”) :

Disaggregation of Income Statement Expenses (“ASU 2024-03”) and in January 2025 the FASB issued ASU 2025-01, Clarifying the Effective Date .

This standard responds to investor input by requiring public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to the financial statements.

This standard is effective for all entities that are subject to Subtopic 220-40, for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, but early adoption is permitted.

ASU 2024-03 is not expected to have a significant impact on the Company’s consolidated financial statements.

Fair Value of Assets and Liabilities

13 unchanged sentences

Changes in Fair Value Recorded In

September 30, 2024

March 31, 2025

Securities available-for-sale:

government agency securities, mortgage-backed securities, obligations of states and political subdivisions, collateralized mortgage obligations, and corporate bonds $ 97,111 $ — $ 97,111 $ — OCI

Derivatives – interest rate swap — — — — NI

December 31, 2024

1 unchanged sentence

government agency securities, mortgage-backed securities, obligations of states and political subdivisions, collateralized mortgage obligations, and corporate bonds $ 98,194 $ — $ 98,194 $ — OCI

Derivatives – interest rate swap 10 — 10 — NI

Available-for-sale securities are recorded at fair value on a recurring basis.

When available, quoted market prices (Level 1 inputs) are used to determine the fair value of available-for-sale securities.

If quoted market prices are not available,

management obtains 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 inputs).

If quoted market prices are not available, management obtains 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 inputs).

Level 2 securities include U.S.

2 unchanged sentences

In addition, values use discounted cash flow models and may include significant management judgment and estimation.

As of September 30, 2024 and December 31, 2023, there were no Level 1 available-for-sale securities and no transfers between Level 1 and Level 2 classifications for assets or liabilities measured at fair value on a recurring basis.

As of March 31, 2025 and December 31, 2024, there were no Level 1 available-for-sale securities and no transfers between Level 1 and Level 2 classifications for assets or liabilities measured at fair value on a recurring basis.

On a recurring basis, derivative financial instruments are recorded at fair value, which is based on the income approach using observable Level 2 market inputs, reflecting market expectations of future interest rates as of the measurement date.

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A similar credit risk adjustment, correlated to the credit standing of the counterparty, is made when collateral posted by the counterparty does not fully cover their liability to the Company.

There was no carrying value or fair value for interest rate swaps as of September 30, 2024.

There was no carrying value or fair value for interest rate swaps as of March 31, 2025 and December 31, 2024.

Certain financial assets may be measured at fair value on a non-recurring basis.

These assets are subject to fair value adjustments that result from the application of the lower of cost or fair value accounting or write-downs of individual assets, such as collateral dependent loans and other real estate owned.

As of September 30, 2024 and December 31, 2023, the carrying amount of assets measured at fair value on a non-recurring basis was immaterial to the Company.

As of March 31, 2025 and December 31, 2024, the carrying amount of assets measured at fair value on a non-recurring basis was immaterial to the Company.

Disclosures about Fair Value of Financial Instruments

Table 2.2 is a summary of fair value estimates for financial instruments as of September 30, 2024 and December 31, 2023.

Table 2.2 is a summary of fair value estimates for financial instruments as of March 31, 2025 and December 31, 2024.

The carrying amounts in Table 2.2 are recorded in the consolidated balance sheets under the indicated captions.

1 unchanged sentence

Fair Value Estimates for Financial Instruments

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

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

6 unchanged sentences

Loans held for investment, net of allowance for credit losses 3,582,595 3,512,114 Level 3 3,494,895 3,412,032 Level 3

FHLB stock and other investments 24,112 N/A N/A 21,801 N/A N/A

Interest rate swap — — Level 2 10 10 Level 2

Financial liabilities:

Interest rate swap $ — $ — Level 2 $ 10 $ 10 Level 2

Time deposits

1 unchanged sentence

Subordinated notes 73,932 73,481 Level 3 73,895 73,371 Level 3

Other borrowings — — Level 2 170,000 170,000 Level 2

The Company used the following methods and assumptions to estimate the fair value of its financial instruments at September 30, 2024 and December 31, 2023:

The Company used the following methods and assumptions to estimate the fair value of its financial instruments at March 31, 2025 and December 31, 2024:

Cash and cash equivalents and time deposits in banks :

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The allowance for credit losses is considered to be a reasonable estimate of loan discount for credit quality concerns.

FHLB stock and other investments :

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

Commitments to extend credit :

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The Company also invests in residential and commercial mortgage-backed securities, collateralized mortgage obligations issued or guaranteed by GSEs, and corporate bonds, as reflected in Tables 3.1 and 3.2.

A summary of the amortized cost and fair value related to securities held-to-maturity as of September 30, 2024 and December 31, 2023 is presented in Table 3.1.

Securities held-to-maturity had a $ 20.0 thousand allowance for credit losses as of September 30, 2024 and December 31, 2023.

A summary of the amortized cost and fair value related to securities held-to-maturity as of March 31, 2025 and December 31, 2024 is presented in Table 3.1.

Securities held-to-maturity, at amortized cost, had a $ 20.0 thousand allowance for credit losses as of March 31, 2025 and December 31, 2024.

Securities Held-to-Maturity

1 unchanged sentence

Gains (Losses)

September 30, 2024

March 31, 2025

Obligations of states and political subdivisions $ 2,585 $ — $ ( 310 ) $ 2,275

9 unchanged sentences

and (v) whether or not such securities have credit enhancements such as guarantees, contain a defeasance clause, or are pre-refunded by the issuers.

A summary of the amortized cost and fair value related to securities available-for-sale as of September 30, 2024 and December 31, 2023 is presented in Table 3.2.

Securities available-for-sale did not have an allowance for credit losses as of September 30, 2024 or December 31, 2023.

As of March 31, 2025 and December 31, 2024, the allowance for credit losses on held-to-maturity securities, at amortized cost, was $ 20.0 thousand.

The Company did not record an allowance for credit losses on available-for-sale securities as of March 31, 2025 or December 31, 2024.

A summary of the amortized cost and fair value related to securities available-for-sale as of March 31, 2025 and December 31, 2024 is presented in Table 3.2.

Securities available-for-sale did not have an allowance for credit losses as of March 31, 2025 or December 31, 2024.

Securities Available-for-Sale

1 unchanged sentence

Gains (Losses)

September 30, 2024

March 31, 2025

government agency securities $ 7,513 $ 147 $ ( 86 ) $ 7,574

11 unchanged sentences

Total available-for-sale $ 115,757 $ 159 $ ( 17,722 ) $ 98,194

The amortized cost and fair value of investment securities by contractual maturity at September 30, 2024 and December 31, 2023 are shown in Table 3.3.

The amortized cost and fair value of investment securities by contractual maturity at March 31, 2025 and December 31, 2024 are shown in Table 3.3.

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.

Contractual Maturities - Investment Securities

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

(in thousands) March 31, 2025 December 31, 2024

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

10 unchanged sentences

Total $ 2,585 $ 2,275 $ 113,642 $ 97,111 $ 2,720 $ 2,353 $ 115,757 $ 98,194

There were no purchases or sales of investment securities during the three and nine months ended September 30, 2024 and September 30, 2023.

Pledged investment securities are shown in Table 3.4.

There were no purchases or sales of investment securities during the three months ended March 31, 2025 and March 31, 2024.

Pledged Investment Securities

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

(in thousands) March 31, 2025 December 31, 2024

The State of California, securing deposits of public funds and borrowings $ 49,201 $ 49,477

1 unchanged sentence

Total pledged investment securities $ 93,983 $ 95,053

Table 3.5 details the gross unrealized losses and fair values aggregated by investment category and length of time that individual available-for-sale securities have been in a continuous unrealized loss position at September 30, 2024 and December 31, 2023.

Securities Available-for-Sale in Continuous Unrealized Loss Positions

1 unchanged sentence

Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss

September 30, 2024

March 31, 2025

government agency securities $ 2,183 $ ( 14 ) $ 3,750 $ ( 72 ) $ 5,933 $ ( 86 )

13 unchanged sentences

$ 2,316 $ ( 11 ) $ 91,330 $ ( 17,711 ) $ 93,646 $ ( 17,722 )

There were 145 and 149 available-for-sale securities in unrealized loss positions at September 30, 2024 and December 31, 2023, respectively.

As of September 30, 2024, the investment portfolio included 143 investment securities that had been in a continuous loss position for twelve months or more and two investment securities that had been in a loss position for less than twelve months.

There was one held-to-maturity security in a continuous unrealized loss position at September 30, 2024 and December 31, 2023, which had been in a continuous loss position for more than twelve months.

There were 147 available-for-sale securities in unrealized loss positions at both March 31, 2025 and December 31, 2024.

As of March 31, 2025, the investment portfolio included 141 investment securities that had been in a continuous loss position for twelve months or more and six investment securities that had been in a loss position for less than twelve months.

There was one held-to-maturity security in a continuous unrealized loss position at both March 31, 2025 and December 31, 2024, which at December 31, 2024 had been in a continuous loss position for more than twelve months.

Obligations issued or guaranteed by government agencies such as the GNMA and the SBA or GSEs under conservatorship such as the FNMA and the FHLMC, are guaranteed or sponsored by agencies of the U.S.

2 unchanged sentences

The Company’s investment in obligations of states and political subdivisions is deemed credit worthy after management’s comprehensive analysis of the issuers’ latest financial information, credit ratings by major credit agencies, and/or credit enhancements.

Non-Marketable Securities Included in Other Assets

Non-Marketable Securities

FHLB capital stock :

2 unchanged sentences

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

The Company held $ 15.0 million of FHLB stock at September 30, 2024 and December 31, 2023.

The Company held $ 15.0 million of FHLB stock at both March 31, 2025 and December 31, 2024.

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

Based on management’s analysis of the FHLB’s financial condition and certain qualitative factors, management determined that the FHLB stock was not impaired at September 30, 2024 or December 31, 2023.

Based on management’s analysis of the FHLB’s financial condition and certain qualitative factors, management determined that the FHLB stock was not impaired at March 31, 2025 or December 31, 2024.

Loans and Allowance for Credit Losses

3 unchanged sentences

Loans Outstanding

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

(in thousands) March 31, 2025 December 31, 2024

Commercial $ 2,941,201 $ 2,857,173

12 unchanged sentences

Loans held for investment, net of allowance for credit losses $ 3,582,595 $ 3,494,895

Commercial loans :

Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business.

Underwriting standards are designed to promote relationship banking rather than transactional banking.

Once it is determined that the borrower’s management possesses sound ethics and solid business acumen, the Company’s management examines current and projected cash flows to determine the ability of the borrower to repay its obligations as agreed.

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

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

Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee;

however, some short-term loans may be made on an unsecured basis.

In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Real estate loans :

8 unchanged sentences

With respect to construction loans that the Company may originate from time to time, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success.

Construction loans may be underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity

analysis of absorption and lease rates, and financial analysis of the developers and property owners.

Construction loans may be underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates, and financial analysis of the developers and property owners.

Construction loans are generally based upon estimates of costs and value associated with the completed project.

5 unchanged sentences

Residential real estate loans are underwritten based upon the borrower’s income, credit history, and collateral.

To monitor and manage residential loan risk, policies and procedures are developed and modified, as needed.

To monitor and manage residential loan risk, policies and procedures are developed and modified,

This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk.

5 unchanged sentences

This may be exacerbated by, among other things, industry changes, changes in the individual financial capacity of the business owner, general economic conditions, and changes in business cycles, as well as adverse weather conditions.

Commercial loans :

Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business.

Underwriting standards are designed to promote relationship banking rather than transactional banking.

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

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

Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee;

however, some short-term loans may be made on an unsecured basis.

Consumer loans :

31 unchanged sentences

Loans by Risk Category and Vintage

Amortized Cost Basis by Origination Year as of September 30, 2024

Amortized Cost Basis by Origination Year as of March 31, 2025

(in thousands) 2025 2024 2023 2022 2021 Prior Revolving Loans Revolving Converted to Term Total

50 unchanged sentences

Pass 1,054 2,042 7,032 11,467 6,960 17,373 — — 45,928

Watch 501 — 791 — — — — — 1,292

Total 1,555 2,042 7,823 11,467 6,960 17,373 — — 47,220

7 unchanged sentences

Pass 232,420 33,453 7,874 5,812 6 207 — — 279,772

Watch — 16 — — — — — — 16

Substandard — — 9 — — — — — 9

7 unchanged sentences

Typically, commercial borrowers with lines of credit are required to submit financial information with reporting intervals generally ranging from monthly to annually depending on credit size, risk, and complexity.

In addition, investor commercial real estate borrowers with loans exceeding a certain dollar threshold are usually required to submit rent rolls or property income statements annually.

All commercial borrowers with loans exceeding a certain dollar threshold are usually required to submit financials annually for review;

this includes business financial statements, rent rolls, property income statements, and tax returns.

Management monitors construction loans monthly and reviews consumer loans based on delinquency.

4 unchanged sentences

30-59 Days 60-89 Days Greater Than 90 Days Total Past Due Current Total Loans Receivable

September 30, 2024

March 31, 2025

Commercial $ 386 $ — $ — $ 386 $ 2,938,097 $ 2,938,483

19 unchanged sentences

Total $ 1,174 $ — $ — $ 1,174 $ 3,531,512 $ 3,532,686

There were no loans greater than 90 days past due and still accruing interest income as of September 30, 2024 or December 31, 2023.

No collateral dependent loans were in process of foreclosure at September 30, 2024 or December 31, 2023.

Non-accrual loans, segregated by class, as of September 30, 2024 and December 31, 2023 are shown in Table 4.4.

Nonaccrual Loans

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

There were no loans greater than 90 days past due and still accruing interest income as of March 31, 2025 or December 31, 2024.

No collateral dependent loans were in process of foreclosure at March 31, 2025 or December 31, 2024.

The Company had one collateral dependent commercial real estate loan outstanding as of March 31, 2025 and December 31, 2024 in the amounts of $ 1.7 million and $ 1.8 million, respectively, for which the borrower was experiencing financial difficulty.

Non-accrual loans, segregated by class, as of March 31, 2025 and December 31, 2024 are shown in Table 4.4.

Non-accrual Loans

(in thousands) March 31, 2025 December 31, 2024

Commercial $ 1,722 $ 1,750

1 unchanged sentence

Total non-accrual loans $ 1,765 $ 1,798

No interest income was recognized on non-accrual loans in the three and nine months ended September 30, 2024 or September 30, 2023.

Non-accrual real estate loans did not have an allowance for credit losses as of September 30, 2024.

No interest income was recognized on non-accrual loans in the three months ended March 31, 2025 or March 31, 2024.

Non-accrual real estate loans did not have an allowance for credit losses as of March 31, 2025.

Interest income can be recognized on non-accrual loans in cases where resolution occurs through a sale or full payment is received on the non-accrual loan.

The amount of foregone interest income related to non-accrual loans was $ 37.8 thousand and $ 115.2 thousand for the three and nine months ended September 30, 2024, respectively, as compared to $ 27.1 thousand and $ 62.3 thousand for the three and nine months ended September 30, 2023, respectively.

The amount of foregone interest income related to non-accrual loans was $ 35.2 thousand for the three months ended March 31, 2025, as compared to $ 39.2 thousand for the three months ended March 31, 2024.

Allowance for Credit Losses

1 unchanged sentence

Allowance for Credit Losses

(in thousands) Beginning Balance Effect of Adoption of ASC 326 Charge-offs Recoveries Provision (Benefit) Ending Balance

Three months ended September 30, 2024

Commercial $ 24,708 $ — $ — $ — $ 1,509 $ 26,217

Commercial land and development 72 — — — 17 89

Commercial construction 1,097 — — — 659 1,756

Residential construction 100 — — — ( 53 ) 47

Residential 195 — — — 89 284

Farmland 402 — — — 179 581

Secured 7,386 — ( 837 ) 53 ( 553 ) 6,049

Unsecured 214 — ( 5 ) 34 8 251

Consumer and other 1,232 — ( 59 ) 41 1,095 2,309

Total $ 35,406 $ — $ ( 901 ) $ 128 $ 2,950 $ 37,583

Allowance for Credit Losses (continued)

(in thousands) Beginning Balance Effect of Adoption of ASC 326 Charge-offs Recoveries Provision (Benefit) Ending Balance

Three months ended September 30, 2023

Commercial $ 27,553 $ — $ — $ — $ 348 $ 27,901

Commercial land and development 184 — — — 14 198

Commercial construction 1,212 — — — 8 1,220

Residential construction 217 — — — ( 102 ) 115

Residential 152 — — — ( 1 ) 151

Farmland 236 — — — 157 393

Secured 3,751 — ( 1,245 ) 219 736 3,461

Unsecured 209 — — — 4 213

Consumer and other 470 — ( 187 ) 207 ( 114 ) 376

Total $ 33,984 $ — $ ( 1,432 ) $ 426 $ 1,050 $ 34,028

Nine months ended September 30, 2024

(in thousands) Beginning Balance Charge-offs Recoveries Provision (Benefit) Ending Balance

Three months ended March 31, 2025

Commercial $ 25,864 $ — $ — $ 1,163 $ 27,027

8 unchanged sentences

Total $ 37,791 $ ( 816 ) $ 99 $ 2,150 $ 39,224

Nine months ended September 30, 2023

Three months ended March 31, 2024

Commercial $ 29,015 $ — $ — $ ( 120 ) $ 28,895

7 unchanged sentences

Consumer and other 378 ( 71 ) 93 260 660

Unallocated 45 ( 45 ) — — — —

Total $ 34,431 $ ( 1,103 ) $ 275 $ 1,050 $ 34,653

3 unchanged sentences

Unfunded Loan Commitment Reserves

Three months ended Nine months ended

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

Three months ended

(in thousands) March 31, 2025 March 31, 2024

Balance at beginning of period $ 747 $ 1,247

Effect of adoption of ASC 326 — — — 1,092

Provision ( 200 ) — ( 300 ) 330

Provision (benefit)

( 250 ) ( 150 )

Balance at end of period $ 497 $ 1,097

Pledged Loans

The Company’s FHLB line of credit is secured under terms of a collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $ 1.8 billion and $ 1.7 billion at September 30, 2024 and December 31, 2023, respectively.

In addition, the Company pledges eligible tenants in common loans, which totaled $ 1.2 billion at September 30, 2024 and December 31, 2023, to secure its borrowing capacity with the Federal Reserve Discount Window.

See Note 6, Long Term Debt and Other Borrowings, for further discussion of these borrowings.

The Company’s FHLB line of credit is secured under terms of a collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $ 1.9 billion at March 31, 2025 and December 31, 2024.

In addition, the Company pledges eligible tenants in common loans, which totaled $ 1.2 billion at March 31, 2025 and December 31, 2024, to secure its borrowing capacity with the Federal Reserve Discount Window.

See Note 6, Subordinated Notes and Other Borrowings, for further discussion of these borrowings.

Interest-Bearing Deposits

Table 5.1 shows the composition of interest-bearing deposits as of September 30, 2024 and December 31, 2023.

Table 5.1 shows the composition of interest-bearing deposits as of March 31, 2025 and December 31, 2024.

Interest-Bearing Deposits

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

(in thousands) March 31, 2025 December 31, 2024

Interest-bearing transaction accounts $ 295,633 $ 315,217

5 unchanged sentences

Total interest-bearing deposits $ 2,802,702 $ 2,635,365

Time deposits totaled $ 491.0 million and $ 466.6 million as of September 30, 2024 and December 31, 2023, respectively.

Scheduled maturities of time deposits as of September 30, 2024 for the next five years are shown in Table 5.2.

Time deposits totaled $ 801.4 million and $ 670.2 million as of March 31, 2025 and December 31, 2024, respectively.

Scheduled maturities of time deposits as of March 31, 2025 for the next five years are shown in Table 5.2.

Scheduled Maturities of Time Deposits

6 unchanged sentences

The Company considers the reciprocal deposits to be in-market deposits, as distinguished from traditional out-of-market brokered deposits.

There were no one-way deposits at September 30, 2024 or December 31, 2023.

The composition of network deposits as of September 30, 2024 and December 31, 2023 is shown in Table 5.3.

There were no one-way deposits at March 31, 2025 or December 31, 2024.

The composition of network deposits as of March 31, 2025 and December 31, 2024 is shown in Table 5.3.

Network Deposits

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

(in thousands) March 31, 2025 December 31, 2024

CDARS $ 18,679 $ 19,292

1 unchanged sentence

Total network deposits $ 695,112 $ 693,745

Table 5.4 presents interest expense recognized on interest-bearing deposits for the periods ended September 30, 2024 and 2023.

Table 5.4 presents interest expense recognized on interest-bearing deposits for the periods ended March 31, 2025 and 2024.

Interest Expense Recognized on Interest-Bearing Deposits

Three months ended Nine months ended

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

Three months ended

(in thousands) March 31, 2025 March 31, 2024

Interest-bearing transaction accounts $ 1,112 $ 1,126

2 unchanged sentences

Time accounts, $ 250 or more

2,387 3,865 8,622 8,462

Other time accounts 3,873 1,545

Total interest expense on interest-bearing deposits $ 21,948 $ 19,511

Long Term Debt and Other Borrowings

Subordinated Notes and Other Borrowings

Subordinated notes :

2 unchanged sentences

The subordinated notes have a maturity date of September 1, 2032 and bear interest, payable semi-annually, at the rate of 6.00 % per annum until September 1, 2027.

On that date, the interest rate will be adjusted to float at a rate equal to the three-month Term SOFR plus 329.0 basis points ( 7.93 % as of September 30, 2024) until maturity.

On that date, the interest rate will be adjusted to float at a rate equal to the three-month Term SOFR plus 329.0 basis points ( 7.58 % as of March 31, 2025) until maturity.

The notes include a right of prepayment, on or after August 17, 2027 or, in certain limited circumstances, before that date.

2 unchanged sentences

Eligible amounts will be phased out by 20% per year beginning five years before the maturity date of the notes.

Debt issuance costs incurred in conjunction with the notes were $ 1.5 million, of which $ 0.3 million has been amortized as of September 30, 2024.

Debt issuance costs incurred in conjunction with the notes were $ 1.5 million, of which $ 0.4 million has been amortized as of March 31, 2025.

The Company reflects debt issuance costs as a direct deduction from the face of the note.

The debt issuance costs are amortized into interest expense through the maturity period.

At September 30, 2024 and December 31, 2023, the carrying value of the Company’s subordinated notes outstanding was $ 73.9 million and $ 73.7 million, respectively.

At March 31, 2025 and December 31, 2024, the carrying value of the Company’s subordinated notes outstanding was $ 73.9 million.

Other borrowings :

The Company entered into an agreement with the FHLB which granted the FHLB a blanket lien on certain loans receivable as collateral for a borrowing line.

The Company’s total financing availability is based on the dollar

volume of qualifying loan collateral.

The Company’s total financing availability is based on the dollar volume of qualifying loan collateral.

The Company’s total financing availability with the FHLB is decreased by outstanding borrowings and letters of credit (“LCs”) issued on behalf of the Company, as shown in Table 6.1.

Financing Availability with the FHLB

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

(in thousands) March 31, 2025 December 31, 2024

Total financing ability from the FHLB $ 1,276,072 $ 1,212,209

4 unchanged sentences

Available borrowing capacity with the FHLB $ 544,572 $ 510,709

At September 30, 2024 and December 31, 2023, the Company had the ability to borrow from the Federal Reserve Discount Window.

At September 30, 2024 and December 31, 2023, the borrowing capacity under this arrangement was $ 858.3 million and $ 770.6 million, respectively.

There were no amounts outstanding at September 30, 2024 or December 31, 2023.

At March 31, 2025 and December 31, 2024, the Company had the ability to borrow from the Federal Reserve Discount Window.

The borrowings were available at an interest rate of 4.50 % as of March 31, 2025.

At March 31, 2025 and December 31, 2024, the borrowing capacity under this arrangement was $ 856.4 million and $ 862.1 million, respectively.

There were no amounts outstanding at March 31, 2025 or December 31, 2024.

The borrowing line is secured by certain liens on the Company’s loans and certain available-for-sale securities.

At September 30, 2024 and December 31, 2023, the Company had five unsecured federal funds lines of credit with its correspondent banks totaling $ 175.0 million.

There were no amounts outstanding at September 30, 2024 or December 31, 2023.

At March 31, 2025 and December 31, 2024, the Company had five unsecured federal funds lines of credit totaling $ 175.0 million with five of its correspondent banks.

The borrowings were available at interest rates ranging from 4.50 % to 5.70 % as of March 31, 2025.

There were no amounts outstanding at March 31, 2025 or December 31, 2024.

Shareholders’ Equity

5 unchanged sentences

However, under the two-class method, the difference in EPS is not significant for these participating securities.

Three months ended Nine months ended

(in thousands, except share count and earnings per common share) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Three months ended

(in thousands, except share count and earnings per common share) March 31, 2025 March 31, 2024

Net income $ 13,111 $ 10,631

5 unchanged sentences

Diluted EPS $ 0.62 $ 0.62

The Company did not have any anti-dilutive shares at September 30, 2024 or September 30, 2023.

The Company did not have any anti-dilutive shares at March 31, 2025 or March 31, 2024.

(b) Dividends

On July 18, 2024, the board of directors declared a $ 0.20 per common share dividend, totaling $ 4.3 million.

The board of directors declared on January 16, 2025, and the Company subsequently paid, a cash dividend of $ 0.20 per share, totaling $ 4.3 million.

6 unchanged sentences

Shares granted to non-employee directors vested immediately upon grant, while shares granted to certain employees, officers, and executives vest ratably over three , five , or seven years (as defined in the respective agreements).

Since the completion of the IPO, the Company has granted RSAs under the Equity Incentive Plan to certain executives, which vest ratably over three or five years (as defined in the respective agreements), and to directors, which vest over one year .

directors, which vest over one year .

All RSAs were granted at the fair value of common stock at the time of the award.

The RSAs are considered fixed awards, as the number of shares and fair value are known at the date of grant and the fair value at the grant date is amortized over the service period.

Non-cash stock compensation expense recognized for the three months ended September 30, 2024 and 2023 was $ 0.3 million and $ 0.2 million, respectively.

Non-cash stock compensation expense recognized for the nine months ended September 30, 2024 and 2023 was $ 0.9 million and $ 0.7 million, respectively.

At September 30, 2024 and 2023, there were 137,457 and 82,324 unvested restricted shares, respectively.

As of September 30, 2024, there was approximately $ 2.3 million of unrecognized compensation expense related to the 137,457 unvested restricted shares.

For both the three months ended March 31, 2025 and the three months ended March 31, 2024, $ 0.3 million of non-cash stock compensation expense was recognized.

As of March 31, 2025, there was approximately $ 2.1 million of unrecognized compensation expense related to the 111,786 unvested restricted shares.

The holders of unvested RSAs are entitled to dividends at the same per-share ratio as holders of common stock.

Tax benefits for dividends paid on unvested RSAs are recorded as tax benefits in the consolidated statements of income with a corresponding decrease to current taxes payable.

Such tax benefits are expected to be recognized over the weighted average term remaining on the unvested restricted shares of 3.14 years as of September 30, 2024.

The impact of tax benefits for dividends paid on unvested restricted stock on the Company’s unaudited consolidated statements of income for the three and nine months ended September 30, 2024 and 2023 was immaterial.

Such tax benefits and related expense are expected to be recognized over the weighted average term remaining on the unvested restricted shares of 2.82 years as of March 31, 2025.

The impact of tax benefits for dividends paid on unvested restricted stock on the Company’s unaudited consolidated statements of income for the three months ended March 31, 2025 and March 31, 2024 was immaterial.

Table 7.2 summarizes activity related to restricted shares for the periods indicated.

Restricted Share Activity

For the three months ended September 30,

For the nine months ended September 30,

2024 2023 2024 2023

Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value

Unvested Restricted Share Activity

For the three months ended March 31,

Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value

Beginning of the period balance 120,577 $ 21.36 69,338 $ 20.53

11 unchanged sentences

The Company uses the same credit policies in making commitments to originate loans and lines of credit as it does for on-balance sheet instruments, including obtaining collateral at exercise of the commitment.

The contractual amounts of unfunded loan commitments and standby letters of credit not reflected in the unaudited consolidated balance sheets at the dates indicated are presented in Table 8.1.

The contractual

amounts of unfunded loan commitments and standby letters of credit not reflected in the unaudited consolidated balance sheets at the dates indicated are presented in Table 8.1.

Unfunded Loan Commitments and Standby Letters of Credit

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

(in thousands) March 31, 2025 December 31, 2024

Commercial lines of credit $ 215,712 $ 230,063

7 unchanged sentences

The Company records an allowance for credit losses on unfunded loan commitments at the consolidated 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 historical loss rates determined for pooled funded loans.

The allowance for credit losses on unfunded commitments totaled $ 0.9 million as of September 30, 2024 and $ 1.2 million as of December 31, 2023, which is recorded in “Interest payable and other liabilities” in the unaudited consolidated balance sheets.

The allowance for credit losses on unfunded commitments totaled $ 0.5 million as of March 31, 2025 and $ 0.7 million as of December 31, 2024, which is recorded in “Interest payable and other liabilities” in the unaudited consolidated balance sheets.

Concentrations of credit risk :

1 unchanged sentence

Although the Company has a diversified loan portfolio, a substantial portion is secured by commercial and residential real estate.

In management’s judgment, a concentration of loans exists in real estate related loans, which represented approximately 86.42 % of the Company’s loan portfolio at September 30, 2024 and 92.30 % of the Company’s loan portfolio at December 31, 2023.

In management’s judgment, a concentration of loans exists in real estate related loans, which represented approximately 86.62 % of the Company’s loan portfolio at March 31, 2025 and 86.41 % of the Company’s loan portfolio at December 31, 2024.

Although management believes such concentrations have no more than the normal risk of collectability, a substantial decline in the economy in general, or a decline in real estate values in the Company’s primary market areas in particular, could have an adverse impact on the collectability of these loans.

1 unchanged sentence

Deposit concentrations :

At September 30, 2024, the Company had 101 deposit relationships that exceeded $ 5.0 million each, totaling $ 2.1 billion, or approximately 60.58 % of total deposits.

The Company’s largest single deposit relationship at September 30, 2024 totaled $ 275.0 million, or approximately 8.09 % of total deposits.

At March 31, 2025, the Company had 104 deposit relationships that exceeded $ 5.0 million each, totaling $ 2.3 billion, or approximately 60.87 % of total deposits.

The Company’s largest single deposit relationship at March 31, 2025 totaled $ 400.0 million, or approximately 10.71 % of total deposits.

Management maintains the Company’s liquidity position and lines of credit with correspondent banks to mitigate the risk of large withdrawals by this group of large depositors.

1 unchanged sentence

The Company is subject to legal proceedings and claims which arise in the ordinary course of business.

In the opinion of management, the amount of ultimate liability with respect to such actions will not materially affect the consolidated financial position or results of operations of the Company.

In the opinion of management, the amount of ultimate liability with respect to such actions will not materially adversely affect the consolidated financial position or results of operations of the Company.

Correspondent banking agreements :

The Company maintains funds on deposit with other FDIC-insured financial institutions under correspondent banking agreements.

Uninsured deposits through these agreements totaled approximately $ 39.0 million and $ 22.3 million at September 30, 2024 and December 31, 2023, respectively.

Uninsured deposits through these agreements totaled approximately $ 37.8 million and $ 29.2 million at March 31, 2025 and December 31, 2024, respectively.

Equity investments :

The Company has committed to and is invested in a limited number of venture funds.

As of March 31, 2025 and December 31, 2024, the estimated remaining commitment for these funds totaled $ 14.6 million and $ 10.8 million, respectively.

Litigation Matters

The Company is subject to legal proceedings and claims which arise in the ordinary course of business.

In the opinion of management, the amount of ultimate liability with respect to such actions will not materially affect the consolidated financial position or results of operations of the Company.

Subsequent Events

On October 17, 2024, the board of directors of the Company declared a cash dividend of $ 0.20 per common share, payable on November 12, 2024 to shareholders of record as of November 4, 2024.

On April 17, 2025, the board of directors of the Company declared a cash dividend of $ 0.20 per common share, which the Company expects to pay on May 12, 2025 to shareholders of record as of May 5, 2025.

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