HANMI FINANCIAL CORP
For the period ended Mar 31, 2025. Filed May 9, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 9, 2025
HAFC$32.68+0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-04.
0000950170-24-120861
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0000950170-25-067856
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsForward-Looking StatementsCritical Accounting PoliciesExecutive OverviewNet Interest IncomeCredit Loss ExpenseNoninterest IncomeNoninterest ExpenseIncome Tax ExpenseSecuritiesLoans ReceivableIndustryLoan Quality IndicatorsBorrowings and Subordinated DebenturesCapital Resources and LiquidityOff-Balance Sheet ArrangementsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 164 previous paragraphs and 153 current paragraphs.
69 unchanged; 35 reworded; 48 added; 51 removed; 9 previous and 1 current paragraphs rearranged.
Tables are not compared: 27 previous and 23 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (48)
Current report
the imposition of tariffs or other domestic or international governmental policies;
Current report
We adopted the CECL methodology, as detailed in ASU 2016-13, on January 1, 2020. Effective January 1, 2025 we changed our ACL methodology. We have transitioned certain qualitative factors considered prior to January 1, 2025, to quantitative factors. The transition from qualitative factors to quantitative factors was based upon the availability of certain data relative to the ACL model previously used. Qualitative factors transitioned to quantitative factors effective January 1, 2025 included market and industry specific data, trends relating to credit quality, delinquency, and nonperforming and adversely rated loans.
Current report
In addition, the Company previously used a Probability of Default /Loss Given Default (PD/LGD) methodology to determine the allowance for credit losses. Following a periodic review of its credit loss estimation process, the Company concluded that a historical loss rate approach, adjusted for current conditions and reasonable and supportable forecasts, more appropriately reflects the expected credit losses for its loan portfolio. This change is considered a change in accounting estimate resulting from a change in methodology and assumptions, and is accounted for prospectively in accordance with ASC 250-10-45-17 through 45-18.
Current report
The change in methodology did not have a material impact to the Company’s operating results and financial condition. The provision for credit losses for the quarter ended March 31, 2025 reflects this change in estimate.
Current report
Our allowance for credit losses incorporates a variety of risk considerations, both quantitative and qualitative, that management believes is appropriate to estimate lifetime credit losses at each reporting date. Quantitative factors include the general economic forecast in our markets, risk ratings, delinquency trends, collateral values, changes in nonperforming loans, and other factors.
Current report
We use qualitative factors to adjust the allowance calculation for risks not considered by the quantitative calculations. Qualitative factors considered in our methodologies include, concentrations of credit, changes in lending management and staff, and quality of the loan review system.
Current report
The Company reviews baseline and alternative economic scenarios from Moody’s (previously known as Moody’s Analytics, a subsidiary of Moody’s Corporation) for consideration in the quantitative portion of our analysis of the allowance for credit losses. Moody’s publishes a baseline forecast that represents the estimate of the most likely path for the United States economy through the current business cycle (50% probability that economic conditions will be worse and 50% probability that economic conditions will be better) as well as alternative scenarios to examine how different types of shocks will affect the future performance of the United States economy.
Current report
The Company utilizes a midpoint approach of multiple forward-looking scenarios to incorporate losses from a baseline, upside (stronger near-term growth) and downside (slower near-term growth) economy. As a result, the upside and downside scenarios each receive a weight of 30%, and the baseline receives a weight of 40%.
Current report
Certain quantitative and qualitative factors used to estimate credit losses and establish an allowance for credit losses are subject to uncertainty. The adequacy of our allowance for credit losses is sensitive to changes in current and forecasted economic conditions that may affect the ability of borrowers to make contractual payments as well as the value of the collateral securing such payments.
Current report
Although management believes it uses the best information available to establish the allowance for credit losses, future adjustments to the allowance for credit losses may be necessary and the Company’s results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.
Current report
In addition, because future events affecting borrowers and collateral cannot be predicted without uncertainty, the existing allowance for credit losses may not be adequate or increases may be necessary should the quality of any loans deteriorate as a result of the factors discussed. Any material increase in the allowance for credit losses would adversely impact the Company's financial condition and results of operations.
Current report
The following are the key macroeconomic variable inputs employed in the determination of the allowance for credit losses at March 31, 2025 and December 31, 2024:
Current report
(1) The midpoint approach of the Moody's baseline, upside, and downside scenarios was used for the unemployment rate, GDP growth rate, and CRE price index forecasts for the period ended March 31, 2025.
Current report
(2) The Moody's Baseline scenario was used for the unemployment rate forecast for period ended December 31, 2024.
Current report
(3) The Moody's alternative scenarios 2 and 3 (equally weighted) were used for the GDP growth rate forecast for the period ended December 31, 2024.
Current report
Adverse changes in management’s assessment of the assumptions and key inputs used to determine the allowance for credit losses could lead to increases in the allowance through additional provisions for credit losses. If actual losses and conditions differ materially from the assumptions used to determine the allowance for credit losses, our actual credit losses could differ materially from management’s estimates.
Current report
A sensitivity analysis of our allowance for credit losses was performed by estimating credit losses allocating more weight on the Moody’s S2 scenario, which has a more negative outlook on the economy, compared with the Moody’s baseline and S1 scenarios. The S2 scenario assumes elevated market interest rates, which weakens credit sensitive spending more than anticipated. In addition, the combination of tariffs, rising inflation, deportations, global political unrest and tensions, and reduced credit availability could cause the economy to fall into a mild recession in 2025. Incorporating key macroeconomic inputs from Moody’s S2 projected scenario in our calculation resulted in additional allowance for credit losses of approximately $2.4 million, compared with the results using the midpoint approach of Moody’s baseline, upside, and downside scenarios as of March 31, 2025.
Current report
Management's reviews consider the results of each sensitivity analysis when evaluating the qualitative factor adjustments. While management believes that it has established adequate allowances for lifetime credit losses on loans, actual results may prove different, and could be material. Management monitors the performance of the assumptions, key inputs and various scenarios on an ongoing basis to ensure their effective application in the estimate of the allowance for credit losses.
Current report
Additional significant financial highlights include:
Current report
Loans receivable increased by $30.4 million, or 0.5%, to $6.21 billion as of March 31, 2025, compared with $6.18 billion as of December 31, 2024. The net increase was due to loan production of $345.9 million, offset by payoffs, loan sales, and prepayments of $315.1 million.
Current report
Deposits were $6.62 billion at March 31, 2025 compared with $6.44 billion at December 31, 2024 as money market and savings deposits and time deposits increased by $140.4 million and $72.8 million, respectively, while non-interest bearing demand deposits decreased by $30.0 million.
Current report
Return on average assets and return on average stockholders’ equity for the quarter ended March 31, 2025 were 0.94% and 8.92%, respectively, as compared with 0.81% and 7.90%, respectively, for the quarter ended March 31, 2024.
Current report
Loans receivable include loans held for sale and exclude the allowance for credit losses. Nonaccrual loans receivable are included in the average loans receivable balance.
Current report
Securities average yield is calculated on a fully taxable equivalent basis using the current statutory federal tax rate of 21%.
Current report
Loans receivable include loans held for sale and exclude the allowance for credit losses. Nonaccrual loans receivable are included in the average loans receivable balance.
Current report
Securities average yield is calculated on a fully taxable equivalent basis using the current statutory federal tax rate of 21%.
Current report
For the three months ended March 31, 2025 and 2024, net interest income was $55.1 million and $50.7 million, respectively. The increase of $4.4 million was primarily due to a decrease in interest expense. The net interest spread and net interest margin, on a taxable equivalent basis, for the quarter ended March 31, 2025, were 1.70% and 3.02%, respectively, compared to 1.28% and 2.78%, respectively, for the same period in 2024. Interest and dividend income decreased $0.3 million, or 0.3%, to $99.3 million for the three months ended March 31, 2025 from $99.6 million for the same period in 2024. Interest expense decreased $4.8 million, or 9.8%, to $44.2 million for the three months ended March 31, 2025 from $48.9 million for the same period in 2024 primarily due to decreases in deposit rates.
Current report
The average balance of interest earning assets increased $57.9 million, or 0.8%, to $7.38 billion for the three months ended March 31, 2025, from $7.33 billion for the three months ended March 31, 2024. The average balance of loans increased $51.6 million, or 0.8%, to $6.19 billion for the three months ended March 31, 2025, from $6.14 billion for the three months ended March 31, 2024. The average balance of securities was $1.0 billion for the three months ended March 31, 2025 and 2024. The average balance of interest-bearing deposits at other banks decreased $25.7 million, or 12.7%, to $176.0 million for the three months ended March 31, 2025, from $201.7 million for the three months ended March 31, 2024.
Current report
For the three months ended March 31, 2025 and 2024, noninterest income was $7.7 million. The $0.5 million increase in gain on sale of SBA loans was offset by a $0.3 million decrease in gain on sale of mortgage loans and $0.2 million decrease in service charges on deposit accounts.
Current report
During the first quarter of 2025, the Company sold $10.0 million of residential loans, recognizing a net gain of $0.2 million, and sold $32.2 million of SBA loans, recognizing a net gain of $2.0 million. During the first quarter of 2024, the Company sold $29.7 million of residential loans, recognizing a net gain of $0.4 million, and sold $25.6 million of SBA loans, recognizing a net gain of $1.5 million. Trade premiums on SBA loan sales were 7.82% and 7.23% for the three months ended March 31, 2025 and 2024, respectively.
Current report
For the three months ended March 31, 2025, noninterest expense was $35.0 million, a decrease of $1.4 million, or 4.0%, compared with $36.4 million for the same period in 2024. The decrease was mainly attributed to a $0.6 million decrease in salaries and employee benefits, a $0.4 million decrease in professional fees, and a $0.3 million decrease in advertising and promotion. The decrease in salaries and employee benefits was mainly attributed to an increase in capitalized loan origination costs resulting from an increase in loan originations for the three months ended March 31, 2025 compared to the same period in 2024. Professional fees decreased $0.4 million for the three months ended March 31, 2025 due to the completion of a loan system implementation in 2024. Advertising and promotion decreased $0.3 million due to a decrease in deposit marketing campaign expenses.
Current report
Income tax expense was $7.4 million and $6.6 million, representing an effective income tax rate of 29.6% and 30.2% for the three months ended March 31, 2025 and 2024, respectively.
Current report
Special mention loans were $118.4 million and $139.6 million at March 31, 2025 and December 31, 2024, respectively. The $21.2 million decrease in the first quarter of 2025 included loan upgrades of $20.5 million and amortization/paydowns of $0.9 million, offset by additions of $0.2 million. The increase in loan upgrades was primarily attributable to a $18.9 million loan upgrade of a commercial and industrial loan. The $3.0 million decrease in the first quarter of 2024 included upgrades to pass loans of $1.5 million, downgrades to classified loans of $0.8 million, and paydowns and payoffs of $1.4 million, offset by downgrades from pass loans of $0.7 million. The upgrades to pass loans were primarily attributable to a $1.5 million retail loan and downgrades to classified consisted of two SBA commercial real estate retail loans for $0.8 million.
Current report
Classified loans were $46.5 million and $25.7 million at March 31, 2025 and December 31, 2024, respectively. The $20.8 million increase in classified loans for the three months ended March 31, 2025 resulted from $22.8 million of loan downgrades and $3.4 million of equipment financing downgrades. The increase in loan downgrades was primarily the result of a $20.0 million commercial real estate office loan designated as nonaccrual. Additions were offset by $2.7 million of equipment financing charge-offs, $1.1 million of payoffs, $1.0 million of amortization and paydowns, $0.3 million of loan charge-offs and $0.3 million of loan upgrades. The $7.7 million decrease in the first quarter of 2024 was primarily driven by paydowns and payoffs of $9.4 million, and charge-offs of $1.9 million, offset by new downgrades to classified loans of $3.6 million. The paydowns and payoffs during the three months ended March 31, 2024 were mainly attributed to payoffs of a $4.7 million commercial real estate industrial loan and a $1.2 million commercial real estate office loan, and a $0.9 million paydown on a previously mentioned nonperforming commercial and industrial loan in the health-care industry.
Current report
The modified loans above were current at March 31, 2025.
Current report
The table above includes two retail commercial loans with an amortized cost of $13.5 million that were modified during the three months ended March 31, 2025.
Current report
During the three months ended March 31, 2025, there were no payment defaults on loans modified within the preceding 12 months.
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Removed paragraphs (51)
Previous report
Forward-Looking Statements
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changes in consumer spending, borrowing and savings habits;
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our ability to enter new markets successfully and capitalize on growth opportunities;
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Critical Accounting Policies
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Executive Overview
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Financial results include the following:
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For the nine months ended September 30, 2024, net income was $44.5 million, or $1.47 per diluted share, compared to $61.4 million, or $2.01 per diluted share, for the same period a year ago. The decrease in net income was primarily driven by a decrease in net interest income of $18.8 million, a $3.3 million decrease in noninterest income, and a $5.5 million increase in noninterest expense, offset by decreases in credit loss expense of $3.7 million and income tax expense of $6.9 million. Credit loss expense for the nine months of 2024 was $3.5 million compared to a $7.2 million for the same period a year ago. Credit loss expense for the nine months of 2024 consisted of a $4.0 million provision for loan losses, offset by a $0.5 million recovery for off-balance sheet items. Credit loss expense for the first nine months of 2023 included a $7.9 million provision for loan losses, offset by a $0.7 million recovery for off-balance sheet items.
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Other financial highlights include the following:
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Results of Operations
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Net Interest Income
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For the three months ended September 30, 2024 and 2023, net interest income was $50.1 million and $54.9 million, respectively. The net interest spread and net interest margin, on a taxable equivalent basis, for the quarter ended September 30, 2024, were 1.19% and 2.74%, respectively, compared to 1.64% and 3.03%, respectively, for the same period in 2023. Interest and dividend income increased $6.3 million, or 6.7%, to $100.4 million for the three months ended September 30, 2024 from $94.1 million for the same period in 2023, primarily due to higher average interest-earning asset yields, and an increase in the average balance of loans and securities. Interest expense increased $11.1 million, or 28.4%, to $50.4 million for the three months ended September 30, 2024 from $39.2 million for the same period in 2023 primarily due to increases in deposit rates and average deposit balances and, to a lesser extent, an increase in the cost of borrowings.
Previous report
The average balance of interest earning assets increased $93.0 million, or 1.3%, to $7.30 billion for the three months ended September 30, 2024, from $7.20 billion for the three months ended September 30, 2023. The average balance of loans increased $196.9 million, or 3.3%, to $6.11 billion for the three months ended September 30, 2024, from $5.92 billion for the three months ended September 30, 2023. The average balance of securities increased $30.6 million, or 3.2%, to $986.0 million for the three months ended September 30, 2024, from $955.5 million for the three months ended September 30, 2023. The average balance of interest-bearing deposits at other banks decreased $134.5 million, or 42.4%, to $183.0 million for the three months ended September 30, 2024, from $317.5 million for the three months ended September 30, 2023.
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For the nine months ended September 30, 2024 and 2023, net interest income was $149.3 million and $168.1 million, respectively. The net interest spread and net interest margin, on a taxable equivalent basis, for the nine months ended September 30, 2024, were 1.21% and 2.74%, respectively, compared to 1.84% and 3.14%, respectively, for the same period in 2023. Interest and dividend income increased $26.5 million, or 9.7%, to $298.7 million for the nine months ended September 30, 2024 from $272.1 million for the same period in 2023, primarily due to higher average interest-earning asset yields and an increase in the average balance of loans. Interest expense increased $45.3 million, or 43.6%, to $149.3 million for the nine months ended September 30, 2024 from $104.0 million for the same period in 2023, primarily due to increases in deposit rates and average deposit balances and, to a lesser extent, an increase in the cost of borrowings.
Previous report
The average balance of interest earning assets increased $129.7 million, or 1.8%, to $7.30 billion for the nine months ended September 30, 2024, from $7.17 billion for the nine months ended September 30, 2023. The average balance of loans increased $179.7 million, or 3.0%, to $6.11 billion for the nine months ended September 30, 2024, from $5.93 billion for the nine months ended September 30, 2023. The average balance of securities increased $9.3 million, or 1.0%, to $978.4 million for the nine months ended September 30, 2024, from $969.1 million for the nine months ended September 30, 2023. The average balance of interest-bearing deposits at other banks decreased $59.3 million, or 23.9%, to $188.3 million for the nine months ended September 30, 2024, from $247.6 million for the nine months ended September 30, 2023.
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The average yield on interest-earning assets, on a taxable equivalent basis, increased 39 basis points to 5.47% for the nine months ended September 30, 2024, from 5.08% for the nine months ended September 30, 2023. The average yield on loans increased to 6.00% for the nine months ended September 30, 2024, from 5.63% for the nine months ended September 30, 2023. The average yield on securities, on a taxable equivalent basis, increased to 2.17% for the nine months ended September 30, 2024, from 1.73% for the nine months ended September 30, 2023. The average yield on interest-bearing deposits in other banks increased 29 basis points to 5.16% for the nine months ended September 30, 2024, from 4.87% for the nine months ended September 30, 2023.
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The average balance of interest-bearing liabilities increased $397.8 million, or 9.3%, to $4.69 billion for the nine months ended September 30, 2024 compared with $4.29 billion for the nine months ended September 30, 2023. The average balances of time deposits and money market and savings accounts increased $106.9 million and $342.3 million, respectively, offset partially by decreases in interest-bearing demand deposits and borrowings of $15.8 million and $36.1 million, respectively.
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The average cost of interest-bearing liabilities was 4.26% and 3.24% for the nine months ended September 30, 2024 and 2023, respectively. The average cost of interest-bearing deposits increased 104 basis points to 4.23% for the nine months ended September 30, 2024, compared with 3.19% for the nine months ended September 30, 2023. The average cost of time deposits increased 107 basis points to 4.74% for the nine months ended September 30, 2024 compared with 3.67% for the nine months ended September 30, 2023. The average cost of money market and savings accounts increased 111 basis points to 3.74% for the nine months ended September 30, 2023 compared with 2.63% for the nine months ended September 30, 2023. The average cost of subordinated debentures increased to 5.06% for the nine months ended September 30, 2024 compared with 4.97% for the nine months ended September 30, 2023. The average cost of borrowings increased 104 basis points to 4.31% for the nine months ended September 30, 2024 compared with 3.27% for the nine months ended September 30, 2023.
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Credit Loss Expense
Previous report
For the third quarter of 2024, the Company recorded $2.3 million of credit loss expense, comprised of a $2.3 million provision for loan losses. There was no provision recorded for off-balance sheet items. For the same period in 2023, the Company recorded $5.2 million of credit loss expense, comprised of a $5.2 million provision for loan losses. There was no provision for off-balance sheet items. The decrease in credit loss expense was primarily due to a reduction in net charge-offs during the third quarter of 2024, compared to the third quarter of 2023.
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Noninterest Income
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For the three months ended September 30, 2024, noninterest income was $8.4 million, a decrease of $2.8 million, or 24.8%, compared to $11.2 million for the same period in 2023, due primarily to a $4.0 million gain on the sale-leaseback of a branch property in the third quarter of 2023, compared to a $0.9 million sale-leaseback gain in the same period in 2024, offset by a $0.4 million increase in gain on sale of SBA loans in 2024. During the third quarter of 2024, the Company sold $20.9 million of residential loans and recognized a net gain of $0.3 million. In the third quarter of 2024, the Company also sold $23.0 million of SBA loans and recognized a net gain of $1.5 million. During the third quarter of 2023, the Company sold $21.0 million of SBA loans and recognized a net gain of $1.2 million. For the three months ended September 30, 2024, trade premiums on SBA loan sales increased 170 basis points, to 8.54%, from 6.84% for the three months ended September 30, 2023.
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For the nine months ended September 30, 2024, noninterest income was $24.2 million, a decrease of $3.3 million, or 11.9%, compared to $27.5 million for the same period in 2023, due primarily to a $4.0 million gain on the sale-leaseback of a branch property in the third quarter of 2023, compared to a $0.9 million sale-leaseback gain for the same period in 2024, and a $1.8 million decrease in all other operating income, offset partially by $1.1 million in gain on sale of mortgage loans in the first nine months of 2024. The decrease in all other operating income was mainly attributed to a $0.9 million increase in income related to equipment financing agreements and $0.6 million in swap fee income in the nine months ended September 30, 2023.
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Noninterest Expense
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For the three months ended September 30, 2024, noninterest expense was $35.1 million, an increase of $0.8 million, or 2.4%, compared with $34.2 million for the same period in 2023. The increase was mainly attributed to a $0.5 million increase in salaries and employee benefits, and a $0.3 million increase in data processing expense. The increase in salaries and employee benefits was mainly attributed to annual merit increases. Data processing expense increased due to an increase in software license and maintenance expense.
Previous report
For the nine months ended September 30, 2024, noninterest expense was $106.8 million, an increase of $5.5 million, or 5.4%, compared with $101.3 million for the same period in 2023, primarily attributable to increases in salaries and employee benefits, data processing, professional fees, and other operating expenses. Salaries and employee benefits increased $1.5 million due to higher salaries, group insurance, and share-based compensation expense, offset primarily by capitalized labor costs associated with the Company's investment in a new loan origination system. Data processing expense increased $0.9 million due to an increase in software license and maintenance expense in 2024. Professional fees decreased $0.9 million primarily due to increases in consulting fees, and legal fees related to loan matters. All other operating expenses increased $1.3 million mainly due to a $0.6 million increase in loan and deposit-related expenses and a $0.4 million SBA servicing asset adjustment. Repossessed personal property expense increased mainly due to a $0.8 million loss on sale of lease assets.
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Income Tax Expense
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Income tax expense was $6.2 million and $7.9 million, representing an effective income tax rate of 29.5% and 29.6% for the three months ended September 30, 2024 and 2023, respectively. Income tax expense was $18.8 million and $25.7 million, representing an effective income tax rate of 29.7% and 29.5% for the nine months ended September 30, 2024 and 2023, respectively.
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Financial Condition
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Securities
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Loans Receivable
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Industry
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Loan Quality Indicators
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Special mention loans were $131.6 million and $65.3 million at September 30, 2024 and December 31, 2023, respectively. The $66.3 million increase included downgrades from pass loans of $130.0 million, offset by upgrades to pass loans of $10.3 million, downgrades to classified loans of $36.3 million, and paydowns and payoffs of $17.0 million. Additions during the third quarter of 2024 included the downgrade to the special mention category of two commercial real estate loans in the hospitality industry for $109.7 million and a commercial and industrial loan in the health care industry for $20.1 million, all of which were current and fully collateralized at September 30, 2024. Reductions during the third quarter of 2024 included the downgrade from the special mention category to the classified category of a $28.3 million completed construction loan for a memory care and assisted-living facility. Additionally, during the third quarter of 2024, the $28.3 million loan was transferred from classified to held-for-sale after the Bank recognized a $1.1 million charge-off on this loan. Subsequent to the end of the third quarter, the Bank completed the sale of the loan for $27.2 million (see Note 16 - Subsequent Events, for more information). Additional reductions in special mention loans during the third quarter resulted from upgrades of $6.1 million
Previous report
Classified loans were $28.4 million and $31.4 million at September 30, 2024 and December 31, 2023, respectively. Classified loan activity for the nine months ended September 30, 2024 included increases primarily due to loan downgrades of $47.0 million that included the $28.3 special mention construction loan, offset by paydowns and payoffs of $18.2 million, $4.5 million in loan charge-offs, and the transfer, after the charge-off, of the $27.2 million construction loan to the held-for-sale nonaccrual category.
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The modified loan above was current at September 30, 2024.
Previous report
Management selected three loss methodologies for the collective allowance estimation. At September 30, 2024, the Company used the discounted cash flow (“DCF”) method to estimate allowances for credit losses for the commercial and industrial loan portfolio, the Probability of Default/Loss Given Default (“PD/LGD”) method for the commercial real estate, construction and residential real estate portfolios, and the Weighted Average Remaining Maturity (“WARM”) method to estimate expected credit losses for equipment financing agreements. Loans that do not share similar risk characteristics are individually evaluated for allowances.
Previous report
For all loans utilizing the DCF method, the Company determined that four quarters represented a reasonable and supportable forecast period and reverted to a historical loss rate over twelve quarters on a straight-line basis. For this loan segment, the Company applied an annualized historical PD/LGD using all available historical periods. Since reasonable and supportable forecasts of economic conditions are embedded directly into the DCF model, qualitative adjustments are considered but were minimal.
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For each of the loan segments identified above, the Company applied an annualized historical PD/LGD using all available historical periods. The PD/LGD method incorporates a forecast of economic conditions into loss estimates using a qualitative adjustment.
Previous report
For loan pools utilizing the PD/LGD method, the Company used historical periods that included an economic downturn to derive historical losses for better alignment in the estimation of expected losses under the PD/LGD method. The Company relied on Frye-Jacobs-modeled LGD rates for loan segments with insufficient historical loss data. The Frye-Jacobs model provides a means of applying an LGD rate in the event that limited to no loss data is available. The PD/LGD method incorporates a forecast into loss estimates using a qualitative adjustment.
Previous report
The Company used the WARM method to estimate expected credit losses for the equipment financing agreements portfolio. The Company applied an expected loss ratio based on internal historical losses adjusted as appropriate for qualitative factors.
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Reworded paragraphs (35)
Previous wording
The following is management’s discussion and analysis of our results of operations and financial condition as of and for the three and nine months ended September 30, 2024. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report on Form 10-K”) and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q for the period ended September 30, 2024 (this “Report”).
Current wording
The following is management’s discussion and analysis of our results of operations and financial condition as of and for the three months ended March 31, 2025. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report on Form 10-K”) and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q for the period ended March 31, 2025 (this “Report”).
Previous wording
general economic and business conditions internationally, nationally and in those areas in which we operate;
Current wording
general economic and business conditions internationally, nationally and in those areas in which we operate, including potential recessionary conditions;
Previous wording
We have established various accounting policies that govern the application of GAAP in the preparation of our financial statements. Our significant accounting policies are described in the Notes to the consolidated financial statements in our 2023 Annual Report on Form 10-K. We had no significant changes in our accounting policies since the filing of our 2023 Annual Report on Form 10-K.
Current wording
We have established various accounting policies that govern the application of GAAP in the preparation of our financial statements. Our significant accounting policies are described in the Notes to the consolidated financial statements in our 2024 Annual Report on Form 10-K. We had no significant changes in what constituted our accounting policies since the filing of our 2024 Annual Report on Form 10-K.
Previous wording
Certain accounting policies require us to make significant estimates and assumptions that have a material impact on the carrying value of certain assets and liabilities, and we consider these critical accounting policies. For a description of these critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” in our 2023 Annual Report on Form 10-K. Actual results could differ significantly from these estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the reporting periods. Management has discussed the development and selection of these critical accounting policies with the Audit Committee of the Company’s Board of Directors.
Current wording
Certain accounting policies require us to make significant estimates and assumptions that have a material impact on the carrying value of certain assets and liabilities, and we consider these to be critical accounting policies. For a description of these critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” in our 2024 Annual Report on Form 10-K. Actual results could differ significantly from these estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the reporting periods. Management has discussed the development and selection of these critical accounting policies with the Audit Committee of the Company’s Board of Directors.
Previous wording
Net income was $14.9 million, or $0.49 per diluted share, for the three months ended September 30, 2024 compared to $18.8 million, or $0.62 per diluted share, for the same period a year ago. The decrease in net income was driven by a $4.8 million decrease in net interest income, a $2.8 million decrease in noninterest income, and a $0.9 million increase in noninterest expense, offset by decreases in credit loss expense of $2.9 million and income tax expense of $1.7 million. Credit loss expense for the third quarter of 2024 was $2.3 million compared to a $5.2 million expense for the third quarter of 2023, and consisted of provision for loan losses for both periods.
Current wording
Net income was $17.7 million, or $0.58 per diluted share, for the three months ended March 31, 2025 compared to $15.2 million, or $0.50 per diluted share, for the same period a year ago. The increase in net income was driven by a $4.4 million increase in net interest income and a $1.5 million decrease in noninterest expense, offset by an increase in credit loss expense of $2.5 million and income tax expense of $0.9 million. Credit loss expense for the first quarter of 2025 was $2.7 million compared to a $0.2 million expense for the first quarter of 2024.
Previous wording
The average yield on interest-earning assets, on a taxable equivalent basis, increased 29 basis points to 5.48% for the three months ended September 30, 2024, from 5.19% for the three months ended September 30, 2023. The average yield on loans increased to 6.00% for the three months ended September 30, 2024, from 5.73% for the three months ended September 30, 2023. The average yield on securities, on a taxable equivalent basis, increased to 2.27% for the three months ended September 30, 2024, from 1.79% for the three months ended September 30, 2023.
Current wording
The average yield on interest-earning assets, on a taxable equivalent basis, decreased two basis points to 5.45% for the three months ended March 31, 2025, from 5.47% for the three months ended March 31, 2024. The average yield on loans decreased to 5.95% for the three months ended March 31, 2025, from 6.00% for the three months ended March 31, 2024. The average yield on securities, on a taxable equivalent basis, increased to 2.49% for the three months ended March 31, 2025, from 2.07% for the three months ended March 31, 2024. The increase in the average yield on securities was primarily due to the Company using the proceeds from lower-coupon rate maturing securities to reinvest into higher-coupon rate securities.
Previous wording
The average balance of interest-bearing liabilities increased $286.3 million, or 6.5%, to $4.67 billion for the three months ended September 30, 2024 compared with $4.38 billion for the three months ended September 30, 2023. The average balances of money market and savings accounts and borrowings increased by $284.0 million and $23.1 million, respectively, offset partially by decreases in interest-bearing demand deposits and time deposits of $11.1 million and $10.4 million, respectively.
Current wording
The average balance of interest-bearing liabilities increased $70.3 million, or 1.5%, to $4.77 billion for the three months ended March 31, 2025 compared with $4.70 billion for the three months ended March 31, 2024. The average balances of money market and savings accounts and borrowings increased by $222.1 million and $17.0 million, respectively, offset partially by decreases in interest-bearing demand deposits and time deposits of $7.0 million and $162.5 million, respectively. The increase in average balances of money market and savings accounts was due to an increase in new commercial accounts. The decrease in the average balance of time deposits was due to the shift to money market and savings accounts as market rates decreased.
Previous wording
The average cost of interest-bearing liabilities was 4.29% and 3.55% for the three months ended September 30, 2024 and 2023, respectively. The average cost of interest-bearing deposits increased 74 basis points to 4.27% for the three months ended September 30, 2024, compared with 3.53% for the three months ended September 30, 2023. The average cost of time deposits increased 84 basis points to 4.79% for the three months ended September 30, 2024 compared with 3.95% for the three months ended September 30, 2023. The average cost of money market and savings accounts increased 68 basis points to 3.77% for the three months ended September 30, 2023 compared with 3.09% for the three months ended September 30, 2023. The average cost of borrowings increased to 4.33% for the three months ended September 30, 2024 compared with 2.48% for the three months ended September 30, 2023.
Current wording
The average cost of interest-bearing liabilities was 3.75% and 4.19% for the three months ended March 31, 2025 and 2024, respectively. The average cost of interest-bearing deposits decreased 47 basis points to 3.69% for the three months ended March 31, 2025, compared with 4.16% for the three months ended March 31, 2024. The average cost of time deposits decreased 49 basis points to 4.17% for the three months ended March 31, 2025 compared with 4.66% for the three months ended March 31, 2024. The average cost of money market and savings accounts decreased 40 basis points to 3.27% for the three months ended March 31, 2024 compared with 3.67% for the three months ended March 31, 2024. The decrease in the cost of deposits was due to a decrease in deposit market rates. The average cost of borrowings increased to 4.57% for the three months ended March 31, 2025 compared with 4.10% for the three months ended March 31, 2024.
Previous wording
For the nine months ended September 30, 2024, the Company recorded $3.5 million of credit loss expense, comprised of a $4.0 million provision for loan losses, partially offset by a $0.5 million recovery for off-balance sheet items. For the same period in 2023, the Company recorded $7.2 million of credit loss expense, comprised of a $7.9 million provision for loan losses, partially offset by a $0.7 million recovery for off-balance sheet items. The decrease in credit loss expense was primarily due to a reduction in net charge-offs during the first nine months of 2024, compared to the same period in 2023.
Current wording
For the first quarter of 2025, the Company recorded $2.7 million of credit loss expense, comprised of a $2.4 million provision for loan losses and a $0.3 million provision recorded for off-balance sheet items. For the same period in 2024, the Company recorded $0.2 million of credit loss expense, comprised of a $0.4 million provision for loan losses, partially offset by a $0.2 million recovery for off-balance sheet items. The $2.0 million increase in provision for loan losses is the result of a $3.7 million increase in specific reserves and a $0.4 million increase net charge-offs, partially offset by a $2.1 million decrease resulting from quantitative and qualitative considerations.
Previous wording
Securities increased $43.2 million to $908.9 million at September 30, 2024 from $865.7 million at December 31, 2023, mainly attributed to $128.3 million in securities purchases, partially offset by $105.9 million in payments and maturities, and a decrease in unrealized securities losses of $22.7 million during the nine months ended September 30, 2024.
Current wording
Securities increased $1.2 million to $907.0 million at March 31, 2025 from $905.8 million at December 31, 2024, mainly attributed to $32.5 million in securities purchases and a decrease in unrealized securities losses of $14.5 million during the three months ended March 31, 2025, partially offset by $45.1 million in payments and maturities.
Previous wording
As of September 30, 2024 and December 31, 2023, loans receivable (excluding loans held for sale), net of deferred loan fees and costs, discounts and allowance for credit losses, were $6.19 and $6.11 billion, respectively. For the nine months ended September 30, 2024, there was $855.6 million in new loan production, which included $38.4 million in SBA loan purchases, offset partially by $454.4 million in loan sales and payoffs, and amortization and other reductions of $325.9 million. Loan production consisted of commercial real estate loans of $258.0 million, residential mortgages of $124.1 million, commercial and industrial loans of $214.9 million, equipment financing agreements of $121.8 million and SBA loans of $136.9 million.
Current wording
As of March 31, 2025 and December 31, 2024, loans receivable (excluding loans held for sale), net of deferred loan fees and costs, discounts and allowance for credit losses, were $6.21 billion and $6.18 billion, respectively. For the three months ended March 31, 2025, there was $345.9 million in new loan production, which included $11.0 million in SBA loan purchases, offset partially by $167.2 million in loan sales and payoffs, and amortization and other reductions of $144.6 million. Loan production consisted of commercial real estate loans of $146.6 million, residential mortgages of $55.0 million, commercial and industrial loans of $42.3 million, equipment financing agreements of $46.7 million and SBA loans of $55.2 million.
Previous wording
As of September 30, 2024, the loan portfolio included the following concentrations of loans to one type of industry that were greater than 10.0% of loans receivable outstanding:
Current wording
As of March 31, 2025, the loan portfolio included the following concentrations of loan types to borrowers in industries that represented greater than 10.0% of loans receivable outstanding:
Previous wording
Loans 30 to 89 days past due and still accruing were $15.0 million at September 30, 2024, compared with $10.3 million at December 31, 2023, attributable to an increase of $5.6 million in past due residential loans, offset by payoffs and other reductions.
Current wording
Loans 30 to 89 days past due and still accruing were $17.3 million at March 31, 2025, compared with $18.5 million at December 31, 2024.
Previous wording
Nonaccrual loans were $15.2 million and $15.5 million as of September 30, 2024 and December 31, 2023, respectively, representing a decrease of $0.3 million, or 2.1%. As of September 30, 2024 and December 31, 2023, 1.90% and 1.25% of equipment financing agreements were on nonaccrual status, respectively. At September 30, 2024 there were $242,000 loans 90 days or more past due and still accruing interest. At December 31, 2023, all loans 90 days or more past due were classified as nonaccrual.
Current wording
Nonaccrual loans were $35.5 million and $14.3 million as of March 31, 2025 and December 31, 2024, respectively, representing an increase of $21.3 million, or 149.1%. The increase was due to the previously mentioned $20.0 million commercial real estate office loan designated as nonaccrual during the first quarter of 2025. As of March 31, 2025 and December 31, 2024, 1.72% and 1.81% of equipment financing agreements were on nonaccrual status, respectively. At March 31, 2025 there were $112,000 of loans 90 days or more past due and still accruing interest. At December 31, 2024, all loans 90 days or more past due were classified as nonaccrual.
Previous wording
The $15.2 million of nonperforming loans as of September 30, 2024 had individually evaluated allowances of $5.2 million, compared to $15.5 million of nonperforming loans with individually evaluated allowances of $3.4 million as of December 31, 2023.
Current wording
The $35.5 million of nonperforming loans as of March 31, 2025 had individually evaluated allowances of $11.8 million, compared to $14.3 million of nonperforming loans with individually evaluated allowances of $6.2 million as of December 31, 2024.
Previous wording
Nonperforming assets were $16.3 million at September 30, 2024, or 0.21% of total assets, compared to $15.6 million, or 0.21%, at December 31, 2023. Additionally, not included in nonperforming assets were repossessed personal property assets associated with equipment finance agreements of $1.2 million and $1.3 million at September 30, 2024 and December 31, 2023, respectively.
Current wording
Nonperforming assets were $35.7 million at March 31, 2025, or 0.46% of total assets, compared to $14.4 million, or 0.19%, at December 31, 2024. Additionally, not included in nonperforming assets were repossessed personal property assets associated with equipment finance agreements of $0.7 million and $0.6 million at March 31, 2025 and December 31, 2024, respectively.
Previous wording
Individually evaluated loans were $15.2 million and $15.4 million as of September 30, 2024 and December 31, 2023, respectively, representing a decrease of $0.2 million, or 1.3%. Specific allowances associated with individually evaluated loans increased $1.8 million to $5.2 million as of September 30, 2024 compared with $3.4 million as of December 31, 2023, mainly attributed to specific reserve allocation on newly added nonperforming equipment finance agreements.
Current wording
Individually evaluated loans were $33.1 million and $14.3 million as of March 31, 2025 and December 31, 2024, respectively, representing a increase of $18.8 million, or 131.5%. Specific allowances associated with individually evaluated loans increased $5.6 million to $11.8 million as of March 31, 2025 compared with $6.2 million as of December 31, 2024.
Previous wording
The following table presents loan modifications made to borrowers experiencing financial difficulty by type of modification, with related amortized cost balances, respective percentage shares of the total class of loans, and the related financial effect, for the periods indicated:
Current wording
The following table presents loan modifications made to borrowers experiencing financial difficulty by type of modification, with related amortized cost balances, respective percentage shares of the total class of loans, and the related financial effect, as of the periods indicated:
Previous wording
No loans were modified to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023.
Current wording
No loans were modified to borrowers experiencing financial difficulty during the three months ended March 31, 2024.
Previous wording
The Company’s estimate of the allowance for credit losses at September 30, 2024 and December 31, 2023 reflected losses expected over the remaining contractual life of assets based on historical, current, and forward-looking information. The contractual term does not consider extensions, renewals or modifications.
Current wording
As previously mentioned, effective January 1, 2025, the Company changed its methodology for estimating expected credit losses on its loan portfolio. The Company’s estimate of the allowance for credit losses at March 31, 2025 and December 31, 2024 reflected losses expected over the remaining contractual life of assets based on historical, current, and forward-looking information. The contractual term does not consider extensions, renewals or modifications.
Previous wording
The allowance for credit losses was $69.2 million and $69.5 million at September 30, 2024 and December 31, 2023, respectively. The allowance attributed to individually evaluated loans was $5.2 million and $3.4 million as of September 30, 2024 and December 31, 2023, respectively. The allowance attributed to collectively evaluated loans was $64.0 million and $66.1 million as of September 30, 2024 and December 31, 2023, respectively, and considered the impact of changes in macroeconomic assumptions, normalized interest rate forecasts for the subsequent four quarters, and a net reduction in specific qualitative factors allocated to criticized hospitality loans impacted by the pandemic.
Current wording
The allowance for credit losses was $70.6 million and $70.1 million at March 31, 2025 and December 31, 2024, respectively. The allowance attributed to individually evaluated loans was $11.8 million and $6.2 million as of March 31, 2025 and December 31, 2024, respectively. The allowance attributed to collectively evaluated loans was $58.8 million and $64.0 million as of March 31, 2025 and December 31, 2024, respectively. The decrease in the allowance attributed to collectively evaluated loans was primarily due to the change in ACL methodology.
Previous wording
As of September 30, 2024 and December 31, 2023, the allowance for credit losses related to off-balance sheet items, primarily unfunded loan commitments, was $2.0 million and $2.5 million, respectively. The Bank closely monitors the borrower’s repayment capabilities, while funding existing commitments to ensure losses are minimized. Based on management’s evaluation and analysis of portfolio credit quality and prevailing economic conditions, we believe these allowances were adequate for current expected lifetime losses in the loan portfolio and off-balance sheet exposure as of September 30, 2024.
Current wording
As of March 31, 2025 and December 31, 2024, the allowance for credit losses related to off-balance sheet items, primarily unfunded loan commitments, was $2.4 million and $2.1 million, respectively. The Bank closely monitors the borrower’s repayment capabilities, while funding existing commitments to ensure losses are minimized. Based on management’s evaluation and analysis of portfolio credit quality, prevailing economic conditions and economic forecasts, we believe these allowances were adequate for current expected lifetime losses in the loan portfolio and off-balance sheet exposure as of March 31, 2025.
Previous wording
For the nine months ended September 30, 2024, gross charge-offs decreased $6.1 million from the same period in 2023. Gross charge-offs for the nine months ended September 30, 2024 primarily consisted of a $1.1 million charge-off on a construction loan, equipment financing agreements charge-offs of $6.6 million, and commercial and industrial charge-offs of $0.4 million. Gross charge-offs for the nine months ended September 30, 2023 primarily consisted of equipment financing agreements charge-offs of $7.1 million and commercial and industrial charge-offs of $6.6 million. Gross recoveries for the nine months ended September 30, 2024 increased $1.8 million from the same period in 2023. Gross recoveries for the nine months ended September 30, 2024 primarily consisted of a $1.7 million recovery on a commercial loan and $1.8 million in equipment financing agreements recoveries.
Current wording
For the three months ended March 31, 2025, gross charge-offs increased $1.1 million from the same period in 2024. Gross recoveries for the three months ended March 31, 2025 increased $0.7 million from the same period in 2024. Gross charge-offs for the three months ended March 31, 2025 and 2024 primarily consisted of $2.8 million and $2.0 million of equipment financing agreements charge-offs, respectively. Gross recoveries for the three months ended March 31, 2025 primarily consisted of $0.8 million of recoveries on equipment financing agreements.
Previous wording
Net loan charge-offs were $0.9 million, or 0.06% of average loans and $8.9 million, or 0.60% of average loans for the three months ended September 30, 2024 and 2023, respectively. Net loan charge-offs were $4.3 million, or 0.09% of average loans, and $12.1 million, or 0.27% of average loans, for the nine months ended September 30, 2024 and 2023, respectively.
Current wording
Net loan charge-offs were $1.9 million, or 0.13% of average loans and $1.6 million, or 0.10% of average loans for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
Total deposits were $6.40 billion and $6.28 billion as of September 30, 2024 and December 31, 2023, respectively, representing an increase of $122.6 million, or 2.0%. The increase in deposits was primarily driven by a $164.2 million increase in money market and savings deposits and a $48.2 million increase in noninterest-bearing demand deposits, partially offset by a $81.6 million decrease in time deposits. At September 30, 2024, the loan-to-deposit ratio was 97.7% compared to 98.4% at December 31, 2023.
Current wording
Total deposits were $6.62 billion and $6.44 billion as of March 31, 2025 and December 31, 2024, respectively, representing an increase of $183.7 million, or 2.9%. The increase in deposits was primarily driven by a $140.4 million increase in money market and savings deposits and a $72.8 million increase in time deposits, partially offset by a $30.0 million decrease in noninterest-bearing demand deposits. At March 31, 2025, the loan-to-deposit ratio was 94.9% compared to 97.1% at December 31, 2024.
Previous wording
As of September 30, 2024, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $2.67 billion. The aggregate amount of uninsured time deposits was $651.4 million. Other uninsured deposits, such as demand and money market and savings deposits were $2.02 billion. At September 30, 2024, $1.17 billion of total uninsured deposits were in accounts with balances of $5.0 million or more. As of December 31, 2023, the aggregate amount of uninsured deposits was $2.52 billion. The aggregate amount of uninsured time deposits was $681.0 million.
Current wording
As of March 31, 2025, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $2.67 billion. The aggregate amount of uninsured time deposits was $651.4 million. Other uninsured deposits, such as demand and money market and savings deposits were $2.02 billion. At March 31, 2025, $1.17 billion of total uninsured deposits were in accounts with balances of $5.0 million or more. As of December 31, 2024, the aggregate amount of uninsured deposits was $2.72 billion. The aggregate amount of uninsured time deposits was $647.3 million. Other uninsured deposits, such as demand, money market and savings deposits were $2.07 billion. At December 31, 2024, $1.21 billion of total uninsured deposits were in accounts with balances of $5.0 million or more.
Previous wording
The Bank’s wholesale funds historically consisted of FHLB advances, brokered deposits as well as State of California time deposits. As of September 30, 2024 and December 31, 2023, the Bank had $300.0 million and $325.0 million of FHLB advances, and $13.2 million and $58.3 million of brokered deposits, respectively, and $120.0 million of State of California time deposits, as of September 30, 2024 and December 31, 2023. The decrease in brokered deposits was due to the Bank utilizing more overnight FHLB borrowings as a funding source.
Current wording
The Bank’s wholesale funds historically consisted of FHLB advances, brokered deposits as well as State of California time deposits. As of March 31, 2025 and December 31, 2024, the Bank had $117.5 million and $262.5 million of FHLB advances, and $76.0 million and $60.7 million of brokered deposits, respectively. The Bank had $150.0 million and $120.0 million of State of California time deposits, as of March 31, 2025 and December 31, 2024, respectively.
Previous wording
Borrowings mostly take the form of FHLB advances. At September 30, 2024 and December 31, 2023, FHLB advances were $300.0 million and $325.0 million, respectively. FHLB open advances were $200.0 million and $212.5 million at September 30, 2024 and December 31, 2023, respectively. For the same periods, term advances were $100.0 million and $112.5 million, respectively. Funds from deposit growth not used to fund loan production were used to pay off borrowings.
Current wording
Borrowings mostly take the form of FHLB advances. At March 31, 2025 and December 31, 2024, FHLB advances were $117.5 million and $262.5 million, respectively. FHLB open advances were $80.0 million and $225.0 million at March 31, 2025 and December 31, 2024, respectively. For the same periods, term advances were $37.5 million and $37.5 million, respectively. Funds from deposit growth not used to fund loan production were used to pay off borrowings.
Previous wording
The weighted-average interest rate of all FHLB advances at September 30, 2024 and December 31, 2023 was 4.81% and 4.69%, respectively.
Current wording
The weighted-average interest rate of all FHLB advances at March 31, 2025 and December 31, 2024 was 4.63% and 4.75%, respectively.
Previous wording
The FHLB maximum amount outstanding at any month end during each of the year-to-date periods ended September 30, 2024 and December 31, 2023 was $350.0 million and $450.0 million, respectively.
Current wording
The FHLB maximum amount outstanding at any month end during each of the year-to-date periods ended March 31, 2025 and December 31, 2024 was $232.5 million and $350.0 million, respectively.
Previous wording
Subordinated debentures were $130.5 million and $130.0 million as of September 30, 2024 and December 31, 2023, respectively. Subordinated debentures are comprised of fixed-to-floating subordinated notes of $108.5 million and $108.3 million as of September 30, 2024 and December 31, 2023, respectively, and junior subordinated deferrable interest debentures of $22.0 million and $21.7 million as of September 30, 2024 and December 31, 2023, respectively. See “Note 8 – Borrowings and Subordinated Debentures” to the consolidated financial statements for more details.
Current wording
Subordinated debentures were $130.8 million and $130.6 million as of March 31, 2025 and December 31, 2024, respectively. Subordinated debentures are comprised of fixed-to-floating subordinated notes of $108.6 million and $108.5 million as of March 31, 2025 and December 31, 2024, respectively, and junior subordinated deferrable interest debentures of $22.2 million and $22.1 million as of March 31, 2025 and December 31, 2024, respectively. See “Note 8 – Borrowings and Subordinated Debentures” to the consolidated financial statements for more details.
Previous wording
Stockholders’ equity was $736.7 million and $701.9 million as of September 30, 2024 and December 31, 2023, respectively. Net income, net of $22.8 million of dividends paid, added $21.7 million to stockholders' equity for the period, as did $2.7 million of share-based compensation, and a $16.4 million decrease in unrealized after-tax losses on securities available for sale due to changes in interest rates, offset by a $0.4 million decrease in unrealized after-tax losses on cash flow hedges. In addition, the Company repurchased 345,000 shares of common stock during the period at an average share price of $16.68 for a total cost of $5.8 million. At September 30, 2024, 1,425,000 shares remain under the Company's share repurchase program.
Current wording
Stockholders’ equity was $751.5 million and $732.2 million as of March 31, 2025 and December 31, 2024, respectively. Net income, net of $8.3 million of dividends paid, added $9.4 million to stockholders' equity for the period, as did $0.9 million of share-based compensation, a $10.4 million decrease in unrealized after-tax losses on securities available for sale and a $0.3 million decrease in unrealized after-tax losses on cash flow hedges due to changes in interest rates. In addition, the Company repurchased 50,000 shares of common stock during the period at an average share price of $22.49 for a total cost of $1.1 million. At March 31, 2025, 1,180,500 shares remain under the Company's share repurchase program.
Previous wording
The Company’s ability to pay dividends to stockholders depends in part upon dividends it receives from the Bank. California law restricts the amount available for cash dividends to the lesser of a bank’s retained earnings or net income for its last three fiscal years (less any distributions to stockholders made during such period). Where the above test is not met, cash dividends may still be paid, with the prior approval of the Department of Financial Protection and Innovation (“DFPI”), in an amount not exceeding the greater of: (1) retained earnings of the Bank; (2) net income of the Bank for its last fiscal year; or (3) the net income of the Bank for its current fiscal year. The Company paid dividends of $22.8 million ($0.75 per share) for the nine months ended September 30, 2024 and $30.5 million ($1.00 per share) for the year 2023. As of October 1, 2024, the Bank has the ability to pay dividends of approximately $136.0 million, after giving effect to the $0.25 dividend declared on October 24, 2024, for the fourth quarter of 2024, without the prior approval of the Commissioner of the DFPI.
Current wording
The Company’s ability to pay dividends to stockholders depends in part upon dividends it receives from the Bank. California law restricts the amount available for cash dividends to the lesser of a bank’s retained earnings or net income for its last three fiscal years (less any distributions to stockholders made during such period). Where the above test is not met, cash dividends may still be paid, with the prior approval of the Department of Financial Protection and Innovation (“DFPI”), in an amount not exceeding the greater of: (1) retained earnings of the Bank; (2) net income of the Bank for its last fiscal year; or (3) the net income of the Bank for its current fiscal year. The Company paid dividends of $8.3 million ($0.27 per share) for the three months ended March 31, 2025 and $30.4 million ($1.00 per share) for the year 2024. As of April 1, 2025, the Bank has the ability to pay dividends of approximately $95.6 million, after giving effect to the $0.27 dividend declared on April 24, 2025, for the second quarter of 2025, without the prior approval of the Commissioner of the DFPI.
Previous wording
At September 30, 2024, the Bank’s total risk-based capital ratio of 14.27%, Tier 1 risk-based capital ratio of 13.23%, common equity Tier 1 capital ratio of 13.23% and Tier 1 leverage capital ratio of 11.43% placed the Bank in the “well capitalized” category pursuant to capital rules, which is defined as institutions with total risk-based capital ratio equal to or greater than 10.00%, Tier 1 risk-based capital ratio equal to or greater than 8.00%, common equity Tier 1 capital ratios equal to or greater than 6.50%, and Tier 1 leverage capital ratio equal to or greater than 5.00%.
Current wording
At March 31, 2025, the Bank’s total risk-based capital ratio of 14.47%, Tier 1 risk-based capital ratio of 13.34%, common equity Tier 1 capital ratio of 13.34% and Tier 1 leverage capital ratio of 11.49% placed the Bank in the “well capitalized” category pursuant to capital rules, which is defined as institutions with total risk-based capital ratio equal to or greater than 10.00%, Tier 1 risk-based capital ratio equal to or greater than 8.00%, common equity Tier 1 capital ratios equal to or greater than 6.50%, and Tier 1 leverage capital ratio equal to or greater than 5.00%.
Previous wording
At September 30, 2024, the Company's total risk-based capital ratio was 15.03%, Tier 1 risk-based capital ratio was 12.29%, common equity Tier 1 capital ratio was 11.95% and Tier 1 leverage capital ratio was 10.56%.
Current wording
At March 31, 2025, the Company's total risk-based capital ratio was 15.28%, Tier 1 risk-based capital ratio was 12.46%, common equity Tier 1 capital ratio was 12.12% and Tier 1 leverage capital ratio was 10.67%.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Allowance for Credit Losses and Allowance for Credit Losses Related to Off-Balance Sheet Items
Rearranged previous paragraphs (9)
Previous report — wording carried elsewhere
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Previous report — wording carried elsewhere
The following table shows the average balance of assets, liabilities and stockholders’ equity; the amount of interest income, and interest expense; the average yield or rate for each category of interest-earning assets and interest-bearing liabilities; and the net interest spread and the net interest margin on a tax-equivalent basis for the periods indicated. All average balances are daily average balances.
Previous report — wording carried elsewhere
Represents interest expense on deposits as a percentage of all interest-bearing and noninterest-bearing deposits.
Previous report — wording carried elsewhere
Represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.
Previous report — wording carried elsewhere
Represents net interest income as a percentage of average interest-earning assets.
Previous report — wording carried elsewhere
The table below shows changes in interest income and interest expense and the amounts attributable to variations in interest rates and volumes for the periods indicated. The variances attributable to simultaneous volume and rate changes have been allocated to the change due to volume and the change due to rate categories in proportion to the relationship of the absolute dollar amount attributable solely to the change in volume and to the change in rate.
Previous report — wording carried elsewhere
The following table sets forth the various components of noninterest income for the periods indicated:
Previous report — wording carried elsewhere
The following table sets forth the components of noninterest expense for the periods indicated:
Previous report — wording carried elsewhere
Other uninsured deposits, such as demand, money market and savings deposits were $1.84 billion. At December 31, 2023, $1.09 billion of total uninsured deposits were in accounts with balances of $5.0 million or more.