Business
First Bank : Form 10-Q Quarterly Report
First Bank : Form 10-Q Quarterly
About this update from First Bank
(Mark One) Federal Deposit Insurance Corporation Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to FDIC Certificate Number: 58481 FIRST BANK (Exact Name of Registrant as Specified in its Charter) New Jersey 20-8164471 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 2465 Kuser Road, Hamilton, New Jersey 08690 (Address of Principal Executive Offices) (Zip Code) (877) 821-2265 (Registrant's Telephone Number, Including Area Code) Not Applicable (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Securities registered pursuant to Section 12(b) of the Exchange Act: Title of each class Trading Symbol Name of each exchange on which registered Common Stock, par value $5.00 per share FRBA NASDAQ Global Market Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of May 8, 2025, there were 25,005,834 shares of the registrant's Common Stock, par value $5.00 per share, outstanding. TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) Consolidated Statements of Financial Condition 3 Consolidated Statements of Income 4 Consolidated Statements of Comprehensive Income 5 Consolidated Statements of Changes in Stockholders' Equity 6 Consolidated Statements of Cash Flows 7 Notes to Condensed Consolidated Financial Statements (unaudited) 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 36 Item 3. Quantitative and Qualitative Disclosures about Market Risk 56 Item 4. Controls and Procedures 57 PART II - OTHER INFORMATION Item 1. Legal Proceedings 57 Item 1A. Risk Factors 57 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 57 Item 3. Defaults Upon Senior Securities 58 Item 4. Mine Safety Disclosures 58 Item 5. Other Information 58 Item 6. Exhibits 58 Exhibit Index 58 Signatures 58 PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) FIRST BANK CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (in thousands, except for share data, unaudited) March 31, 2025 December 31, 2024 Assets Cash and due from banks $ 32,396 $ 18,252 Restricted cash 11,910 14,270 Interest bearing deposits with banks 243,778 239,392 Cash and cash equivalents 288,084 271,914 Interest bearing time deposits with banks 743 743 Investment securities available for sale, at fair value (amortized cost of $90,393 and $84,083, respectively) 85,059 77,413 Equity securities, at fair value 1,898 1,870 Investment securities held to maturity, net of allowance for credit losses of $209 and $206, respectively (fair value of $42,565 and $42,770, respectively) 46,387 47,123 Restricted investment in bank stocks 15,933 14,333 Other investments 13,350 11,612 Loans held for sale 618 - Loans, net of deferred fees and costs 3,236,039 3,144,266 Less: Allowance for credit losses (39,223) (37,773) Net loans 3,196,816 3,106,493 Premises and equipment, net 21,267 21,351 Other real estate owned, net 4,822 5,637 Accrued interest receivable 14,889 14,267 Bank-owned life insurance 86,258 85,553 Goodwill 44,166 44,166 Other intangible assets, net 8,341 8,827 Deferred income taxes, net 25,178 25,528 Other assets 26,950 43,516 Total assets $ 3,880,759 $ 3,780,346 Liabilities and Stockholders' Equity Liabilities: Non-interest bearing deposits $ 535,584 $ 519,320 Interest bearing deposits 2,584,210 2,536,576 Total deposits 3,119,794 3,055,896 Borrowings 281,867 246,933 Subordinated debentures 29,981 29,954 Accrued interest payable 4,887 3,820 Other liabilities 29,315 34,587 Total liabilities 3,465,844 3,371,190 Stockholders' Equity: Preferred stock, par value $2 per share; 10,000,000 shares authorized; no shares issued and outstanding - - Common stock, par value $5 per share; 40,000,000 shares authorized; 27,576,676 shares issued and 25,045,612 shares outstanding and 27,375,439 shares issued and 25,100,829 shares outstanding, respectively 136,220 135,495 Additional paid-in capital 124,555 124,524 Retained earnings 184,657 176,779 Accumulated other comprehensive loss (3,938) (4,925) Treasury stock, 2,531,064 and 2,274,610 shares, respectively (26,579) (22,717) Total stockholders' equity 414,915 409,156 Total liabilities and stockholders' equity $ 3,880,759 $ 3,780,346 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 FIRST BANK CONSOLIDATED STATEMENTS OF INCOME (in thousands, except for share data, unaudited) Three Months Ended March 31, 2025 2024 Interest and Dividend Income Investment securities-taxable $ 1,188 $ 1,182 Investment securities-tax-exempt 51 38 Interest bearing deposits with banks, Federal funds sold and other 2,997 3,025 Loans, including fees 51,552 49,319 Total interest and dividend income 55,788 53,564 Interest Expense Deposits 20,844 20,786 Borrowings 2,412 2,116 Subordinated debentures 440 344 Total interest expense 23,696 23,246 Net interest income 32,092 30,318 Credit loss expense (benefit) 1,544 (698) Net interest income after credit loss expense (benefit) 30,548 31,016 Non-Interest Income Service fees on deposit accounts 356 344 Loan fees 326 102 Income from bank-owned life insurance 793 785 Gains on sale of loans, net 29 229 Gains on recovery of acquired loans 24 118 Other non-interest income 443 386 Total non-interest income 1,971 1,964 Non-Interest Expense Salaries and employee benefits 11,118 10,038 Occupancy and equipment 2,464 2,026 Legal fees 368 316 Other professional fees 726 756 Regulatory fees 684 602 Directors' fees 282 242 Data processing 805 806 Marketing and advertising 399 296 Travel and entertainment 236 244 Insurance 214 244 Other real estate owned expense, net 920 88 Other expense 2,168 2,152 Total non-interest expense 20,384 17,810 Income Before Income Taxes 12,135 15,170 Income tax expense 2,754 2,658 Net Income $ 9,381 $ 12,512 Basic earnings per common share $ 0.37 $ 0.50 Diluted earnings per common share $ 0.37 $ 0.50 Basic weighted average common shares outstanding 25,118,062 25,039,949 Diluted weighted average common shares outstanding 25,269,002 25,199,381 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 FIRST BANK CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands, unaudited) Three Months Ended March 31, 2025 2024 Net income $ 9,381 $ 12,512 Other comprehensive income (loss): Unrealized holding gains (losses) on investments arising during the period 1,336 (299) Income tax effect (349) 157 Total other comprehensive income (loss), net of tax 987 (142) Total comprehensive income $ 10,368 $ 12,370 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 FIRST BANK CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (in thousands, except share data, unaudited) Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Treasury Stock Total Stockholders' Equity Balance-December 31, 2024 $ 135,495 $ 124,524 $ 176,779 $ (4,925) $ (22,717) $ 409,156 Net income - - 9,381 - - 9,381 Other comprehensive income, net of tax - - - 987 - 987 Vesting of restricted stock, 114,104 shares 570 (570) - - - - Exercise of stock options, 30,950 shares 155 47 - - - 202 Stock-based compensation expense - 554 - - - 554 Cash dividends - common, $0.06 per share - - (1,503) - - (1,503) Purchase of 256,454 shares of common stock - - - - (3,862) (3,862) Balance-March 31, 2025 $ 136,220 $ 124,555 $ 184,657 $ (3,938) $ (26,579) $ 414,915 Balance-December 31, 2023 $ 134,552 $ 122,881 $ 140,563 $ (5,718) $ (21,378) $ 370,900 Net income - - 12,512 - - 12,512 Other comprehensive loss, net of tax - - - (142) - (142) Vesting of restricted stock, 90,306 shares 452 (452) - - - - Stock-based compensation expense - 484 - - - 484 Cash dividends - common, $0.06 per share - - (1,500) - - (1,500) Balance-March 31, 2024 $ 135,004 $ 122,913 $ 151,575 $ (5,860) $ (21,378) $ 382,254 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 FIRST BANK CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, unaudited) Three Months Ended March 31, 2025 2024 Cash flows from operating activities: Net income $ 9,381 $ 12,512 Adjustments to reconcile net income to net cash provided by operating activities: Credit loss expense (benefit) 1,544 (698) Depreciation and amortization of premises and equipment 626 508 Accretion and amortization of discounts/premiums on investment securities, net (7) 64 Accretion and amortization of fair value adjustments, net (2,771) (4,478) Accretion and amortization of deferred loan fees and costs, net (771) (676) Amortization of core deposit intangible assets and loan servicing rights 494 556 Amortization of subordinated debentures issuance cost 27 28 Noncash operating lease expense 653 581 Stock-based compensation 554 484 Net (gain) loss on equity securities (27) 19 Originations of loans held for sale (618) (3,171) Proceeds from sale of loans held for sale - 3,803 Gains on sale of loans (29) (229) Loss on sale of premises and equipment 22 - Increase in other real estate owned valuation allowance 815 - Income from bank-owned life insurance (793) (785) Changes in assets and liabilities: Increase in accrued interest receivable (622) (430) Decrease (increase) in intangible and other assets 18,427 (480) Increase in accrued interest payable 1,068 1,200 (Decrease) increase in other liabilities (7,814) 1,289 Net cash provided by operating activities 20,159 10,097 Cash flows from investing activities: Net (increase) decrease in loans (88,653) 22,138 Proceeds from sale of loans not originated for sale 517 - Purchases of investment securities available for sale (12,547) (8,540) Purchases of investment securities held to maturity (157) (669) Proceeds from maturities, calls and paydowns of investment securities available for sale 6,253 7,468 Proceeds from maturities, calls and paydowns of investment securities held to maturity 880 1,591 Purchase of restricted stocks (3,850) (5,400) Redemption of restricted stocks 2,250 5,739 Purchases of other investments (1,738) (256) Proceeds from other investments - 57 Purchases of premises and equipment (545) (350) Redemption of bank-owned life insurance - 323 Benefit proceeds on bank-owned life insurance - 187 Net cash (used in) provided by investing activities (97,590) 22,288 Cash flows from financing activities: Net increase in deposits 63,815 2,654 Proceeds from borrowings 85,000 120,000 Repayments of borrowings (50,051) (127,526) Redemption of subordinated debentures - (25,000) Proceeds from stock option exercises 202 - Cash dividends paid on common stock (1,503) (1,500) Purchase of treasury stock (3,862) - Net cash provided by (used in) financing activities 93,601 (31,372) Net increase in cash and cash equivalents 16,170 1,013 Cash and cash equivalents at beginning of year 271,914 227,951 Cash and cash equivalents at end of period $ 288,084 $ 228,964 7 FIRST BANK CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, unaudited) continued Three Months Ended March 31, 2025 2024 Supplemental disclosures of cash flow information: Cash paid for interest on deposits and borrowings $ 22,519 $ 21,980 Cash paid for income taxes $ 705 $ 80 Supplemental schedule of non-cash activities: Vesting of restricted stock $ 570 $ 452 Transfer of loans to other real estate owned $ - $ 5,999 The accompanying notes are an integral part of these condensed consolidated financial statements. 8 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 1 - Summary of Significant Accounting Policies Basis of Financial Statement Presentation The condensed consolidated financial statements of First Bank have been prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP"). The condensed consolidated financial statements are prepared on an accrual basis and include the accounts of First Bank's wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated from the accompanying condensed consolidated financial statements. As used in this Quarterly Report on Form 10-Q, "the Bank" and "the Company" refer to First Bank and its consolidated subsidiaries unless otherwise noted. The Consolidated Statement of Financial Condition as of March 31, 2025, the Consolidated Statements of Income, the Consolidated Statements of Comprehensive Income and the Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2025 and 2024, and the Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024 are unaudited. The Consolidated Statement of Financial Condition as of December 31, 2024 was derived from the audited Consolidated Statement of Financial Condition as of that date. In the opinion of management, all adjustments and disclosures which are generally routine and recurring in nature and necessary for a fair statement of interim results have been made. In preparing the unaudited condensed consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Statements of Financial Condition and results of operations for the periods indicated. Material estimates that are particularly susceptible to change are: the determination of the fair value of acquired loans; the allowance for credit losses and the evaluation of goodwill for impairment. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are deemed necessary. While management uses its best judgment, actual results could differ from those estimates. The interim unaudited condensed consolidated financial statements included herein have been prepared in accordance with instructions for the Quarterly Report on Form 10-Q and the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP and industry practice have been condensed or omitted from interim reporting pursuant to SEC rules. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results which may be expected for the entire year. The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the condensed consolidated financial statements in this Quarterly Report on Form 10-Q were available to be issued. Interim financial statements should be read in conjunction with the condensed consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the FDIC. Segment Reporting The Company's operations are solely in the financial services industry and provides a range of regional community banking services to retail and commercial customers. The Company operates throughout New Jersey, Pennsylvania and in Florida. Operating segments are defined as components of an entity for which separate financial information is available and is regularly reviewed by the chief operating decision maker ("CODM"). The Company's CODM is the Chief Executive Officer. The CODM makes operating decisions and manages the activities of the business on a consolidated basis. Therefore, management concluded the Company has a single operating segment, and therefore one reportable segment. Further, the CODM allocates resources and assesses performance based on an ongoing review of the Company's consolidated financial results. Specifically, the CODM reviews net income, reported within the consolidated statements of income, along with information in consolidated statement of financial condition to decide whether to reinvest profits into the Company or other strategic investments. Refer to the Consolidated Statements of Financial Condition and Consolidated Statements of Income for net income and all significant expenses regularly provided to and reviewed by the CODM. 9 Note 1 - Summary of Significant Accounting Policies (continued) Recent Accounting Standards Not Yet Adopted In December 2023, the "Financial Accounting Standards Board (FASB)" issued "Accounting Standard Update (ASU)" 2023-09, " Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09") . The amendments in this ASU require public entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. ASU 2023-09 is effective for the Company for annual periods beginning after December 15, 2024. The Company will update additional income tax disclosures in its Form 10-K for the year ended December 31, 2025. In November 2024, the FASB issued ASU 2024-03, "Disaggregation of Income Statement Expenses (DISE)." ("ASU 2024-03") requires additional disclosure of the nature of expenses included in the income statement to be presented in a tabular format in the footnotes to the financial statements. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The amendments in ASU 2024-03 should be applied on a prospective basis, although retrospective application is permitted. ASU 2024-03 is not expected to have a material impact on the Company's financial statements. Note 2 - Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss included in stockholders' equity are as follows: March 31, 2025 December 31, 2024 (in thou sands) Net unrealized losses on investment securities available for sale $ (5,334) $ (6,670) Income tax effect 1,396 1,745 Accumulated other comprehensive loss $ (3,938) $ (4,925) Note 3 - Earnings Per Share Basic earnings per share represent the effect of earnings upon the weighted average number of shares and participating securities outstanding for the period. Diluted earnings per share reflects the effect of earnings upon weighted average shares including the potential dilution that could occur if securities or contracts to issue common stock were converted or exercised, utilizing the treasury stock method. Unvested stock awards, which contain non-forfeitable rights to dividends whether paid or unpaid (i.e., participating securities), are included in the number of shares outstanding for both basic and diluted earnings per share. There are no securities that could potentially dilute basic earnings per share that were not included in the computation of diluted earnings per share. 10 Note 3 - Earnings Per Share - (Continued) The following table presents a reconciliation of the calculation of basic and diluted earnings per share for the periods indicated: Three Months Ended March 31, 2025 2024 (in thousands, exce pt per share data) Net income available to common stockholders $ 9,381 $ 12,512 Basic weighted average common shares outstanding 25,118 25,040 Effect of dilutive common stock equivalents 151 159 Diluted weighted average common shares outstanding 25,269 25,199 Basic earnings per common share $ 0.37 $ 0.50 Diluted earnings per common share $ 0.37 $ 0.50 Number of common stock equivalents excluded from the calculation of diluted earnings per share as the exercise prices were greater than the average price of the common stock 505 576 Note 4 - Stock-Based Compensation On April 24, 2024, the Company's shareholders approved the First Bank 2024 Equity Incentive Plan. Consistent with prior equity plans, the 2024 Equity Incentive Plan allows for the grant of incentive options, non-qualified options and restricted stock to officers, employees and members of the Board of Directors. The 2024 Equity Incentive Plan increased the number of awards available for grant to 1,300,000, at which time all awards available for grant under predecessor plans were cancelled. The following table presents the number of awards authorized, cumulative granted awards, net of cancellations, and awards available for grant at March 31, 2025: Awards authorized 3,483,683 Cumulative granted awards, net of cancellations 2,391,085 Awards available for grant 1,092,598 The Company issues shares from its authorized but unissued common stock to satisfy stock option exercises and restricted stock grants. Stock-based compensation expense recognized in earnings for the three months ended March 31, 2025 and 2024 was $554,000 and $484,000, respectively. 11 The Company's stock option activity for the three months ended March 31, 2025 and 2024 is summarized in the following tables: Weighted Weighted Average Remaining Aggregate Shares Average Exercise Price Contractual Life (years) Intrinsic Value Outstanding-December 31, 2024 678,366 $ 11.02 Exercised (30,950) 6.54 Expired (199) 11.57 Outstanding - March 31, 2025 647,217 $ 11.23 4.4 $ 2,316,693 Exercisable- March 31, 2025 609,466 $ 11.08 4.1 $ 2,276,314 Weighted Weighted Average Remaining Aggregate Shares Average Exercise Price Contractual Life (years) Intrinsic Value Outstanding-December 31, 2023 722,017 $ 10.61 Granted 29,432 13.75 Expired (91) 14.25 Outstanding - March 31, 2024 751,358 $ 10.73 5.0 $ 2,363,915 Exercisable-March 31, 2024 639,422 $ 10.33 4.3 $ 2,268,610 No options were granted in the first quarter of 2025. All options granted in 2024 and previous years have a term that shall not exceed ten years and a vesting period of one to three years. The exercise price of the options granted under the Plan and previous plans must be at least 100% of the fair market value of the Company's common stock on the date of grant. Terms and conditions of restricted stock awards are determined by the Board of Directors at the time of grant. The aggregate intrinsic values in the preceding tables represents the pre-tax intrinsic values calculated by multiplying the number of in-the-money shares by the difference between the Company's closing stock price on the last trading day of the current reporting period and the exercise price. Unrecognized compensation expense related to unvested stock options was $162,000 as of March 31, 2025 which is expected to be recognized over a weighted average period of 1.4 years. 12 Restricted stock activity under the Company's stock-based compensation plans for the three months ended March 31, 2025 and 2024 is summarized in the following tables: Weighted Weighted Average Restricted Average Grant Date Remaining Contractual Shares Fair Value Life (years) Outstanding-December 31, 2024 276,378 $ 12.29 Granted 170,766 13.86 Vested (114,104) 12.39 Forfeited (479) 12.37 Outstanding - March 31, 2025 332,561 $ 13.06 2.1 Weighted Weighted Average Restricted Average Grant Date Remaining Contractual Shares Fair Value Life (years) Outstanding-December 31, 2023 238,751 $ 12.17 Granted 133,844 12.13 Vested (90,306) 12.30 Forfeited (5,517) 12.42 Outstanding - March 31, 2024 276,772 $ 12.10 2.1 All restricted stock awards granted have a vesting period of one to three years. Unrecognized compensation expense related to restricted stock was $3.7 million as of March 31, 2025 which is expected to be recognized over a weighted average period of 2.4 years. Note 5 - Investment Securities Available-for-Sale ("AFS") Securities The amortized cost and estimated fair value of investment securities available for sale are as follows as of the dates indicated, with gross unrealized gains and losses therein: March 31, 2025 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Investment securities available for sale (in thousands) U.S. Government-sponsored agency securities $ 2,500 $ - $ (1) $ 2,499 Residential mortgage-backed securities: Issued by FNMA and FHLMC 57,046 236 (4,333) 52,949 Issued by GNMA 20,686 36 (1,272) 19,450 U.S. Treasury securities 5,937 26 - 5,963 SBA pools 2,816 5 (18) 2,803 Asset-backed securities 408 - (4) 404 Corporate obligations 1,000 - (9) 991 Total $ 90,393 $ 303 $ (5,637) $ 85,059 13 December 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Investment securities available for sale (in thousands) U.S. Government-sponsored agency securities $ 2,500 $ - $ (2) $ 2,498 Residential mortgage-backed securities: Issued by FNMA and FHLMC 53,876 45 (5,178) 48,743 Issued by GNMA 20,437 7 (1,506) 18,938 SBA Pools 2,832 - (20) 2,812 Asset-backed securities 437 - (8) 429 Corporate obligations 4,001 2 (10) 3,993 Total $ 84,083 $ 54 $ (6,724) $ 77,413 The Company did not record an Allowance for Credit Losses ("ACL") on the AFS securities at March 31, 2025 and December 31, 2024. The Company considers the unrealized losses on the AFS securities to be related to fluctuations in market conditions, primarily interest rates, and not reflective of deterioration in credit. In addition, the Company has the intent and ability to hold these AFS securities until the amortized cost is recovered and it is more likely than not that any of AFS securities in an unrealized loss position would not be required to be sold. The Company does not estimate an allowance for credit losses on accrued interest receivable from AFS securities as the Company has a policy to charge off accrued interest deemed uncollectible in a timely manner. A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent. Interest accrued but not received for a security placed on nonaccrual is reversed against interest income. Accrued interest receivable totaled $336,000 and $277,000 at March 31, 2025 and December 31, 2024, respectively, for AFS securities and was reported in accrued interest receivable on the accompanying Consolidated Statements of Financial Condition. HTM Securities The amortized cost, estimated fair value and allowance for credit losses of investment securities held to maturity are as follows as of the dates indicated, with gross unrealized gains and losses therein: March 31, 2025 Amortized Gross Unrealized Gross Unrealized Fair Allowance for Cost Gains Losses Value Credit Losses Investment securities held to maturity (in thousands) Residential mortgage-backed securities: Issued by FNMA and FHLMC $ 9,754 $ - $ (1,667) $ 8,087 $ - Issued by GNMA 2,144 - (74) 2,070 - Obligations of state and political subdivisions 8,198 10 (262) 7,946 (5) Corporate obligations 26,500 37 (2,075) 24,462 (204) Total $ 46,596 $ 47 $ (4,078) $ 42,565 $ (209) 14 December 31, 2024 Amortized Gross Unrealized Gross Unrealized Fair Allowance for Cost Gains Losses Value Credit Losses Investment securities held to maturity (in thousands) Residential mortgage-backed securities: Issued by FNMA and FHLMC $ 9,882 $ - $ (1,830) $ 8,052 $ - Issued by GNMA 2,153 - (106) 2,047 - Obligations of state and political subdivisions 8,794 15 (293) 8,516 (4) Corporate obligations 26,500 37 (2,382) 24,155 (202) Total $ 47,329 $ 52 $ (4,611) $ 42,770 $ (206) The following table presents the activity in the ACL for the held to maturity debt securities: Obligations of state and political subdivisions Corporate obligations ACL Total Three Months Ended March 31, 2025 (in thousands) Balance-beginning of period $ 4 $ 202 $ 206 Credit loss expense 1 2 $ 3 Balance-end of period $ 5 $ 204 $ 209 Obligations of state and political subdivisions Corporate obligations ACL Total Three Months Ended March 31, 2024 (in thousands) Balance-beginning of period $ 4 $ 196 $ 200 Credit loss benefit - (6) (6) Balance-end of period $ 4 $ 190 $ 194 The Company segments its HTM portfolio into agency residential mortgage-backed securities, obligations of state and political subdivisions and corporate obligations to determine the ACL. The ACL is determined based on the Company's historical losses, adjusted for qualitative factors including economic forecasts over a two-year reasonable and supportable forecast period. The Company has determined that for agency residential mortgage-backed securities it would be appropriate to assume the expected credit loss to be zero because these securities are guaranteed by enterprises that have credit ratings on par with the U.S. government or are guaranteed by the U.S. government. This assumption is reviewed and attested quarterly. The Company does not estimate an allowance for credit losses on accrued interest receivable from HTM securities as the Company has a policy to charge off accrued interest deemed uncollectible in a timely manner. A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent. Interest accrued but not received for a security placed on nonaccrual is reversed against interest income. Accrued interest receivable totaled $341,000 and $260,000 at March 31, 2025 and December 31, 2024, respectively, for HTM securities and was reported in accrued interest receivable on the accompanying Consolidated Statements of Financial Condition. At March 31, 2025, the Company had no HTM securities that were past due 30 days or more as to principal or interest payments. The Company had no HTM securities classified as nonaccrual at March 31, 2025. 15 The amortized cost, fair value and contractual maturities of investment securities available for sale and held to maturity are shown in the tables below. Certain of these securities have call features which allow the issuer to redeem the security prior to maturity at the issuer's discretion. Expected maturities may differ from contractual maturities because the underlying mortgages supporting mortgage-backed securities may be prepaid without penalties. Consequently, residential mortgage-backed securities are not presented by maturity category. March 31, 2025 Available for Sale Held to Maturity Amortized Cost Fair Value Amortized Cost Fair Value (in thousands) Due within one year $ 1,935 $ 1,935 $ 2,776 $ 2,774 Due after one year through five years 7,910 7,921 5,991 5,873 Due after five years through ten years - - 25,931 23,761 Due after ten years 2,816 2,804 - - Residential mortgage-backed securities: Issued by FNMA and FHLMC 57,046 52,949 9,754 8,087 Issued by GNMA 20,686 19,450 2,144 2,070 Total investment securities $ 90,393 $ 85,059 $ 46,596 $ 42,565 (1) Tax equivalent using federal income tax rate of 21%. The unrealized losses, categorized by the length of time of continuous loss position, and the fair value of related investment securities available for sale are as follows, as of the dates indicated: March 31, 2025 Less than 12 months 12 months or longer Total Number Fair Unrealized Number Fair Unrealized Number Fair Unrealized of Issues Value Losses of Issues Value Losses of Issues Value Losses Investment securities available for sale (dollars in thousands) U.S. Government-sponsored agency securities 1 $ 2,499 $ (1) - $ - $ - 1 $ 2,499 $ (1) Residential mortgage-backed securities: Issued by FNMA and FHLMC 2 4,196 (11) 24 24,575 (4,322) 26 28,771 (4,333) Issued by GNMA - - - 11 11,675 (1,272) 11 11,675 (1,272) SBA pools - - - 1 1,332 (18) 1 1,332 (18) Asset-backed securities - - - 1 404 (4) 1 404 (4) Corporate obligations - - - 1 991 (9) 1 991 (9) Total 3 $ 6,695 $ (12) 38 $ 38,977 $ (5,625) 41 $ 45,672 $ (5,637) 16 December 31, 2024 Less than 12 months 12 months or longer Total Number Fair Unrealized Number Fair Unrealized Number Fair Unrealized of Issues Value Losses of Issues Value Losses of Issues Value Losses Investment securities available for sale (dollars in thousands) U.S. Government-sponsored agency securities 1 $ 2,498 $ (2) - $ - $ - 1 $ 2,498 $ (2) Residential mortgage-backed securities: Issued by FNMA and FHLMC 6 13,561 (134) 24 24,649 (5,044) 30 38,210 (5,178) Issued by GNMA 3 5,636 (18) 11 12,269 (1,488) 14 17,905 (1,506) SBA pools 1 1,471 (3) 1 1,341 (17) 2 2,812 (20) Asset-backed securities - - - 1 429 (8) 1 429 (8) Corporate obligations - - - 1 990 (10) 1 990 (10) Total 11 $ 23,166 $ (157) 38 $ 39,678 $ (6,567) 49 $ 62,844 $ (6,724) The unrealized losses, categorized by the length of time of continuous loss position, and the fair value of related investment securities held to maturity are as follows, as of the dates indicated. March 31, 2025 Less than 12 months 12 months or longer Total Number Fair Unrealized Number Fair Unrealized Number Fair Unrealized of Issues Value Losses of Issues Value Losses of Issues Value Losses Investment securities held to maturity (dollars in thousands) Residential mortgage-backed securities: Issued by FNMA and FHLMC - $ - $ - 15 $ 8,087 $ (1,667) 15 $ 8,087 $ (1,667) Issued by GNMA 1 1,663 (28) 1 407 (46) 2 2,070 (74) Obligations of state and political subdivisions 4 1,664 (28) 8 2,896 (234) 12 4,560 (262) Corporate obligations - - - 22 22,925 (2,075) 22 22,925 (2,075) Total 5 $ 3,327 $ (56) 46 $ 34,315 $ (4,022) 51 $ 37,642 $ (4,078) December 31, 2024 Less than 12 months 12 months or longer Total Number Fair Unrealized Number Fair Unrealized Number Fair Unrealized of Issues Value Losses of Issues Value Losses of Issues Value Losses Investment securities held to maturity (dollars in thousands) Residential mortgage-backed securities: Issued by FNMA and FHLMC - $ - $ - 15 $ 8,052 $ (1,830) 15 $ 8,052 $ (1,830) Issued by GNMA 1 1,646 (51) 1 401 (55) 2 2,047 (106) Obligations of state and political subdivisions 3 1,132 (32) 10 3,723 (261) 13 4,855 (293) Corporate obligations - - - 22 22,618 (2,382) 22 22,618 (2,382) Total 4 $ 2,778 $ (83) 48 $ 34,794 $ (4,528) 52 $ 37,572 $ (4,611) During the three months ended March 31, 2025 and 2024, there were no securities sold. Investment securities with a market value of $ 6 .7 million, $603,000 and $47.4 million, respectively, were pledged as collateral for municipal deposits, Federal Home Loan Bank ("FHLB") and Federal Reserve Bank ("FRB") borrowings at March 31, 2025. Investment securities with a market value of $1.3 million, $622,000 and $49.9 million, respectively, were pledged as collateral for municipal deposits, FHLB and FRB borrowings at December 31, 2024. 17 The composition of loans is as follows as of the dates indicated: March 31, 2025 December 31, 2024 (in thou sands) Commercial and industrial $ 651,690 $ 576,625 Commercial real estate: Owner-occupied 694,113 671,357 Investor 1,160,549 1,181,684 Construction and development 200,262 205,096 Multi-family 308,217 287,843 Residential real estate: Residential mortgage and first lien home equity loans 142,298 142,769 Home equity-second lien loans and revolving lines of credit 52,438 51,020 Consumer and other 29,760 31,324 3,239,327 3,147,718 Net deferred loan fees and costs (3,288) (3,452) Total loans $ 3,236,039 $ 3,144,266 As of March 31, 2025 loans held for sale were $618,000. There were no loans held for sale as of December 31, 2024. Mortgage and Small Business Administration ("SBA") loans originated and intended for sale in the secondary market are included in loans held for sale and are reported at the lower of cost or fair value, as determined by the aggregate commitments from investors or current investor yield requirements. Accrued interest receivable is not included in the amortized cost basis of the Company's loans. Additionally, the Company does not estimate an allowance for credit losses on accrued interest receivable as the Company has a policy to charge off accrued interest deemed uncollectible in a timely manner. When a loan is placed on nonaccrual status, which occurs when a borrower becomes delinquent by 90 days, interest previously accrued but not collected is reversed against current period interest income. Accrued interest receivable for loans totaled $13.9 million and $13.4 million at March 31, 2025 and December 31, 2024, respectively, with no related ACL and was reported in accrued interest receivable on the accompanying Consolidated Statements of Financial Condition. The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The following tables summarizes the Company's loans by year of origination and internally assigned credit risk rating at March 31, 2025 and December 31, 2024. See the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the FDIC for additional information about asset classifications. There were no loans classified as "doubtful" or "loss" as of March 31, 2025 and December 31, 2024. 18 Loans by Year of Origination at March 31, 2025 2025 2024 2023 2022 2021 Prior Revolving Total Commercial and industrial (in thousands) Pass $ 22,356 $ 95,359 $ 59,312 $ 54,086 $ 30,016 $ 45,620 $ 324,395 $ 631,144 Special Mention - - 4,768 - 1,956 3,315 2,900 12,939 7,607 - 7,015 - 206 244 142 Substandard - Total Commercial and industrial $ 22,356 $ 95,501 $ 64,324 $ 54,292 $ 31,972 $ 55,950 $ 327,295 $ 651,690 Owner-occupied Pass $ 31,945 $ 120,925 $ 62,656 $ 81,771 $ 83,712 $ 245,635 $ 14,086 $ 640,730 Special Mention - - - 30,519 322 1,177 4,750 36,768 84,034 113,132 62,926 694,113 18,836 262,315 Substandard - - 270 842 - 15,503 - 16,615 120,925 Total Owner-occupied $ 31,945 $ $ Investor $ $ $ $ $ Pass $ 4,458 $ 76,983 $ 64,577 $ 204,291 $ 179,982 $ 619,525 $ 8,194 $ 1,158,010 179,982 204,291 64,577 1,160,549 8,194 622,064 Substandard - - - - - 2,539 - 2,539 76,983 Total Investor $ 4,458 $ $ Construction and development $ $ $ $ $ 200,262 15,845 17,415 10,776 50,836 44,636 54,269 Pass $ 6,485 $ $ $ $ $ $ $ Total Construction and development $ 6,485 $ 54,269 $ 44,636 $ 50,836 $ 10,776 $ 17,415 $ 15,845 $ 200,262 Multi-family 58,544 75,451 28,284 308,217 507 112,563 Pass $ 2,981 $ 29,887 $ 28,284 $ 75,451 $ 58,544 $ 112,563 $ 507 $ 308,217 29,887 Total Multi-family $ 2,981 $ $ Residential mortgage and first lien home equity loans $ $ $ $ $ Pass $ 6,242 $ 7,178 $ 7,289 $ 15,396 $ 13,499 $ 89,377 $ 243 $ 139,224 13,499 15,396 7,289 142,298 243 92,451 Substandard - - - - - 3,074 - 3,074 7,178 Pass $ 675 $ 1,770 $ 1,970 $ 1,333 $ 152 $ 6,081 $ 40,034 $ 52,015 Total Residential mortgage and first lien home equity loans $ 6,242 $ $ Home equity-second lien loans and revolving lines of credit $ $ $ $ $ 152 1,333 1,970 52,438 40,034 6,504 Substandard - - - - - 423 - 423 1,770 Pass $ 22 $ 3,179 $ 3,162 $ 1,992 $ 3,102 $ 2,745 $ 15,555 $ 29,757 Total Home equity-second lien loans and revolving lines of credit $ 675 $ $ Consumer and other $ $ $ $ $ Total Consumer and other $ 22 $ $ $ $ $ $ $ 3,102 1,992 3,162 3,179 29,760 15,555 2,748 Substandard - - - - - 3 - 3 Special Mention - - 4,768 30,519 2,278 4,492 7,650 49,707 Total Loans Pass $ 75,164 $ 389,550 $ 271,886 $ 485,156 $ 379,783 $ 1,138,961 $ 418,859 $ 3,159,359 Total Loans $ 75,164 $ $ $ $ $ $ $ 382,061 516,723 277,168 389,692 3,239,327 426,509 1,172,010 Substandard - 142 514 1,048 - 28,557 - 30,261 19 Loans by Year of Origination at December 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Total Commercial and industrial (in thousands) Pass $ 97,820 $ 60,531 $ 57,446 $ 32,131 $ 9,916 $ 31,096 $ 270,571 $ 559,511 Special Mention - 4,707 - 1,965 680 2,655 - 10,007 7,107 - 7,042 - - 65 - Substandard - Total Commercial and industrial $ 97,820 $ 65,238 $ 57,511 $ 34,096 $ 10,596 $ 40,793 $ 270,571 $ 576,625 Owner-occupied Pass $ 121,187 $ 62,690 $ 94,752 $ 84,726 $ 61,417 $ 191,739 $ 11,576 $ 628,087 Special Mention - - 21,385 324 - - 4,750 26,459 204,235 64,617 85,050 116,979 671,357 16,326 Substandard - 273 842 - 3,200 12,496 - 16,811 62,963 Total Owner-occupied $ 121,187 $ $ Investor $ $ $ $ $ 1,178,880 6,719 523,539 121,946 181,136 205,247 64,733 Pass $ 75,560 $ $ $ $ $ $ $ 526,343 121,946 181,136 205,247 1,181,684 6,719 Substandard - - - - - 2,804 - 2,804 64,733 Total Investor $ 75,560 $ $ Construction and development $ $ $ $ $ 204,984 18,228 17,675 - 11,879 71,928 42,880 Pass $ 42,394 $ $ $ $ $ $ $ 17,787 - 11,879 71,928 205,096 18,228 Substandard - - - - - 112 - 112 42,880 Pass $ 29,879 $ 28,323 $ 56,032 $ 58,799 $ 49,949 $ 64,320 $ 347 $ 287,649 Total Construction and development $ 42,394 $ $ Multi-family $ $ $ $ $ 64,514 49,949 58,799 56,032 287,843 347 Substandard - - - - - 194 - 194 28,323 Total Multi-family $ 29,879 $ $ Pass $ 7,776 $ 7,398 $ 16,489 $ 16,476 $ 23,699 $ 67,660 $ 97 $ 139,595 Residential mortgage and first lien home equity loans $ $ $ $ $ 70,834 23,699 16,476 16,489 142,769 97 Substandard - - - - - 3,174 - 3,174 7,398 Pass $ 1,579 $ 2,124 $ 1,242 $ 155 $ 153 $ 4,474 $ 40,882 $ 50,609 Total Residential mortgage and first lien home equity loans $ 7,776 $ $ Home equity-second lien loans and revolving lines of credit $ $ $ $ $ 4,885 153 155 1,242 51,020 40,882 Substandard - - - - - 411 - 411 2,124 Pass $ 3,186 $ 3,197 $ 2,049 $ 3,125 $ 1,920 $ 1,062 $ 16,782 $ 31,321 Total Home equity-second lien loans and revolving lines of credit $ 1,579 $ $ Consumer and other $ $ $ $ $ Total Consumer and other $ 3,186 $ $ $ $ $ $ $ 1,065 1,920 3,125 2,049 3,197 31,324 16,782 Substandard - - - - - 3 - 3 Special Mention - 4,707 21,385 2,289 680 2,655 4,750 36,466 Total Loans Pass $ 379,381 $ 271,876 $ 505,185 $ 388,427 $ 269,000 $ 901,565 $ 365,202 $ 3,080,636 Total Loans $ 379,381 $ $ $ $ $ $ $ 930,456 272,880 390,716 527,477 276,856 3,147,718 369,952 Substandard - 273 907 - 3,200 26,236 - 30,616 20 Attention : This is an excerpt of the original content. 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