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What changed in California BanCorp \ CA's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of California BanCorp \ CA's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+505 added−544 removedSource: 10-K (2026-03-13) vs 10-K (2025-04-01)

Top changes in California BanCorp \ CA's 2025 10-K

505 paragraphs added · 544 removed · 382 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

91 edited+6 added−19 removed124 unchanged
Biggest changeAdditionally, the Bank Holding Company Act provides that the Federal Reserve may not approve any of these transactions if it would result in or tend to create a monopoly, substantially lessen competition, or otherwise function as a restraint of trade, unless the anti-competitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the communities to be served.
Biggest changeThe Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve before: • acquiring direct or indirect ownership or control of any voting shares of any bank if, after the acquisition, the bank holding company will directly or indirectly own or control more than 5% of the bank’s voting shares; • acquiring all or substantially all of the assets of any bank; or • merging or consolidating with any other bank holding company. 16 Table of Contents Additionally, the Bank Holding Company Act provides that the Federal Reserve may not approve any of these transactions if it would result in or tend to create a monopoly, substantially lessen competition, or otherwise function as a restraint of trade, unless the anti-competitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the communities to be served.
Deposit Products We offer comprehensive treasury services tools that are designed to improve our clients’ cash flow, minimize unnecessary fees, and maximize their earnings. These services are offered at our branch locations and include analyzed business checking accounts, remote deposit capture, ACH origination, 12 Table of Contents cash vault services, courier service, and lockbox processing.
Treasury securities. 12 Table of Contents Deposit Products We offer comprehensive treasury services tools that are designed to improve our clients’ cash flow, minimize unnecessary fees, and maximize their earnings. These services are offered at our branch locations and include analyzed business checking accounts, remote deposit capture, ACH origination, cash vault services, courier service, and lockbox processing.
Although we typically require monthly payments of interest and a portion of the principal on our loan products, we will offer consumer loans with a single maturity date when a specific source of repayment is available. Also included in our consumer loan portfolio are consumer solar panel loans that were acquired as part of the merger with CALB.
Although we typically require monthly payments of interest and a portion of the principal on our loan products, we will offer consumer loans with a single maturity date when a specific source of repayment is available. Also included in our consumer loan portfolio were consumer solar panel loans that were acquired as part of the merger with CALB.
We generally invest in bonds with lower credit risk, primarily those secured by government agencies or highly rated municipalities, to assist in the diversification of credit risk within our asset base. Currently, we primarily invest in agency securities, municipal bonds, mortgage-backed securities, collateralized mortgage obligations securities, SBA loan pools securities, and U.S. Treasury securities.
We generally invest in bonds with lower credit risk, primarily those secured by government agencies or highly rated municipalities, to assist in the diversification of credit risk within our asset base. Currently, we primarily invest in agency securities, municipal bonds, mortgage-backed securities, collateralized mortgage obligations securities, SBA loan pools securities, and U.S.
Lending is a dynamic process and is dependent on the assessment of the adequacy and reliability of a borrower’s cash flow, collateral, integrity and willingness to repay the loan according to normal and customary terms. We understand the nature of gathering information, assessing its value and then making decisions based on the relevant facts.
Lending is a dynamic process and is dependent on the assessment of the adequacy and reliability of a borrower’s cash flow, collateral, and willingness to repay the loan according to normal and customary terms. We understand the nature of gathering information, assessing its value and then making decisions based on the relevant facts.
The following table sets forth the minimum regulatory capital levels for each category: Capital Category Total Risk-Based Capital Ratio Tier 1 Risk-Based Capital Ratio Common Equity Tier 1 (CET1) Capital Ratio Leverage Ratio Tangible Equity to Assets Supplemental Leverage Ratio Well-Capitalized 10% or greater 8% or greater 6.5% or greater 5% or greater n/a n/a Adequately Capitalized 8% or greater 6% or greater 4.5% or greater 4% or greater n/a 3% or greater Undercapitalized Less than 8% Less than 6% Less than 4.5% Less than 4% n/a Less than 3% Significantly Undercapitalized Less than 6% Less than 4% Less than 3% Less than 3% n/a n/a Critically Undercapitalized n/a n/a n/a n/a Less than 2% n/a 19 Table of Contents An institution’s capital category is determined solely for the purpose of applying prompt corrective action regulations, and the capital category may not constitute an accurate representation of the institution’s overall financial condition or prospects for other purposes.
The following table sets forth the minimum regulatory capital levels for each category: Capital Category Total Risk-Based Capital Ratio Tier 1 Risk-Based Capital Ratio Common Equity Tier 1 (CET1) Capital Ratio Leverage Ratio Tangible Equity to Assets Supplemental Leverage Ratio Well-Capitalized 10% or greater 8% or greater 6.5% or greater 5% or greater n/a n/a Adequately Capitalized 8% or greater 6% or greater 4.5% or greater 4% or greater n/a 3% or greater Undercapitalized Less than 8% Less than 6% Less than 4.5% Less than 4% n/a Less than 3% Significantly Undercapitalized Less than 6% Less than 4% Less than 3% Less than 3% n/a n/a Critically Undercapitalized n/a n/a n/a n/a Less than 2% n/a An institution’s capital category is determined solely for the purpose of applying prompt corrective action regulations, and the capital category may not constitute an accurate representation of the institution’s overall financial condition or prospects for other purposes.
Anti-Money Laundering and Suspicious Activity . Several federal laws, including the Bank Secrecy Act, the Money Laundering Control Act and the Patriot Act require all financial institutions, including banks, to implement policies and procedures relating to anti-money laundering, compliance, suspicious activities, and currency transaction reporting and due diligence on clients.
Several federal laws, including the Bank Secrecy Act, the Money Laundering Control Act and the Patriot Act require all financial institutions, including banks, to implement policies and procedures relating to anti-money laundering, compliance, suspicious activities, and currency transaction reporting and due diligence on clients.
These are generally based on the financial strength and integrity of the borrower and guarantor(s) and generally (with some exceptions) are collateralized by short-term assets such as accounts receivable, inventory, equipment, or a borrower’s other business assets.
These are generally based on the financial strength of the borrower and guarantor(s) and generally (with some exceptions) are collateralized by short-term assets such as accounts receivable, inventory, equipment, or a borrower’s other business assets.
We could remain an emerging growth company until the earliest of (i) the end of the fiscal year following the fifth anniversary of the completion of our initial public offering which would be December 31, 2028, (ii) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three year period.
We could remain an emerging growth company until the earliest of (i) the end of the fiscal year following the fifth anniversary of the completion of our initial public offering which would be December 31, 2028, (ii) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 13 Table of Contents million as of the last business day of our most recently completed second fiscal quarter, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three year period.
For this purpose, federal banking regulations define five capital categories: “well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” As of December 31, 2024, the Bank’s capital levels exceeded the minimum levels required to be considered “well-capitalized,” which means it had a common equity Tier 1 capital ratio of 6.5% or higher; a Tier I risk-based capital ratio of 8.0% or higher; a total risk-based capital ratio of 10.0% or higher; and a leverage ratio of 5.0% or higher.
For this purpose, federal banking regulations define five capital categories: “well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” As of December 31, 2025, the Bank’s capital levels exceeded the minimum levels required to be considered “well-capitalized,” which means it had a common equity Tier 1 capital ratio of 6.5% or higher; a Tier I risk-based capital ratio of 8.0% or higher; a total risk-based capital ratio of 10.0% or higher; and a leverage ratio of 5.0% or higher.
These actions include the power to enjoin any “unsafe or unsound” banking practices; to require that affirmative action be taken to correct any conditions resulting from any violation of law or 16 Table of Contents unsafe or unsound practice; to issue an administrative order that can be judicially enforced; to require that it increase its capital; to restrict its growth; to assess civil monetary penalties against it or its officers or directors; to remove officers and directors of the bank; and if the federal banking agency concludes that such conditions at the bank holding company or the bank cannot be corrected or there is an imminent risk of loss to depositors, to terminate a bank’s deposit insurance, which would then require it to cease its banking operations.
These actions include the power to enjoin any “unsafe or unsound” banking practices; to require that affirmative action be taken to correct any conditions resulting from any violation of law or unsafe or unsound practice; to issue an administrative order that can be judicially enforced; to require that it increase its capital; to restrict its growth; to assess civil monetary penalties against it or its officers or directors; to remove officers and directors of the bank; and if the federal banking agency concludes that such conditions at the bank holding company or the bank cannot be corrected or there is an imminent risk of loss to depositors, to terminate a bank’s deposit insurance, which would then require it to cease its banking operations.
Management’s confidence in this opportunity is based on the fact that the state has the highest concentration of small businesses in the nation, while it has also experienced a 70% decrease in banks headquartered in the area over the last 23 years, according to data gathered from the FDIC and S&P Global IQ Pro, as of December 31, 2024.
Management’s confidence in this opportunity is based on the fact that the state has the highest concentration of small businesses in the nation, while it has also experienced a 70% decrease in banks headquartered in the area over the last 23 years, according to data gathered from the FDIC and S&P Global IQ Pro, as of December 31, 2025.
The products offered are aimed at both business and individual customers in our target market. Credit Administration and Loan Review The safety of a bank’s capital is dependent on the quality of its loan portfolio. We believe high quality loans are typically associated with a bank that has a simple but concise loan policy.
The products offered are aimed at both business and individual customers in our target markets. Credit Administration and Loan Review The safety of a bank’s capital is dependent on the quality of its loan portfolio. We believe high quality loans are typically associated with a bank that has a simple but concise loan policy.
We compete with commercial banks, credit unions, mortgage banking firms, finance companies, non-bank lenders, including “fintech” lenders, securities brokerage firms, insurance companies, money market funds and other mutual funds, as well as regional and national financial institutions that operate offices in our market areas and elsewhere.
We compete with commercial banks, credit unions, mortgage banking firms, finance companies, non-bank lenders, including “fintech” lending and payment companies, securities brokerage firms, insurance companies, money market funds and other mutual funds, as well as regional and national financial institutions that operate offices in our market areas and elsewhere.
These provisions include: 13 Table of Contents • a requirement to have only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations; • exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002; • reduced disclosure about the emerging growth company’s executive compensation arrangements; and • no non-binding advisory votes on executive compensation or golden parachute arrangements.
These provisions include: • a requirement to have only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations; • exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002; • reduced disclosure about the emerging growth company’s executive compensation arrangements; and • no non-binding advisory votes on executive compensation or golden parachute arrangements.
Item 1. Business General Overview California BanCorp (formerly Southern California Bancorp) is a California corporation incorporated on October 2, 2019 and is registered with the Board of Governors of the Federal Reserve System as a bank holding company for California Bank of Commerce, N.A. (formerly Bank of Southern California, N.A.) under the Bank Holding Company Act of 1956, as amended.
Item 1. Business General Overview California BanCorp is a California corporation incorporated on October 2, 2019 and is registered with the Board of Governors of the Federal Reserve System as a bank holding company for California Bank of Commerce, N.A. under the Bank Holding Company Act of 1956, as amended.
The portions of the SBA 7(a) loans not sold but collateralized by real estate are monitored by collateral type and are included in our loans held for investment portfolio. The SBA 504 loan program is not guaranteed by the SBA, as there is a junior lien loan that is funded separately by the SBA.
The portions of the SBA 7(a) loans not sold but collateralized are monitored by the collateral type and are included in our loans held for investment portfolio. The SBA 504 loan program is not guaranteed by the SBA, as there is a junior lien loan that is funded separately by the SBA.
In addition, as an insured depository institution, we are subject to regulation by the FDIC. Federal and state laws and regulations generally applicable to financial institutions regulate our scope of business, investments, reserves against deposits, capital levels, the nature and amount of collateral for loans, the establishment of branches, mergers, acquisitions, dividends, and other matters.
In addition, as an insured depository institution, we are subject to regulation by the FDIC. Federal and state laws and regulations generally applicable to financial institutions regulate our scope of business, investments, reserves against deposits, capital levels, the nature and amount of 14 Table of Contents collateral for loans, the establishment of branches, mergers, acquisitions, dividends, and other matters.
These reforms may include amendments to the Dodd-Frank Act, other federal banking laws, and structural changes to the Consumer Financial Protection Bureau (CFPB). We cannot predict whether any of these proposals will be enacted and, if enacted, the effect that these proposals, or any implementing regulations, would have on our business, consolidated financial condition and consolidated results of operations.
These reforms may include amendments to the Dodd-Frank Act, other federal banking laws, and structural changes to the CFPB. We cannot predict whether any of these proposals will be enacted and, if enacted, the effect that these proposals, or any implementing regulations, would have on our business, consolidated financial condition and consolidated results of operations.
The GLBA established certain information security guidelines that require each financial institution to maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer 22 Table of Contents information, to protect against anticipated threats or hazards to the security or integrity of such information, and to protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer.
The GLBA established certain information security guidelines that require each financial institution to maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information, to protect against anticipated threats or hazards to the security or integrity of such information, and to protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer.
New proposals that could substantially intensify the regulation of the financial services industry have been and may be 23 Table of Contents expected to continue to be introduced in the United States Congress, in state legislatures, and by applicable regulatory authorities. These proposals may change banking statutes and regulations and our operating environment in substantial and unpredictable ways.
New proposals that could substantially intensify the regulation of the financial services industry have been and may be expected to continue to be introduced in the United States Congress, in state legislatures, and by applicable regulatory authorities. These proposals may change banking statutes and regulations and our operating environment in substantial and unpredictable ways.
Because our loan portfolio contains a number of CRE loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in our levels of nonperforming assets. Commercial and Industrial Loans Our C&I loans are generally made to businesses located in California.
Because our loan portfolio contains a number of CRE loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in our levels of non-performing assets. Commercial and Industrial Loans Our C&I loans are generally made to businesses located in California.
Small Business Administration (“SBA”) Loans Small Business Administration Loans We are designated as a Preferred Lender under the SBA Preferred Lender Program, and we offer both an SBA 7(a) loan program, generally at variable rates, and an SBA 504 loan program, generally with 11 Table of Contents an initial fixed rate for a term of between five and seven years.
Small Business Administration (“SBA”) Loans Small Business Administration Loans We are designated as a Preferred Lender under the SBA Preferred Lender Program, and we offer both an SBA 7(a) loan program, generally at variable rates, and an SBA 504 loan program, generally with an initial fixed rate for a term of between five and seven years.
Any such guarantee from a depository institution’s holding company is entitled to a priority of payment in bankruptcy. The bank regulators have greater power in situations where an institution becomes “significantly” or “critically” undercapitalized or fails to submit a capital restoration plan.
Any such guarantee from a depository institution’s holding company is entitled to a priority of payment in bankruptcy. 19 Table of Contents The bank regulators have greater power in situations where an institution becomes “significantly” or “critically” undercapitalized or fails to submit a capital restoration plan.
The Bank Holding Company Act provides that, in the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a bank subsidiary will be assumed by the bankruptcy trustee and entitled to priority of payment. Restrictions on Dividends and Stock Repurchases .
The Bank Holding Company Act provides that, in the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a bank subsidiary will be assumed by the bankruptcy trustee and entitled to priority of payment. 17 Table of Contents Restrictions on Dividends and Stock Repurchases .
A financial institution is expected to have a robust business continuity program to recover from a cyberattack and procedures for monitoring the security of third-party service providers that may have access to nonpublic data at the institution. Consumer Laws and Regulations .
A financial institution is expected to have a robust business continuity program to recover from a cyberattack and procedures for monitoring the security of third-party service providers that may have access to nonpublic data at the institution. 22 Table of Contents Consumer Laws and Regulations .
The federal banking agencies have adopted minimum risk-based capital requirements (Tier 1 capital, common equity Tier 1 capital (“CET1”) and total capital) and leverage capital requirements, as well as guidelines that define components of the calculation of capital and the level of risk associated with 15 Table of Contents various types of assets.
The federal banking agencies have adopted minimum risk-based capital requirements (Tier 1 capital, common equity Tier 1 capital (“CET1”) and total capital) and leverage capital requirements, as well as guidelines that define components of the calculation of capital and the level of risk associated with various types of assets.
Our policies are designed to help ensure that all loan applicants are 8 Table of Contents credit-checked thoroughly and the decision to provide a credit extension is made only after all pertinent information is developed and analyzed. Basic to developing mutually profitable relationships is flexibility and adaptability to our clients’ requirements, while adhering to sound lending principles and objectives.
Our policies are designed to help ensure that all loan applicants are credit-checked thoroughly and the decision to provide a credit extension is made only after all pertinent information is developed and analyzed. Basic to developing mutually profitable relationships is flexibility and adaptability to our clients’ requirements, while adhering to sound lending principles and objectives.
These SBA loans are reported in construction and land loans, real estate loans, and C&I loans. We originate SBA 7(a) loans with the intention of selling the guaranteed portion in the secondary market as soon as the loan is fully funded and the guaranteed portion may be sold.
These SBA loans are reported in construction and land loans, real estate loans, and C&I loans. We originate SBA 7(a) loans with the intention of selling the guaranteed portion in the secondary market as soon as the loan is fully funded.
The SBA 504 loan program consists of real estate backed commercial mortgages where we have the first mortgage and the SBA has the second mortgage on the property. Generally, we have a 50% loan-to-value ratio on SBA 504 loan program loans at the origination date.
The SBA 504 loan program consists of real estate backed commercial mortgages where we have the first mortgage and the SBA has the second mortgage on the property. 11 Table of Contents Generally, we have a 50% loan-to-value ratio on SBA 504 loan program loans at the origination date.
These loans are secured by single family residential properties (one to four units), multifamily residential properties (five or more units), owner-occupied CRE, and non-owner-occupied CRE. Real estate loans are subject to the same general risks as other loans and may also be impacted by changing demographics, collateral maintenance, 10 Table of Contents and product supply and demand.
These loans are secured by single family residential properties (one to four units), multifamily residential properties (five or more units), owner-occupied CRE, and non-owner-occupied CRE. Real estate loans are subject to the same general risks as other loans and may also be impacted by changing demographics, collateral maintenance, and product supply and demand.
Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer most types of financial services, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking.
Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer most types of financial 7 Table of Contents services, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking.
See our discussion in “Item 1A - Risk Factors.” Employees As of December 31, 2024, we had 289 full-time equivalent employees. None of our employees are represented by any collective bargaining unit or is party to a collective bargaining agreement.
See our discussion in “Item 1A - Risk Factors.” Employees As of December 31, 2025, we had 288 full-time equivalent employees. None of our employees are represented by any collective bargaining unit or is party to a collective bargaining agreement.
The competing major commercial banks have greater resources that may provide them with a competitive advantage by 7 Table of Contents enabling them to maintain numerous branch offices, mount extensive advertising campaigns and invest in new technologies.
The competing major commercial banks have greater resources that may provide them with a competitive advantage by enabling them to maintain numerous branch offices, mount extensive advertising campaigns and invest in new technologies.
In connection with the Merger, our shareholders also approved a change of the Company’s name from Southern California 6 Table of Contents Bancorp to California BanCorp.
In connection with the Merger, our shareholders also approved a change of the Company’s name from Southern California Bancorp to California BanCorp.
Our held-to-maturity and available-for-sale debt securities represented 1.32% and 3.52%, respectively, of total assets at December 31, 2024. The primary objective of our investing activities is to provide for the safety of the principal invested. Our secondary considerations include the maximization of earnings, liquidity and to help decrease our overall exposure to changes in interest rates.
Our held-to-maturity and available-for-sale debt securities represented 1.31% and 5.82%, respectively, of total assets at December 31, 2025. The primary objective of our investing activities is to provide for the safety of the principal invested. Our secondary considerations include the maximization of earnings, liquidity and to help decrease our overall exposure to changes in interest rates.
Prior to the merger with CALB during the third quarter of 2024, the Company qualified for treatment under the Small Bank Holding Company Policy Statement and, therefore, was not subject to consolidated capital rules at the bank holding company level.
Prior to the Merger during the third quarter of 2024, the Company qualified for treatment under the Small Bank Holding Company Policy Statement and, therefore, was not subject to consolidated capital rules at the bank holding company level. Beginning in the third quarter of 2024, the Company became subject to the consolidated capital rules at the bank holding company level.
In the event an institution becomes “undercapitalized,” it must submit a capital restoration plan. The capital restoration plan will not be accepted by the regulators unless each company “having control of” the undercapitalized institution “guarantees” the subsidiary’s compliance with the capital restoration plan until it becomes “adequately capitalized.” For purposes of this statute, the Company controls the Bank.
The capital restoration plan will not be accepted by the regulators unless each company “having control of” the undercapitalized institution “guarantees” the subsidiary’s compliance with the capital restoration plan until it becomes “adequately capitalized.” For purposes of this statute, the Company controls the Bank.
The federal banking regulators have issued guidance to identify institutions that may be exposed to potential significant CRE lending risks and may therefore warrant greater supervisory scrutiny.
Concentrations in Commercial Real Estate Lending . The federal banking regulators have issued guidance to identify institutions that may be exposed to potential significant CRE lending risks and may therefore warrant greater supervisory scrutiny.
In addition to salaries, we provide annual bonus opportunities to all employees, and we offer a 401(k) plan with an employer matching contribution, healthcare and insurance benefits, as well as flexible and health care savings accounts. We have implemented a Diversity, Equity, and Inclusion (“DEI”) Policy.
In addition to salaries, we provide annual bonus opportunities to all employees, and we offer a 401(k) plan with an employer matching contribution, healthcare and insurance benefits, as well as flexible and health care savings accounts.
Debt securities classified as “available-for-sale” may be sold prior to maturity due to changes in interest rates, prepayment risks, availability of alternative investments, or to meet our liquidity needs. At December 31, 2024, debt securities held-to-maturity and available-for sale had carrying amounts of $53.3 million and $142.0 million, respectively.
Debt securities classified as “available-for-sale” may be sold prior to maturity due to changes in interest rates, prepayment risks, availability of alternative investments, or to meet our liquidity needs. At December 31, 2025, debt securities held-to-maturity and available-for sale had carrying amounts of $52.9 million and $234.9 million, respectively.
This was comprised of an “outstanding” rating on Community Development, and “satisfactory” on lending, under the Intermediate Small Bank regulatory criteria. On October 24, 2023, the federal regulatory agencies jointly issued a final rule to strengthen and modernize regulations implementing the CRA.
The Bank received a “satisfactory” overall rating in its most recent CRA evaluation in 2024. This was comprised of an “outstanding” rating on Community Development, and “satisfactory” on lending, under the Intermediate Small Bank regulatory criteria. On October 24, 2023, the federal regulatory agencies jointly issued a final rule to strengthen and modernize regulations implementing the CRA.
The Gramm Leach Bliley Act (“GLBA”) expanded the permissible activities of a bank holding company that qualifies as a financial holding company to engage in activities that are financial in nature or incidental or complementary to 17 Table of Contents financial activities. Those activities include, among other activities, certain insurance, advisory and securities activities.
The Gramm Leach Bliley Act (“GLBA”) expanded the permissible activities of a bank holding company that qualifies as a financial holding company to engage in activities that are financial in nature or incidental or complementary to financial activities. Those activities include, among other activities, certain insurance, advisory and securities activities. We have not elected to be a financial holding company.
Most loans require payment in full upon the sale or refinance of the property, unless the project is user-owned which may then convert to a conventional term loan.
The term of construction and development loans generally is limited to 12 to 36 months. Most loans require payment in full upon the sale or refinance of the property, unless the project is user-owned which may then convert to a conventional term loan.
SBA loans are personally guaranteed. As of December 31, 2024, we had $189.4 million of SBA loans, representing 6.1% of total loans held for investment, and there were $374 thousand non-performing SBA loans. Consumer Loans We occasionally make loans to individuals for personal and household purposes, including secured and unsecured installment loans and revolving lines of credit.
SBA loans are personally guaranteed. As of December 31, 2025, we had $175.7 million of SBA loans, representing 5.9% of total loans held for investment, and there were $473 thousand non-performing SBA loans. Consumer Loans We occasionally make loans to individuals for personal and household purposes, including secured and unsecured installment loans and revolving lines of credit.
The primary source of capital for the Company’s payment of any dividend or its repurchase of stock is expected to be the Bank, through the Bank’s payment of dividends or management fees to the Company. During the year ended December 31, 2024, there were no dividends paid by the Bank to the Company.
The primary source of capital for the Company’s payment of any dividend or its repurchase of stock is expected to be the Bank, through the Bank’s payment of dividends or management fees to the Company. During the years ended December 31, 2025 and 2024 there were $60.0 million and zero, respectively, in dividends paid by the Bank to the Company.
As of December 31, 2024, we had $222.0 million of construction and development loans, or 7.1% of our loans held-for-investment portfolio, excluding SBA loans, and there were $9.7 million non-performing construction and land development loans. Real Estate Loans A significant component of our loan portfolio is real estate loans.
As of December 31, 2025, we had $134.3 million of construction and development loans, or 4.4% of our loans held-for-investment portfolio, excluding SBA loans, and there were $13.8 million non-performing construction and land development loans. Real Estate Loans A significant component of our loan portfolio is real estate loans.
Our CRE loans generally have terms of 10 years or less, although payments may be structured on a longer amortization basis. Each borrower is evaluated on an individual basis with an emphasis on determining their business risks and credit profile.
There were $83 thousand non-performing real estate loans at December 31, 2025. 10 Table of Contents Our CRE loans generally have terms of 10 years or less, although payments may be structured on a longer amortization basis. Each borrower is evaluated on an individual basis with an emphasis on determining their business risks and credit profile.
Regulators have increased their focus on the regulation of the financial services industry in recent years, leading in many cases to greater uncertainty and compliance costs for regulated entities.
Future Legislation and Regulation Legislative acts are periodically introduced in both Congress and the California legislature. Regulators have increased their focus on the regulation of the financial services industry in recent years, leading in many cases to greater uncertainty and compliance costs for regulated entities.
Additional information can be found on our website: www.californiabankofcommerce.com. Information on our website or any other website is not incorporated by reference herein and does not constitute a part of this annual report. Public Information Our SEC filings are available to the public on the SEC’s Internet site at http://www.sec.gov.
Information on our website or any other website is not incorporated by reference herein and does not constitute a part of this annual report. Public Information Our SEC filings are available to the public on the SEC’s Internet site at http://www.sec.gov. You may also obtain these documents, free of charge, from the investor relations section of our website at http://www.californiabankofcommerce.com.
As a bank holding company, the Company is subject to the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”), and its primary regulator is the Federal Reserve.
Supervision and Regulation We are extensively regulated under federal and state law. As a bank holding company, the Company is subject to the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”), and its primary regulator is the Federal Reserve.
As of December 31, 2024, we had $2.01 billion of real estate loans, or 64.0% of our loans held for investment, excluding SBA loans.
As of December 31, 2025, we had $2.13 billion of real estate loans, or 70.3% of our loans held for investment, excluding SBA loans.
As of December 31, 2024, we had $693.5 million of C&I loans, or 22.1% of our loans held for investment portfolio, excluding SBA loans, and there were $4.9 million non-performing C&I loans.
As of December 31, 2025, we had $589.0 million of C&I loans, or 19.4% of our loans held for investment portfolio, excluding SBA loans, and there were $2.2 million non-performing C&I loans.
In connection with our participation in this program, we purchased $5.0 million in letters of credit issued by FHLB as collateral at December 31, 2024. Well-capitalized institutions are not subject to limitations on brokered deposits. As of December 31, 2024, we had $121.1 million brokered time deposits, representing 3.6% of total deposits.
In connection with our participation in this program, we had $5.0 million in letters of credit issued by FHLB as collateral at December 31, 2025. We had $3.8 million brokered time deposits, representing 0.1% of total deposits at December 31, 2025.
We have not elected to be a financial holding company. Imposition of Liability for Undercapitalized Subsidiaries: Source of Strength . Under the Federal Deposit Insurance Act (the “FDIA”) federal banking agencies are required to take “prompt corrective action” should an insured depository institution fail to meet certain capital adequacy standards.
Imposition of Liability for Undercapitalized Subsidiaries: Source of Strength . Under the Federal Deposit Insurance Act (the “FDIA”) federal banking agencies are required to take “prompt corrective action” should an insured depository institution fail to meet certain capital adequacy standards. In the event an institution becomes “undercapitalized,” it must submit a capital restoration plan.
Capital and surplus means Tier 1 and Tier 2 capital plus the amount of ACL not included in Tier 2 capital. We do not have loans in excess of our loans-to-one borrower limit. FDIC Insurance Assessments . The Bank’s deposits are insured by the Deposit Insurance Fund of the FDIC up to the maximum amount permitted by law.
Capital and surplus means Tier 1 and Tier 2 capital plus the amount of ACL not included in Tier 2 capital. We do not have loans in excess of our loans-to-one borrower limit. 20 Table of Contents FDIC Insurance Assessments .
We support our communities through philanthropic giving to nonprofit organizations with which we generally have a direct banking relationship (including investments, deposits, and loans) and/or Community Reinvestment Act (“CRA”) service or referral relationships. Our Advisory Boards consist of leaders in the local business communities that offer insights into business conditions in the regional area and introduce us to prospective clients.
We have deep roots in the communities in which we do business, through donations, regional Advisory Boards, and our employees’ involvement in local nonprofits. We support our communities through philanthropic giving to nonprofit organizations with which we generally have a direct banking relationship (including investments, deposits, and loans) and/or Community Reinvestment Act (“CRA”) service or referral relationships.
Since its founding, our franchise has experienced significant growth through acquisitions and our dedication to serving the communities in which we operate. As of December 31, 2024, our consolidated assets have grown to $4.03 billion and our branch footprint has been extended throughout California.
Since its founding, our franchise has experienced significant growth through acquisitions and our dedication to serving the communities in which we operate. As of December 31, 2025, we had consolidated assets of $4.03 billion and our branch footprint extends throughout California. Community support is integral to who we are, how we operate, and our success in each community we bank.
Our strategy for evaluating credit worthiness is to follow conservative loan policies and consistent underwriting practices. The following are key objectives of our loan philosophy: a. Sound and constructive extension of credit based on the adequacy and reliability of cash flow. b. Structuring loan terms around the purpose of the loan and the corresponding primary repayment source. c.
Our strategy for evaluating credit worthiness is to follow conservative loan policies and consistent underwriting practices. 8 Table of Contents The following are key objectives of our loan philosophy: a. Relationship-based loan extensions that include a deposit relationship, not solely transaction based. b. Sound and constructive extension of credit based on the adequacy and reliability of cash flow. c.
The final rule exempts most Insured Depository Institutions that are part of a small banking organization from making payments under the special assessment. The special assessment will not apply to any banking organizations with total assets under $5 billion. Concentrations in Commercial Real Estate Lending .
The final rule exempts most Insured Depository Institutions that are part of a small banking organization from making payments under the special assessment. The special assessment will not apply to any banking organizations with total assets under $5 billion. As of December 31, 2025, the Bank’s total assets were $4.03 billion and was not subject to this special assessment.
The following table presents the capital ratios applicable to the Company and the Bank: Minimum Capital Required To be With Capital To be Well- Adequately Conservation Capitalized under Capitalized Buffer PCA Provisions (1) As of December 31, 2024: Total Capital (to Risk-Weighted Assets) 8.0 % 10.5 % 10.0 % Tier 1 Capital (to Risk-Weighted Assets) 6.0 % 8.5 % 8.0 % CET1 Capital (to Risk-Weighted Assets) 4.5 % 7.0 % 6.5 % Tier 1 Capital (to Average Assets) 4.0 % 4.0 % 5.0 % 1.
The following table presents the capital ratios applicable to the Company and the Bank: Minimum Capital Required To be With Capital To be Well- Adequately Conservation Capitalized under Capitalized Buffer PCA Provisions (1) As of December 31, 2025: Total Capital (to Risk-Weighted Assets) 8.0 % 10.5 % 10.0 % Tier 1 Capital (to Risk-Weighted Assets) 6.0 % 8.5 % 8.0 % CET1 Capital (to Risk-Weighted Assets) 4.5 % 7.0 % 6.5 % Tier 1 Capital (to Average Assets) 4.0 % 4.0 % 5.0 % (1) For Bank only. 15 Table of Contents The capital rules require that goodwill and other intangible assets (other than mortgage servicing assets), net of associated deferred tax liabilities (“DTLs”), be deducted from CET1 capital.
As an FDIC insured financial institution, we are subject to deposit insurance assessments as determined by the FDIC.
The Bank’s deposits are insured by the Deposit Insurance Fund of the FDIC up to the maximum amount permitted by law. As an FDIC insured financial institution, we are subject to deposit insurance assessments as determined by the FDIC.
We retained the banking offices of both banks, adding California Bank of Commerce’s one full-service bank branch and its four loan production offices in the Northern California to the Bank’s 13 full-service bank branches located throughout the Southern California region, for a total of 14 branch offices.
We retained the banking offices of both banks, adding California Bank of Commerce’s one full-service bank branch and its four loan production offices in the Northern California region to the Bank’s 13 full-service bank branches located throughout the Southern California region, for a total of 14 branch offices. 6 Table of Contents When we completed the Merger on July 31, 2024, CALB had total loans of $1.43 billion, total assets of $1.91 billion, and total deposits of $1.64 billion.
For Bank only. The capital rules require that goodwill and other intangible assets (other than mortgage servicing assets), net of associated deferred tax liabilities (“DTLs”), be deducted from CET1 capital. Additionally, deferred tax assets (“DTAs”) that arise from net operating loss and tax credit carryforwards, net of associated DTLs and valuation allowances, are fully deducted from CET1 capital.
Additionally, deferred tax assets (“DTAs”) that arise from net operating loss and tax credit carryforwards, net of associated DTLs and valuation allowances, are fully deducted from CET1 capital.
They consist of residential solar panel loans to consumers with an average individual term ranging from 10 to 20 years and are primarily collateralized by the related equipment.
At December 31, 2025, the consumer solar panel loans were transferred to loans held for sale at fair value. They consist of residential solar panel loans to consumers with an average individual term ranging from 10 to 20 years and are primarily collateralized by the related equipment. These loans were originated and serviced by unaffiliated third parties.
Total interest-bearing non-maturity deposits at December 31, 2024 were $1.86 billion, representing 54.6% of total deposits. We participated in the Time Deposit Program administered by the California State Treasurer in 2024 and 2023. As of December 31, 2024, time deposits from the State of California totaled $5.0 million.
Total time deposits at December 31, 2025 were $128.2 million, representing 3.8% of total deposits. We had $45.4 million CDARS deposits. We participated in the Time Deposit Program administered by the California State Treasurer in 2025 and 2024. As of December 31, 2025, time deposits from the State of California totaled $5.0 million.
On March 29, 2024, a federal district court in Texas granted a preliminary injunction barring implementation of the final rule in response to a lawsuit filed by several trade groups. We will continue to monitor the litigation until resolved. We have also begun efforts to evaluate the impact of the new rule and to develop a strategy to ensure compliance.
On March 29, 2024, a federal district court in Texas granted a preliminary injunction barring implementation of the final rule in response to a lawsuit filed by several trade groups.
As a California corporation, we are subject to California law, which permits California corporations to distribute cash or property to shareholders, including as a dividend or repurchase or redemption of shares, if the corporation meets either a retained earnings test or a “balance sheet” test. 18 Table of Contents Under the retained earnings test, we may make a distribution from retained earnings to the extent that our retained earnings exceed the sum of the amount of the distribution plus the amount, if any, of dividends in arrears on shares with preferential dividend rights.
As a California corporation, we are subject to California law, which permits California corporations to distribute cash or property to shareholders, including as a dividend or repurchase or redemption of shares, if the corporation meets either a retained earnings test or a “balance sheet” test.
In September 2024, the OCC adopted a final rule and policy statement regarding its review of Bank Merger Act applications for OCC-supervised institutions, including the 20 Table of Contents Bank.
The OCC must approve the Bank’s acquisition of other financial institutions and certain other acquisitions, such as the acquisition and assumption of the deposits of another depository institution. In September 2024, the OCC adopted a final rule and policy statement regarding its review of Bank Merger Act applications for OCC-supervised institutions, including the Bank.
Our deposit products consist primarily of demand, money market, and certificates of deposit accounts and we offer treasury management services including online banking, cash vault, sweep accounts, and lockbox services.
Our lending products consist primarily of construction and land development loans, commercial real estate (“CRE”) loans, commercial and industrial (“C&I”) loans, U.S. Small Business Administration (“SBA”) loans, and consumer loans. Our deposit products consist primarily of demand, money market, and certificates of deposit accounts and we offer treasury management services including online banking, cash vault, sweep accounts, and lockbox services.
The Bank paid dividends to the Company of $2.0 million during the year ended December 31, 2023. The ability of the Bank to pay cash dividends or fees to the Company is limited by law and regulation, as described in “ Regulation of the Bank — Dividend Restrictions Applicable to the Bank ,” below.
The ability of the Bank to pay cash dividends or fees to the Company is limited by law and regulation, as described in “ Regulation of the Bank — Dividend Restrictions Applicable to the Bank ,” below. 18 Table of Contents Regulation of the Bank The Bank is a national banking association chartered under the National Bank Act.
The deposit accounts of the Bank are insured by the FDIC to the maximum extent provided under federal law and the Bank is therefore subject to certain FDIC regulations as well. The OCC regularly examines the Bank’s operations and has the authority to approve or disapprove mergers, the establishment of branches and similar corporate actions.
As a national bank, the Bank is subject to supervision and regulation by the OCC, the chartering authority for national banks. The deposit accounts of the Bank are insured by the FDIC to the maximum extent provided under federal law and the Bank is therefore subject to certain FDIC regulations as well.
At July 31, 2024, CALB had total loans of $1.43 billion, total assets of $1.91 billion, and total deposits of $1.64 billion. The Merger created a bank holding company with approximately $4.25 billion in assets and 14 branches across California, with approximately 300 employees serving our communities.
The Merger created a bank holding company with approximately $4.25 billion in assets and 14 branches across California, with approximately 300 employees serving our communities. Total aggregate consideration paid for the Merger was approximately $216.6 million and resulted in approximately $73.1 million of goodwill.
Failure to adequately meet these criteria could impose additional requirements and limitations on the Bank. Additionally, the Bank must publicly disclose the terms of various CRA-related agreements. The Bank received a “satisfactory” overall rating in its most recent CRA evaluation in 2024.
Federal banking agencies must consider an institution’s CRA compliance in approving mergers, acquisitions, and applications to open a branch. Failure to adequately meet these criteria could impose additional requirements and limitations on the Bank. Additionally, the Bank must publicly disclose the terms of various CRA-related agreements.
As of December 31, 2024, we had $24.7 million consumer loans, representing 0.7% of total loans held for investment. There were $150 thousand consumer solar loans that were over 90 days past due that were accruing interest and no nonaccrual consumer loans at December 31, 2024.
As of December 31, 2025, we had $2.2 million consumer loans, representing 0.0% of total loans held for investment. There were no nonaccrual consumer loans at December 31, 2025.
Banking regulators expect banks with concentrations of 21 Table of Contents CRE loans to maintain appropriate underwriting discipline, risk-management and capital commensurate with the level and nature of their CRE risks. Community Reinvestment Act .
Banking regulators expect banks with concentrations of CRE loans to maintain appropriate underwriting discipline, risk-management and capital commensurate with the level and nature of their CRE risks. Community Reinvestment Act . The CRA requires that the federal banking agencies evaluate the record of each financial institution in meeting the credit needs of its local community, including low- and moderate-income neighborhoods.
These reciprocal deposits are not required to be treated as brokered deposits up to the lesser of 20% of the Bank’s total liabilities or $5 billion. Reciprocal deposits are recorded as interest-bearing non-maturity deposits in the consolidated balance sheets. As of December 31, 2024, total reciprocal deposits were $754.4 million, or 22.2% of total deposits.
Reciprocal deposits are recorded as interest-bearing non-maturity deposits in the consolidated balance sheets. As of December 31, 2025, total reciprocal deposits were $743.6 million, or 22.1% of Bank’s total deposits. Total interest-bearing non-maturity deposits at December 31, 2025 were $2.06 billion, representing 61.2% of total deposits.
As of December 31, 2024, we had total deposits of $3.40 billion, including noninterest-bearing demand deposits of $1.26 billion, or 37.0% of total deposits. Our total deposit cost was 2.01% for the year ended December 31, 2024.
As of December 31, 2025, we had total deposits of $3.37 billion, including noninterest-bearing demand deposits of $1.18 billion, or 35.0% of total deposits. Our total deposit cost was 1.55% for the year ended December 31, 2025. We participate in the Certificate of Deposit Account Registry Service (“CDARS”) and IntraFi Network Insured Cash Sweep (“ICS”) networks.
These included $1.13 billion of loans secured by non-owner occupied CRE, $472.2 million of loans secured by owner-occupied CRE, $244.0 million of loans secured by multifamily residential properties, and $164.4 million of loans secured by single family residential properties, of which $28.7 million were HELOCs. There were $11.8 million non-performing real estate loans at December 31, 2024.
These included $1.15 billion of loans secured by non-owner occupied CRE, $519.3 million of loans secured by owner-occupied CRE, $324.1 million of loans secured by multifamily residential properties, and $142.4 million of loans secured by single family residential properties, of which $31.6 million were HELOCs.
At December 31, 2024, our limit on aggregate loans-to-one-borrower was $73.9 million for loans that are not fully secured. An additional 10% limit is allowed if fully secured by readily marketable collateral. Our legal lending limit will increase or decrease as our level of capital increases or decreases.
If the loan is secured by readily marketable collateral, the limit is raised by 10%, bringing the total to 25% of unimpaired capital and surplus. An additional 10% limit is allowed if fully secured by readily marketable collateral. Our legal lending limit will increase or decrease as our level of capital increases or decreases.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

73 edited+23 added−44 removed131 unchanged
Biggest changeOur allowance for credit losses may not be adequate to cover actual losses. • Regulatory policies regarding commercial real estate loans could limit our ability to leverage our capital and limit our growth. • We may suffer losses in our loan portfolio despite our underwriting practices. • The small- to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair our borrowers’ ability to repay loans. 24 Table of Contents • In addition to general lending risks, we face particular risks related to our SBA, real estate, commercial real estate, construction, commercial and consumer lending. • We have a significant number of loans secured by real estate, so we face risks related to a downturn in the real estate market and the impact of changes in interest rates on our real estate loans. • We rely upon independent appraisals to determine the value of the real estate that secures a significant portion of our loans, and the values indicated by such appraisals may not be realizable if we are forced to foreclose upon such loans.
Biggest changeOur allowance for credit losses may not be adequate to cover actual losses. • Regulatory policies regarding commercial real estate loans could limit our ability to leverage our capital and limit our growth. • The appraisals value of the real estate that secures a significant portion of our loan portfolio may not be realizable if we foreclose on such loans. • The small- to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair our borrowers’ ability to repay loans. • Our loan portfolio may be subject to increased concentration and volatility risks due to variability, driven by large relationship-based lending commitments. • Our construction and land development loans involve additional risks that could results in higher losses.
The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services, including the use of artificial intelligence and machine learning to interact with customers and review to review and analyze data. The effective use of technology increases efficiency and enables financial institutions to better serve customers and reduce costs.
The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services, including the use of artificial intelligence and machine learning to interact with customers and review and analyze data. The effective use of technology increases efficiency and enables financial institutions to better serve customers and reduce costs.
KEY PERSONNEL RISKS We rely heavily on our executive management team and other key personnel for our successful operation, and we could be adversely affected by the unexpected loss of their services. Our success depends in large part on the performance of our key personnel that have substantial experience and tenure with us and in the markets that we serve.
We rely heavily on our executive management team and other key personnel for our successful operation, and we could be adversely affected by the unexpected loss of their services. Our success depends in large part on the performance of our key personnel that have substantial experience and tenure with us and in the markets that we serve.
As a result, construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property, rather than the ability of the borrower or guarantor to repay principal and interest.
As a result, construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell, operate, or lease the property, rather than the ability of the borrower or guarantor to repay principal and interest.
Under this guidance, an institution that has (i) total reported loans for construction, land development, and other land which represent 100% or more of the institution’s total risk-based capital; or 29 Table of Contents (ii) total CRE representing 300% or more of the institution’s total risk-based capital, where the outstanding balance of the institution’s CRE loan portfolio has increased 50% or more during the prior 36 months, is identified as having potential CRE concentration risk.
Under this guidance, an institution that has (i) total reported loans for construction, land 28 Table of Contents development, and other land which represent 100% or more of the institution’s total risk-based capital; or (ii) total CRE representing 300% or more of the institution’s total risk-based capital, where the outstanding balance of the institution’s CRE loan portfolio has increased 50% or more during the prior 36 months, is identified as having potential CRE concentration risk.
Our goodwill was not considered impaired as of December 31, 2024 and 2023; however, no assurance can be given that we will not record an impairment loss on goodwill in the future and any such impairment loss could have a material adverse effect on our business, consolidated financial condition, and our consolidated results of operations.
Our goodwill was not considered impaired as of December 31, 2025 and 2024; however, no assurance can be given that we will not record an impairment loss on goodwill in the future and any such impairment loss could have a material adverse effect on our business, consolidated financial condition, and our consolidated results of operations.
Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” as defined in Rule 12b-2 in the Exchange Act, which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to provide an auditor attestation of our internal control over 43 Table of Contents financial reporting and reduced disclosure regarding our executive compensation arrangements in our periodic reports and proxy statements.
Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” as defined in Rule 12b-2 in the Exchange Act, which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to provide an auditor attestation of our internal control over financial reporting and reduced disclosure regarding our executive compensation arrangements in our periodic reports and proxy statements.
See “ Supervision and Regulation - Capital Adequacy. ” Details regarding the Bank’s actual capital amounts and ratios and the amount of required capital are included in Note 16 — Regulatory Matters of the Notes to Consolidated Financial Statements included in Item 8 of this annual report.
See “ Supervision and Regulation - Capital Adequacy. ” Details regarding the Bank’s actual capital amounts and ratios and the amount of required capital are included in Note 17 — Regulatory Matters of the Notes to Consolidated Financial Statements included in Item 8 of this annual report.
Accordingly, any failure, or perceived failure, to comply with applicable privacy or data protection laws may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or result in significant liabilities, fines or 37 Table of Contents penalties, and could damage our reputation and otherwise adversely affect our operations, consolidated financial condition and consolidated results of operations .
Accordingly, any failure, or perceived failure, to comply with applicable privacy or data protection laws may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or result in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our operations, consolidated financial condition and consolidated results of operations .
In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. These costs and claims could adversely affect our business, consolidated results of operations and prospects.
In addition, if we are the owner or former owner of a contaminated site, we may be subject to 38 Table of Contents common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. These costs and claims could adversely affect our business, consolidated results of operations and prospects.
Liquidity represents an institution’s ability to provide funds to satisfy demands from depositors, borrowers and other creditors by either converting assets into cash or accessing new or existing sources of incremental funds. Liquidity risk arises from the possibility that we may be unable to satisfy current or future funding requirements and needs.
Liquidity represents an institution’s ability to provide funds to satisfy demands from depositors, borrowers and other creditors by either converting assets into cash or accessing new or existing sources of 30 Table of Contents incremental funds. Liquidity risk arises from the possibility that we may be unable to satisfy current or future funding requirements and needs.
Our failure to so comply could adversely affect us and our future growth. • We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws could damage our reputation or otherwise adversely affect our business. • Our failure to comply with stringent capital requirements could result in regulatory criticism, requirements and restrictions. • We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
Our failure to comply could adversely affect us and our future growth. 24 Table of Contents • We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws could damage our reputation or otherwise adversely affect our business. • Our failure to comply with stringent capital requirements could result in regulatory criticism, requirements and restrictions. • We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
The inability of the Bank to pay dividends to the Company could have a material adverse effect on our business, including the market price of our common stock. STRATEGIC AND COMPETITIVE RISKS Our growth, expansion and any acquisitions we may pursue may strain our ability to manage our operations and financial resources.
The inability of the Bank to pay dividends to the Company could have a material adverse effect on our business, including the market price of our common stock. 32 Table of Contents STRATEGIC AND COMPETITIVE RISKS Our growth, expansion and any acquisitions we may pursue may strain our ability to manage our operations and financial resources.
Furthermore, even though goodwill is a non-cash item, significant impairment of goodwill could subject us to regulatory limitations, including the ability to pay dividends on our common stock. 35 Table of Contents Our reputation is critical to the success of our business and our failure to maintain our reputation may materially adversely affect our performance.
Furthermore, even though goodwill is a non-cash item, significant impairment of goodwill could subject us to regulatory limitations, including the ability to pay dividends on our common stock. Our reputation is critical to the success of our business and our failure to maintain our reputation may materially adversely affect our performance.
If we become subject to such regulatory actions, our business, consolidated financial condition and consolidated results of operations, and reputation could be adversely affected. We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws could damage our reputation or otherwise adversely affect our business.
If we become subject to such regulatory actions, our business, consolidated financial condition and consolidated results of operations, and reputation could be adversely affected. 34 Table of Contents We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws could damage our reputation or otherwise adversely affect our business.
If our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds 40 Table of Contents applicable insurance limits, it could have a material adverse effect on our business, consolidated financial condition and consolidated results of operations.
If our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, consolidated financial condition and consolidated results of operations.
An investment in our common stock is subject to many risks, such as those described in this document and others. As a result, if you acquire our common stock, you could lose some or all of your investment. Item 1B. Unresolved Staff Comments None.
An investment in our common stock is subject to many risks, such as those described in this document and others. As a result, if you acquire our common stock, you could lose some or all of your investment. 41 Table of Contents Item 1B. Unresolved Staff Comments None.
The risks associated with climate change are rapidly changing and evolving in an escalating fashion, making them difficult to assess. Any of the risks associated with climate change could have a 42 Table of Contents material negative impact on our business, consolidated financial condition and consolidated results of operations.
The risks associated with climate change are rapidly changing and evolving in an escalating fashion, making them difficult to assess. Any of the risks associated with climate change could have a material negative impact on our business, consolidated financial condition and consolidated results of operations.
In the event the Bank is unable to pay dividends to the Company, the Company could have difficulty meeting its other financial obligations and may need to seek other forms of liquidity, such as the 34 Table of Contents sale of stock or indebtedness.
In the event the Bank is unable to pay dividends to the Company, the Company could have difficulty meeting its other financial obligations and may need to seek other forms of liquidity, such as the sale of stock or indebtedness.
Failure to keep pace successfully with technological change affecting the financial services 38 Table of Contents industry could harm our ability to compete effectively and could have an adverse effect on our business, growth and consolidated results of operations.
Failure to keep pace successfully with technological change affecting the financial services industry could harm our ability to compete effectively and could have an adverse effect on our business, growth and consolidated results of operations.
Our failure to comply with stringent capital requirements could result in regulatory criticism, requirements and restrictions. We are subject to capital adequacy guidelines and other regulatory requirements specifying minimum amounts and types of capital which we must maintain.
Our failure to comply with stringent capital requirements could result in regulatory criticism, requirements and restrictions. We are s ubject to capital adequacy guidelines and other regulatory requirements specifying minimum amounts and types of capital which we must maintain.
Our access to funding sources in amounts adequate to finance our activities, or on terms attractive to us, could be impaired by factors that affect us specifically or the financial 33 Table of Contents services industry in general.
Our access to funding sources in amounts adequate to finance our activities, or on terms attractive to us, could be impaired by factors that affect us specifically or the financial services industry in general.
An institution that is deemed to have concentrations in CRE lending is expected to employ heightened levels of risk management with respect to its CRE portfolios, and may be required to maintain higher levels of capital. As of December 31, 2024, our CRE loans for purposes of this guidance represented 459.0% of our total risk-based capital.
An institution that is deemed to have concentrations in CRE lending is expected to employ heightened levels of risk management with respect to its CRE portfolios, and may be required to maintain higher levels of capital. As of December 31, 2025, our CRE loans for purposes of this guidance represented 469.3% of our total risk-based capital.
Material estimates subject to change in the near term include, among other items, the ACL, particularly in light of our adoption of the CECL standard in 2023; the fair value of assets and liabilities acquired in business combinations and related purchase price allocation, the valuation of acquired loans, the valuation of goodwill and separately identifiable intangible assets associated with mergers and acquisitions, loan sales and servicing of financial assets and deferred tax assets and liabilities.
Material estimates subject to change in the near term include, among other items, the ACL; the fair value of assets and liabilities acquired in business combinations and related purchase price allocation, the valuation of acquired loans, the valuation of goodwill and separately identifiable intangible assets associated with mergers and acquisitions, loan sales and servicing of financial assets and deferred tax assets and liabilities.
These losses could have an adverse effect on our business, consolidated financial condition and consolidated results of operations. 26 Table of Contents We face risks related to severe weather, natural disasters, global climate change, acts of terrorism and global conflicts.
These losses could have an adverse effect on our business, consolidated financial condition and consolidated results of operations. We face risks related to severe weather, natural disasters, acts of terrorism and global conflicts.
Failure to successfully manage these risks in the development and implementation of new lines of business or offerings of new products, product enhancements or services could have a material adverse effect on our business, consolidated financial condition and consolidated results of operations. Competition may limit our growth and profitability. Competition in the banking and financial services industry is intense.
Failure to successfully manage these risks in the development and implementation of new lines of business or offerings of new products, product enhancements or services could have a material adverse effect on our business, consolidated financial condition and consolidated results of operations. 33 Table of Contents Competition may limit our growth and profitability.
For as long as we continue to be an emerging growth company, we may take advantage of reduced regulatory and reporting requirements that are otherwise generally applicable to public companies.
We are an emerging growth company, as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of reduced regulatory and reporting requirements that are otherwise generally applicable to public companies.
See “ Supervision and Regulation - Capital Requirements .” Details regarding the Bank’s actual capital amounts and ratios and the amount of required capital are included in Note 16 — Regulatory Matters of the Notes to Consolidated Financial Statements included in Item 8 in this annual report.
See “Supervision and Regulation - Capital Requirements.” Details regarding the Bank’s actual capital amounts an d ratios and the amount of required capital are included in Note 17 — Regulatory Matters of the Notes to Consolidated Financial Statements included in Item 8 in this annual report.
We compete with commercial banks, credit unions, mortgage banking firms, finance companies, non-bank lenders including “fintech” lenders, securities brokerage firms, insurance companies, money market funds and other mutual funds, as well as regional and national financial institutions that operate offices in our market areas and elsewhere.
Competition in the banking and financial services industry is intense. We compete with commercial banks, credit unions, mortgage banking firms, finance companies, non-bank lenders including “fintech” lending and payment companies, securities brokerage firms, insurance companies, money market funds and other mutual funds, as well as regional and national financial institutions that operate offices in our market areas and elsewhere.
Further, we could be required to maintain higher levels of capital as a result of our CRE concentration, which could limit our growth, require us to obtain additional capital, and have an adverse effect on our business, consolidated financial condition and consolidated results of operations. We may suffer losses in our loan portfolio despite our underwriting practices.
Further, we could be required to maintain higher levels of capital as a result of our CRE concentration, which could limit our growth, require us to obtain additional capital, and have an adverse effect on our business, consolidated financial condition and consolidated results of operations.
However, as with any risk management framework, there are inherent limitations to our current and future risk management strategies, including risks that we have not appropriately anticipated or identified. In addition, our businesses and the markets in which we operate are continuously evolving. We may fail to adequately or timely enhance our enterprise risk framework to address those changes.
However, as with any risk management framework, there are inherent limitations to our current and future risk management strategies, including risks that we have not appropriately anticipated or identified. In addition, our businesses and the markets in which we operate are continuously evolving.
Economic, Market and Investment Risks • We may be adversely affected by the lack of soundness of other financial institutions • We face risk related to severe weather, natural disasters, acts of terrorism and global conflicts. • We are particularly vulnerable to an economic downturn in California. • We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability. • Changes in interest rates may affect net interest income and otherwise negatively impact our consolidated financial condition and consolidated results of operations.
You should consider this summary together with the more detailed information provided below. 23 Table of Contents Economic, Market and Investment Risks • We may be adversely affected by the lack of soundness of other financial institutions. • We face risks related to severe weather, natural disasters, acts of terrorism and global conflicts. • We are particularly vulnerable to an economic downturn in California. • We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability. • Changes in interest rates may affect net interest income and otherwise negatively impact our consolidated financial condition and consolidated results of operations.
Loss from e-fraud occurs when cybercriminals breach and extract funds directly from customer or our accounts. Attempts to breach sensitive customer data, such as account numbers and social security numbers, present significant reputational, legal and/or regulatory costs to us, if successful.
Two of the most significant cyber-attack risks that we face are e-fraud and loss of sensitive customer data. Loss from e-fraud occurs when cybercriminals breach and extract funds directly from customer or our accounts. Attempts to breach sensitive customer data, such as account numbers and social security numbers, present significant reputational, legal and/or regulatory costs to us, if successful.
The occurrence of any cyber-attack or information security breach could result in potential liability to customers, reputational damage and the disruption of our operations, and regulatory concerns, all of which could adversely affect our business, consolidated financial condition and consolidated results of operations. 39 Table of Contents The use of artificial intelligence in our marketplace may result in reputational harm or liability, or could otherwise adversely affect our business.
The occurrence of any cyber-attack or information security breach could result in potential liability to customers, reputational damage and the disruption of our operations, and regulatory concerns, all of which could adversely affect our business, consolidated financial condition and consolidated results of operations. The development and use of artificial intelligence presents risk and challenges that may adversely impact our business.
RISKS RELATED TO LENDING AND CREDIT Our loan portfolio exposes us to credit risk, but we may not be able to measure and limit our credit risk adequately, which could lead to unexpected losses. The primary component of our business involves making loans to our clients.
RISKS RELATED TO LENDING AND CREDIT Our loan portfolio exposes us to credit risk, but we may not be able to measure and limit our credit risk adequately, which could lead to unexpected losses.
As a holding company with no significant assets other than the Bank, the Company depends on dividends from the Bank to fund operating expenses, service debt and pay taxes.
As a holding company with no significant assets other than the Bank, the Company depends on dividends from the Bank to fund operating expenses, service debt, pay dividends, repurchase shares, and pay taxes. The Bank paid $60.0 million in dividends to the Company during 2025.
Strategic and Competitive Risks • We face risks related to our growth, expansion and any acquisitions we may pursue. • The anticipated benefits and cost savings of the Merger may not be realized. • We may experience goodwill impairment. • Our reputation is critical to the success of our business and our failure to maintain our reputation may materially adversely affect our performance. • New lines of business, products, product enhancements or services may subject us to additional risk. • Competition may limit our growth and profitability.
Strategic and Competitive Risks • We face risks related to our growth, expansion and any acquisitions we may pursue. • We may experience goodwill impairment. • Our reputation is critical to the success of our business and our failure to maintain our reputation may materially adversely affect our performance. • New lines of business, products, product enhancements or services may subject us to additional risk. • Competition may limit our growth and profitability. • We rely heavily on our executive management team and other key personnel.
Additionally, when necessary, the alternative funding sources of borrowed funds described above will be used to augment our primary funding sources. An inability to maintain or raise funds (including the inability to access alternative funding sources) in amounts necessary to meet our liquidity needs would have a substantial negative effect, individually or collectively, on our liquidity.
An inability to maintain or raise funds (including the inability to access alternative funding sources) in amounts necessary to meet our liquidity needs would have a substantial negative effect, individually or collectively, on our liquidity.
As of December 31, 2024, total loans secured by CRE under construction and land development represented 45.5% of our total risk-based capital. As a result, the OCC, which is the Bank’s federal banking regulator, could view the Bank as having a high concentration of CRE loans under this guidance.
As of December 31, 2025, total loans secured by CRE under construction and land development represented 28.0% of our total risk-based capital. As a result, the OCC could view the Bank as having a high concentration of CRE loans under this guidance.
Technology Risks • Our failure to keep up with the rapid technological changes in the financial services industry could have an adverse effect on our competitive position and profitability. • We face risks related to network failures, cyberattacks and data security breaches, which could subject us to increased operating costs as well as litigation and other liabilities. • Our use of artificial intelligence may result in reputational harm or liability, or could adversely affect our business. 25 Table of Contents Operational Risks • Our enterprise risk management framework may not be effective in mitigating risk, including those related to fraud or data processing errors. • We are subject to certain operational risks, including, but not limited to, internal or external fraud and data processing system failures and errors. • We depend on the use of data, modeling and estimates, yet the data, models and estimates we use may be inaccurate or incorrect. • We may be subject to environmental liabilities in connection with the real properties we own and the foreclosure on real estate assets securing our loan portfolio. • We may fail to maintain effective internal controls over financial reporting. • We rely on third-party service providers for key aspects of our operations. • Climate change could have a material negative impact on us and our clients. • Our consolidated financial statements are based in part on assumptions and estimates which, if incorrect, could cause unexpected losses in the future.
Operational Risks • Our enterprise risk management framework may not be effective in mitigating risk, including those related to fraud or data processing errors. • We are subject to certain operational risks, including, but not limited to, internal or external fraud and data processing system failures and errors. • We depend on the use of data, modeling and estimates, yet the data, models and estimates we use may be inaccurate or incorrect. • We may be subject to environmental liabilities in connection with the real properties we own and the foreclosure on real estate assets securing our loan portfolio. • We may fail to maintain effective internal controls over financial reporting. • We rely on third-party service providers for key aspects of our operations. • Climate change could have a material negative impact on us and our clients. • Our consolidated financial statements are based in part on assumptions and estimates which, if incorrect, could cause unexpected losses in the future.
Pandemics, natural disasters, global climate change, acts of terrorism, global conflicts including the Russia-Ukraine War, the Israel-Hamas War, or other similar events have in the past, and may in the future have, a negative impact on our business and operations.
Severe weather, natural disasters, acts of terrorism, global conflicts, or other similar events have in the past, and may in the future have, a negative impact on our business and operations.
As part of our growth strategy, we intend to pursue prudent and commercially attractive acquisitions that will position us to capitalize on market opportunities. Over the last three years, we have grown rapidly through both organic growth and acquisitions.
As part of our growth strategy, we intend to pursue prudent and commercially attractive acquisitions that will position us to capitalize on market opportunities.
We are also continuing to refine our internal controls over financial reporting. Maintaining and improving the effectiveness of our disclosure controls and 41 Table of Contents procedures and internal controls over financial reporting will require that we continue to expend significant resources, including accounting-related costs and significant management oversight.
We are also continuing to refine our internal controls over financial reporting. Maintaining and improving the effectiveness of our disclosure controls and procedures and internal controls over financial reporting will require that we continue to expend significant resources, including accounting-related costs and significant management oversight. Nevertheless, these efforts may not be sufficient to result in an effective internal control environment.
Nevertheless, these efforts may not be sufficient to result in an effective internal control environment. In addition, there are risks that individuals, either employees or contractors, consciously circumvent established control mechanisms by, for example, exceeding trading or investment management limitations, or committing fraud.
In addition, there are risks that individuals, either employees or contractors, consciously circumvent established control mechanisms by, for example, exceeding trading or investment management limitations, or committing fraud.
We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability. The market value of the real estate securing loans as collateral could be adversely affected by unfavorable changes in market and economic conditions.
The market value of the real estate securing loans as collateral could be adversely affected by unfavorable changes in market and economic conditions.
Further, our credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting clients and the quality of the loan portfolio.
Our risk management practices, such as managing the concentration of our loans within specific industries, loan types and geographic areas, and our credit approval practices may not adequately reduce credit risk. Further, our credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting clients and the quality of the loan portfolio.
We target our business development and marketing strategy to serve the banking and financial services needs of our community, including small- to medium-sized businesses and real estate owners.
The small- to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair our borrowers’ ability to repay loans. We target our business development and marketing strategy to serve the banking and financial services needs of our community, including small- to medium-sized businesses and real estate owners.
Loans on land under development or held for 31 Table of Contents future construction also pose additional risk because of the lack of income production by the property and the potential illiquid nature of the collateral. For all of these reasons and uncertainties, construction and land development loans may represent greater risks than other types of loans.
Loans on secured by land under development or held for future construction also pose additional risk because of the lack of income production by the property, the volatility of the future value, and the potential illiquid nature of the collateral.
If our policies, procedures and systems are deemed deficient, we could be required to dedicate additional resources to our anti-money laundering program and could be subject to liabilities, including fines, and regulatory enforcement actions restricting our growth and restrictions on future acquisitions and de novo branching.
If our policies, procedures and systems are deemed deficient, we could be required to dedicate additional resources to our anti-money laundering program and could be subject to liabilities, including fines, and regulatory enforcement actions restricting our growth and restrictions on future acquisitions and de novo branching. 35 Table of Contents TECHNOLOGY RISKS Failure to keep up with the rapid technological changes in the financial services industry could have an adverse effect on our competitive position and profitability.
If a default occurs on a loan secured by real estate that is less valuable than originally estimated, we may not be able to recover the outstanding balance of the loan and will suffer a loss. 30 Table of Contents The small- to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair our borrowers’ ability to repay loans.
If a default occurs on a loan secured by real estate that is less valuable than originally estimated, we may not be able to recover the outstanding balance of the loan and will suffer a loss.
Our business, as well as the operations and activities of our clients, could be negatively impacted by climate change. Climate change presents both immediate and long-term risks to us and our clients, and these risks are expected to increase over time.
Climate change presents both immediate and long-term risks to us and our clients, and 39 Table of Contents these risks are expected to increase over time.
Regulatory policies regarding loans secured by commercial real estate could limit our ability to leverage our capital and adversely affect our growth and profitability. The federal banking agencies have issued guidance regarding concentrations in CRE lending for institutions that are deemed to have particularly high concentrations of CRE loans within their lending portfolios.
The federal banking agencies have issued guidance regarding concentrations in CRE lending for institutions that are deemed to have particularly high concentrations of CRE loans within their lending portfolios.
Datasets may contain biased information or otherwise be insufficient; and inappropriate or controversial data practices could impair the acceptance of artificial intelligence solutions and result in burdensome new regulations.
As with many developing technologies, artificial intelligence presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. Artificial intelligence algorithms may be flawed. Datasets may contain biased information or otherwise be insufficient; and inappropriate or controversial data practices could impair the acceptance of artificial intelligence solutions and result in burdensome new regulations.
These loans involve additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets.
Typical for the construction loan segment, these loans involve additional risks because funds are advanced upon the progress of the project, which often exhibits volatile completion value, as among other things, costs may exceed realizable values in declining real estate markets.
The majority of our banking assets are monetary in nature and subject to risk from changes in interest rates.
Interest rate shifts may affect net interest income and otherwise negatively impact our consolidated financial condition and consolidated results of operations. The majority of our banking assets are monetary in nature and subject to risk from changes in interest rates.
Declines in the real estate market could hurt our business because if real estate values were to decline, the collateral for our loans would provide less security.
Declines in the real estate market could hurt our business because if real estate values were to decline, the collateral for our loans would provide less security. As a result, our ability to recover on defaulted loans by selling the underlying real estate would be diminished, and we would be more likely to suffer losses on defaulted loans.
In either case, if market interest rates should move contrary to our position, this gap will negatively impact our earnings. The impact on earnings is more adverse when the slope of the yield curve flattens; that is, when short-term interest rates increase more than long-term interest rates or when long-term interest rates decrease more than short-term interest rates.
The impact on earnings is more adverse when the slope of the yield curve flattens; that is, when short-term interest rates 27 Table of Contents increase more than long-term interest rates or when long-term interest rates decrease more than short-term interest rates.
Our failure to manage acquisitions and other significant transactions successfully may have a material adverse effect on our consolidated financial condition and consolidated results of operations, and cash flows. Combining the Company and CALB may be more costly than expected and the anticipated benefits and cost savings of the merger may not be realized.
Our failure to manage acquisitions and other significant transactions successfully may have a material adverse effect on our consolidated financial condition and consolidated results of operations, and cash flows. We may experience goodwill impairment.
We are an emerging growth company, and the reduced regulatory and reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors. We are an emerging growth company, as defined in the JOBS Act.
As a consequence of these various limitations and restrictions, we may not be able to make the payment of dividends on our common stock in the future. 40 Table of Contents We are an emerging growth company, and the reduced regulatory and reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors.
As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. 36 Table of Contents We are under continuous threat of loss due to hacking and cyber-attacks especially as we continue to expand customer capabilities to utilize internet and other remote channels to transact business.
Additionally, if we fail to remain “ well-capitalized” our ability to utilize brokered deposits may be restricted. We have somewhat similar risks to the extent high balance core deposits exceed the amount of deposit insurance coverage available. We anticipate we will continue to rely primarily on deposits, loan repayments, and cash flows from our investment securities to provide liquidity.
Additionally, if we fail to remain “ well-capitalized” our ability to utilize brokered deposits may be restricted. We have somewhat similar risks to the extent high balance core deposits (defined as noninterest-bearing demand, interest-bearing NOW, money market and savings account customer relationships, excluding brokered deposits) exceed the amount of deposit insurance coverage available.
The amount that the Bank may pay in dividends is further restricted due to the fact that the Bank must maintain a certain minimum amount of capital to be considered a “well capitalized” institution as well as a separate capital conservation buffer.
The ability of the Bank to pay dividends or make other capital distributions is subject to the restrictions of the National Bank Act and the requirement that the Bank maintains a certain minimum amount of capital to be considered a “well capitalized” institution as well as a separate capital conservation buffer.
Risks Related to an Investment in our Common Stock • Our common stock currently has a limited trading market and is thinly traded, and a more liquid market for our common stock may not develop. • As an emerging growth company and a smaller reporting company, we may take advantage of reduced regulatory and reporting requirements under the federal securities laws, which may make our common stock less attractive to investors. • We may issue additional equity securities which may adversely affect existing holders of our common stock. • Our common stock is not insured or guaranteed by the FDIC.
Risks Related to an Investment in our Common Stock • We may reduce or discontinue the payment of dividends on our common stock. • As an emerging growth company, we may take advantage of reduced regulatory and reporting requirements under the federal securities laws, which may make our common stock less attractive to investors. • We may issue additional equity securities which may adversely affect existing holders of our common stock. • Our common stock is not insured or guaranteed by the FDIC. 25 Table of Contents Risk Factors ECONOMIC, MARKET AND INVESTMENT RISKS We may be adversely affected by the lack of soundness of other financial institutions The failures of some depository institutions have raised concerns among depositors that their deposits may be at risk.
These estimates may be adjusted as more current information becomes available, and any adjustment may be significant. RISKS RELATED TO AN INVESTMENT IN OUR COMMON STOCK Our common stock currently has a limited trading market and is thinly traded, and a more liquid market for our common stock may not develop.
These estimates may be adjusted as more current information becomes available, and any adjustment may be significant. RISKS RELATED TO AN INVESTMENT IN OUR COMMON STOCK We may reduce or discontinue the payment of dividends on our common stock.
Additional provision to increase the ACL, should they become necessary, would decrease our net income and reduce our capital.
Additional provision to increase the ACL, should they become necessary, would decrease our net income and reduce our capital. Regulatory policies regarding loans secured by commercial real estate could limit our ability to leverage our capital and adversely affect our growth and profitability.
Artificial intelligence, including generative artificial intelligence, is or may be enabled by or integrated into our products and services or those developed by our third-party partners. As with many developing technologies, artificial intelligence presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. Artificial intelligence algorithms may be flawed.
The use of artificial intelligence in our marketplace may result in reputational harm or liability, or could otherwise adversely affect our business. Artificial intelligence, including generative artificial intelligence, is or may be enabled by or integrated into our products and services or those developed by our third-party partners.
These estimates may be inaccurate, and we may be exposed to significant losses on loans for these projects. At December 31, 2024, our construction and land development loans totaled $222.0 million, or 7.1% of our loans held for investment portfolio, excluding SBA loans.
At December 31, 2025, our construction and land development loans totaled $134.3 million, or 4.4% of our loans held for investment portfolio, excluding SBA loans.
Economic downturns and other events that negatively impact our market areas could cause us to incur substantial credit losses that could negatively affect our consolidated financial condition and consolidated results of operations. Construction and land development loans are based upon estimates of costs and values associated with the completed project.
Economic downturns and other events that 29 Table of Contents negatively impact our market areas could cause us to incur substantial credit losses that could negatively affect our consolidated financial condition and consolidated results of operations. Our loan portfolio may be subject to increased concentration and volatility risks due to variability, driven by large relationship-based lending commitments.
TECHNOLOGY RISKS Failure to keep up with the rapid technological changes in the financial services industry could have an adverse effect on our competitive position and profitability.
Technology Risks • Our failure to keep up with the rapid technological changes in the financial services industry could have an adverse effect on our competitive position and profitability. • We face risks related to network failures, cyberattacks and data security breaches, which could subject us to increased operating costs as well as litigation and other liabilities. • The development and use of artificial intelligence may result in reputational harm or liability, or could adversely affect our business.
In addition, we may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time while we attempt to dispose of it. Further, in the case of speculative construction loans, there is the added risk associated with the borrower obtaining a take-out commitment for a permanent loan.
Properties under construction are often difficult to sell, either by the borrower of the bank upon foreclosure, and typically must be completed in order to be successfully sold, which may increase our loss exposure. Further, in the case of speculative construction loans, there is the added risk associated with the borrower obtaining a take-out commitment for a permanent loan.
A downturn in the commercial real estate market could increase delinquencies, defaults and foreclosures, and significantly impair the value of our collateral and our ability to sell the collateral upon foreclosure. In addition, this type of lending also typically involves higher loan principal amounts. Some of the builders we deal with have more than one loan outstanding with us.
A downturn in the commercial real estate market could increase delinquencies, defaults and foreclosures, and significantly impair the value of our collateral and our ability to sell the collateral upon foreclosure. During the term of construction loans, often no payment from the borrower is required since the accumulated interest is included in the loan commitment through an interest reserve.
Climate change could have a material negative impact on us and our clients. Concerns over the long-term impact of climate change have led and will continue to lead to governmental efforts to mitigate those impact. Consumers and businesses also may change their behavior as a result of these concerns.
Climate change could have a material negative impact on us and our clients. Concerns over the long-term impact of climate change could significantly affect our geographic markets and disrupt our operations, those of our customers, third parties on which we rely, or supply chains more broadly.
Those factors may lead to depositors withdrawing their deposits or creditors limiting our borrowings.
Those factors may lead to depositors withdrawing their deposits or creditors limiting our borrowings. A portion of our deposits may exceed FDIC insurance limits, and uninsured depositors may be more likely to withdraw their funds during periods of actual or perceived financial stress affecting us or the banking industry generally.
Removed
You should consider this summary together with the more detailed information provided below.
Added
Additionally, our business and our customers may be affected by shifts in federal trade policy and judicial interpretations of trade authorities. In February 2026, the U.S. Supreme Court ruled that the President does not have authority under the International Emergency Economic Powers Act to impose broad tariffs without explicit congressional authorization, striking down major tariffs previously in place.
Removed
Risk Factors ECONOMIC, MARKET AND INVESTMENT RISKS We may be adversely affected by the lack of soundness of other financial institutions The recent failures of some depository institutions have raised concerns among depositors that their deposits may be at risk.
Added
This decision may reduce certain costs for import-dependent businesses and ease inflationary pressures in 26 Table of Contents affected sectors, but it also introduces uncertainty regarding future trade policy, potential tariff refund claims and shifting trade relationships.
Removed
The trade policies and potential tariff initiatives being pursued by the U.S. government under the administration of President Trump may present risks to our borrowers and the markets within which we operate, particularly with respect to the threatened imposition of additional tariffs on certain products imported from countries such as Mexico, Canada, China, which are significant international trading partners for the California economy.
Added
The ruling, and any subsequent legislative or executive actions in response, could influence costs for manufacturers and resellers, alter demand for U.S. exports, and affect broader economic conditions.
Removed
The imposition of tariffs on imports, the potential for retaliatory tariffs by foreign governments, or other similar restrictions on international trade could increase costs for manufacturers and resellers, reduce demand for U.S. exports and disrupt supply chains.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAs a regulated entity, California Bank of Commerce undergoes regular bank regulatory examinations evaluating the information security program and its compliance with federal regulations. 44 Table of Contents The Company's third-party risk management program oversees and identifies cybersecurity threats associated with service providers. While visibility into third-party operations is limited, risk-based evaluations are conducted.
Biggest changeAdditionally, third-party experts conduct periodic program evaluations through penetration testing, audits, and best practice consultations, with results driving program improvement initiatives. As a regulated entity, the Bank undergoes regular bank regulatory examinations evaluating the information security program and its compliance with federal regulations. The Company's third-party risk management program oversees and identifies cybersecurity threats associated with service providers.
Recognizing cybersecurity as a shared responsibility, the Company conducts periodic management-level simulations and tabletop exercises with external resources and advisors as needed. The Board of Directors provides ultimate oversight and monitoring of the Program and its policies. The ARC Committee oversee areas like information technology activities, cybersecurity-related risks, and disaster recovery processes.
Recognizing cybersecurity as a shared responsibility, the Company conducts periodic management-level simulations and tabletop exercises with external resources and advisors as needed. The Board of Directors provides ultimate oversight and monitoring of the Program and its policies. The ARC Committee oversees areas like information technology activities, cybersecurity-related risks, and disaster recovery processes.
In addition, the Company has an incident response plan (“IRP”) that is in effect if an event is identified by information technology or information security team or one of our third party vendors. The Company’s Information Security Officer (“ISO”) would activate the IRP and communicate with the team members in accordance with the IRP.
In addition, the Company has an incident response plan (“IRP”) that is activated if an event is identified by information technology or information security team or one of our third party vendors. The Company’s Information Security Officer (“ISO”) would activate the IRP and communicate with the team members in accordance with the IRP.
Item 1C. Cybersecurity Risk Management and Strategy The Company implements a comprehensive Information Security Program ("Program") to safeguard data confidentiality, integrity, and availability. The Program leverages recognized frameworks like National Institute of Standards and Technology (or NIST) and Federal Financial Institutions Examinations Council (“FFEIC”) to identify, prevent, and mitigate cybersecurity threats.
Item 1C. Cybersecurity Risk Management and Strategy The Company implements a comprehensive Information Security Program (“Program”) to safeguard data confidentiality, integrity, and availability. The Program leverages recognized frameworks like National Institute of Standards and Technology (or “NIST”) and Federal Financial Institutions Examination Council (“FFIEC”) to identify, prevent, and mitigate cybersecurity threats.
These evaluations involve reviewing security assessment questionnaires, testing summaries, audit reports, and information security policies. Recognizing the importance of continuous security awareness, the Company provides comprehensive employee training. This includes mandatory cybersecurity and fraud training at onboarding, monthly email phishing tests, and annual computer-based training.
While visibility into third-party operations is limited, risk-based evaluations are conducted. These evaluations involve reviewing security assessment questionnaires, testing summaries, audit reports, and information security policies. Recognizing the importance of continuous security awareness, the Company provides comprehensive employee training. This includes mandatory cybersecurity and fraud training at onboarding, monthly email phishing tests, and annual computer-based training.
The ISO, who reports directly to the Chief Risk Officer, periodically updates the Company’s Information Technology Committee, the Company’s Audit and Risk Committee (“ARC Committee”) and the Board of Directors on information and cybersecurity risks, threats, exposures, and mitigation measures. The Company's IRP is regularly tested, incorporating cybersecurity scenarios. The ISO leads program development, implementation, and reporting to the Board.
The ISO, who reports directly to the Chief Risk Officer, periodically updates the Company’s management Information Technology Committee, the Company’s Audit and Risk Committee (“ARC Committee”) and the Board of Directors on information and cybersecurity risks, threats, exposures, and mitigation measures.
Removed
Additionally, third-party experts conduct periodic program evaluations through penetration testing, audits, and best practice consultations, with results driving program improvement initiatives.
Added
The Company's IRP is regularly tested, incorporating cybersecurity scenarios. 42 Table of Contents The ISO leads program development, implementation, and reporting to the Board.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our principal executive offices are located in Del Mar, California. As of December 31, 2024, our properties included ten administrative offices and 14 branches in California. We own three properties and lease the remaining properties and believe that, if necessary, we could secure suitable alternative properties on similar terms without materially adversely affecting operations.
Biggest changeWe own three of our branch offices and lease the remaining locations and believe that, if necessary, we could secure suitable alternative properties on similar terms without materially adversely affecting operations. All of our existing facilities are considered to be adequate for our present and anticipated future use. In the opinion of management, all properties are adequately covered by insurance.
All of our existing facilities are considered to be adequate for our present and anticipated future use. In the opinion of management, 45 Table of Contents all properties are adequately covered by insurance. For information regarding our lease commitments, refer to Note 6 - Premises and Equipment and Leases to the Consolidated Financial Statements.
For information regarding our lease commitments, refer to Note 6 - Premises and Equipment and Leases to the Consolidated Financial Statements.
Added
Item 2. Properties Our principal executive offices are located in Del Mar, California. All of our branches are located in California. As of December 31, 2025, we operated from 19 locations throughout California, including 14 branch offices (seven of which also house community banking offices), four standalone community banking offices, and one administrative office.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 46 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 46 Item 6. [Reserved] 47 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 48 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 93 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 43 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 43 Item 6. [Reserved] 44 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 45 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 87 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends Our shareholders are entitled to receive dividends only if, when and as declared by our Board of Directors and out of funds legally available. We have paid no cash dividends to common shareholders since our inception and we have no present intent to commence the payment of dividends in the foreseeable future.
Biggest changeAs of March 10, 2026, there were approximately 403 holders of record of our common stock. 43 Table of Contents Dividends Our shareholders are entitled to receive dividends only if, when and as declared by our Board of Directors and out of funds legally available.
There were no shares repurchased under this share repurchase plan during 2024. 46 Table of Contents The following table presents information with respect to purchases made by or on behalf of us or any “affiliated purchases” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our common stock during the periods indicated: (a) (b) (c) (d) Period Total number of shares (or units) purchased Average price paid per share (or unit) Total number of shares (or units) purchased as part of publicly announced plans or programs Maximum number of shares (or units) that may yet be purchased under the plans or programs October 1 - 31, 2024 — $ — — 550,000 November 1 - 30, 2024 — $ — — 550,000 December 1 - 31, 2024 — $ — — 550,000 Total — $ — —
The following table presents information with respect to purchases made by or on behalf of us or any “affiliated purchases” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our common stock during the periods indicated: (a) (b) (c) (d) Period Total number of shares (or units) purchased Average price paid per share (or unit) Total number of shares (or units) purchased as part of publicly announced plans or programs Maximum number of shares (or units) that may yet be purchased under the plans or programs October 1 - 31, 2025 122,428 $ 16.37 122,428 1,388,072 November 1 - 30, 2025 — $ — — 1,388,072 December 1 - 31, 2025 — $ — — 1,388,072 Total 122,428 $ 16.37 122,428
We anticipate that all of our future earnings will be retained to support our operations, repurchase of our common stock, and finance the growth and development of our business.
During the year ended December 31, 2025, we paid $3.25 million in dividends to our common stockholders. We anticipate that all of our future earnings will be retained to support our operations, pay cash dividends to our common stockholders, repurchase of our common stock, and finance the growth and development of our business.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information; Holders of Record Our common stock is listed on the Nasdaq Capital Market under the symbol “BCAL.” As of March 31, 2025, there were approximately 438 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information; Holders of Record Our common stock has been listed on the Nasdaq Capital Market under the symbol “BCAL” since May 11, 2023.
The repurchase program has no expiration date and may be suspended, modified, or terminated at any time without prior notice.
On May 1, 2025, we announced an increase in the number of shares authorized for repurchase to up to 1,600,000 shares. The repurchase program has no expiration date and may be suspended, modified, or terminated at any time without prior notice. There were 211,928 shares repurchased under this share repurchase plan during 2025.
Added
We currently intend to continue to pay quarterly cash dividends on our common stock, subject to approval by our Board, although we may elect not to pay dividends or to change the amount of such dividends.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

195 edited+91 added−96 removed82 unchanged
Biggest changeThe following table presents the risk categories for total loans by class of loans as of December 31, 2024 and December 31, 2023: (dollars in thousands) Pass Special Mention Substandard Total December 31, 2024 Construction and land development $ 203,484 $ 12,431 $ 11,410 $ 227,325 Real estate - other: 1-4 family residential 157,037 — 7,364 164,401 Multifamily residential 240,207 3,786 — 243,993 Commercial real estate and other 1,710,050 36,026 21,651 1,767,727 Commercial and industrial 617,106 17,096 76,768 710,970 Consumer 24,344 — 405 24,749 $ 2,952,228 $ 69,339 $ 117,598 $ 3,139,165 (dollars in thousands) Pass Special Mention Substandard Total December 31, 2023 Construction and land development $ 243,429 $ — $ 92 $ 243,521 Real estate - other: 1-4 family residential 143,903 — — 143,903 Multifamily residential 208,243 — 13,004 221,247 Commercial real estate and other 1,020,076 2,996 1,171 1,024,243 Commercial and industrial 314,907 — 5,235 320,142 Consumer 4,386 — — 4,386 $ 1,934,944 $ 2,996 $ 19,502 $ 1,957,442 Special mention loans increased by $66.3 million during the year ended December 31, 2024 to $69.3 million, which included $25.5 million of non-PCD loans and $10.1 million of PCD loans acquired in the Merger.
Biggest changeA summary of past due loans, loans still accruing and nonaccrual loans as of December 31, 2025 and 2024 follows: (dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Over 90 Days Past Due Total Past Due Nonaccrual December 31, 2025 Construction and land development $ — $ — $ — $ — $ 13,808 Real estate - other: 1-4 family residential — — — — — Multifamily residential 7,970 — — 7,970 — Commercial real estate and other 5,838 — — 5,838 83 Commercial and industrial 845 53 — 898 2,195 Consumer — 29 — 29 — $ 14,653 $ 82 $ — $ 14,735 $ 16,086 72 Table of Contents Still Accruing (dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Over 90 Days Past Due Total Past Due Nonaccrual December 31, 2024 Construction and land development $ 4,104 $ — $ — $ 4,104 $ 9,659 Real estate - other: 1-4 family residential 40 4,469 — 4,509 2,895 Multifamily residential — — — — — Commercial real estate and other 195 — — 195 8,915 Commercial and industrial 1,866 1,113 — 2,979 4,917 Consumer 69 226 150 445 — $ 6,274 $ 5,808 $ 150 $ 12,232 $ 26,386 The following tables present the risk categories for total loans by class of loans as of December 31, 2025 and December 31, 2024: (dollars in thousands) Pass Special Mention Substandard Total December 31, 2025 Construction and land development $ 125,014 $ — $ 13,880 $ 138,894 Real estate - other: 1-4 family residential 139,732 — 2,667 142,399 Multifamily residential 316,105 7,970 — 324,075 Commercial real estate and other 1,760,143 45,160 15,142 1,820,445 Commercial and industrial 557,590 19,277 28,992 605,859 Consumer 2,215 — — 2,215 $ 2,900,799 $ 72,407 $ 60,681 $ 3,033,887 (dollars in thousands) Pass Special Mention Substandard Total December 31, 2024 Construction and land development $ 203,484 $ 12,431 $ 11,410 $ 227,325 Real estate - other: 1-4 family residential 157,037 — 7,364 164,401 Multifamily residential 240,207 3,786 — 243,993 Commercial real estate and other 1,710,050 36,026 21,651 1,767,727 Commercial and industrial 617,106 17,096 76,768 710,970 Consumer 24,344 — 405 24,749 $ 2,952,228 $ 69,339 $ 117,598 $ 3,139,165 Special mention loans increased by $3.1 million during the year ended December 31, 2025 to $72.4 million at December 31, 2025.
The Company’s loan portfolio consists of the following segments, based on regulatory call codes and related risk ratings: • Construction and land development • Real estate ◦ 1-4 family residential ◦ Multifamily residential ◦ Commercial real estate and other • Commercial and industrial • Consumer Construction and land development loans are typically adjustable rate residential and commercial construction loans to builders, developers and consumers, with terms generally limited to 12 to 36 months.
The Company’s loan portfolio consists of the following loan segments, based on regulatory call codes and related risk ratings: • Construction and land development • Real estate: ◦ 1-4 family residential ◦ Multifamily residential ◦ Commercial real estate and other • Commercial and industrial • Consumer Construction and land development loans are typically adjustable rate residential and commercial construction loans to builders, developers and consumers, with terms generally limited to 12 to 36 months.
The combined company retained all banking offices of both banks, adding CALB’s one full-service bank branch and its four loan production offices in Northern California to the Bank’s 13 full-service bank branches located throughout the Southern California region for a total of 14 Bank branches. 48 Table of Contents Under the terms of the Agreement and Plan of Merger and Reorganization, each outstanding share of CALB common stock was exchanged for the right to receive 1.590 shares of the Company’s common stock, resulting in the net issuance of approximately 13,579,454 shares, with cash (without interest) paid in lieu of fractional shares and repurchase of shares for settlement of accelerated restricted stock units.
The combined company retained all banking offices of both banks, adding CALB’s one full-service bank branch and its four loan production offices in Northern California to the Bank’s 13 full-service bank branches located throughout the Southern California region for a total of 14 bank branches. 45 Table of Contents Under the terms of the Agreement and Plan of Merger and Reorganization, each outstanding share of CALB common stock was exchanged for the right to receive 1.590 shares of the Company’s common stock, resulting in the net issuance of approximately 13,579,454 shares, with cash (without interest) paid in lieu of fractional shares and repurchase of shares for settlement of accelerated restricted stock units.
Provision for credit losses for loans held for investment is included in provision for credit losses in the consolidated statements of income. Loan charge-offs are recognized when management believes the collectability of the principal balance outstanding is unlikely. Subsequent recoveries, if any, are credited to the ACL.
(Reversal of) provision for credit losses for loans held for investment is included in the (reversal of) provision for credit losses in the consolidated statements of income. Loan charge-offs are recognized when management believes the collectability of the principal balance outstanding is unlikely. Subsequent recoveries, if any, are credited to the ACL.
Our ACL is an estimate of expected lifetime credit losses for loans held for investment at the time of origination or acquisition and is maintained at a level deemed appropriate by management to provide for expected lifetime credit losses in the portfolio.
Allowance for Credit Losses Our ACL is an estimate of expected lifetime credit losses for loans held for investment at the time of origination or acquisition and is maintained at a level deemed appropriate by management to provide for expected lifetime credit losses in the portfolio.
For prepayment and curtailment rate, the Company utilized Abrigo’s benchmark since the adoption on January 1, 2023 through the second quarter of 2023 and switched to the Company’s own historical prepayment and curtailment experience beginning in the third quarter of 2023. Quarterly PD is forecasted using a regression model that incorporates certain economic variables as inputs.
For prepayment and curtailment rates, the Company utilized Abrigo’s benchmark since the adoption on January 1, 2023 through the second quarter of 2023 and switched to the Company’s own historical prepayment and curtailment experience beginning in the third quarter of 2023. Quarterly PD is forecasted using a regression model that incorporates certain economic variables as inputs.
(3) Adjusted net income is computed by adjusting net income for the tax-effected one-time initial provision for credit losses related to non-PCD loans and unfunded loan commitments and tax-effected merger related expense adjustments for the periods indicated. (4) Average tangible common equity is computed by subtracting average goodwill and net average intangible assets from average shareholders’ equity.
(3) Adjusted net income is computed by adjusting net income for the tax-effected one-time initial provision for credit losses related to non-PCD loans and unfunded loan commitments and tax-effected merger related expense adjustments for the periods indicated. (4) Average tangible common equity is computed by subtracting average goodwill and average intangible assets (“net average intangible assets”) from average shareholders’ equity.
Accordingly, we applied a zero credit loss assumption for these securities and no ACL was recorded as of December 31, 2024 and 2023. The amortized cost, estimated fair value and weighted average yield of held-to-maturity and available-for-sale debt securities as of December 31, 2024 are presented below by contractual maturities.
Accordingly, we applied a zero credit loss assumption for these securities and no ACL was recorded as of December 31, 2025 and December 31, 2024. The amortized cost, estimated fair value and weighted average yield of held-to-maturity and available-for-sale debt securities as of December 31, 2025 are presented below by contractual maturities.
These critical estimates are difficult to predict and may result in impairment charges in future periods if actual results materially differ from those initially estimated. 56 Table of Contents Non-GAAP Financial Measures This filing contains certain non-GAAP financial measures in addition to results presented in accordance with GAAP.
These critical estimates are difficult to predict and may result in impairment charges in future periods if actual results materially differ from those initially estimated. 52 Table of Contents Non-GAAP Financial Measures This filing contains certain non-GAAP financial measures in addition to results presented in accordance with GAAP.
Effective January 1, 2019, the capital conservation buffer increased by 0.625% to its fully phased-in 2.5%, such that the common equity Tier 1, Tier 1 and total capital ratio minimums inclusive of the capital conservation buffers were 7.0%, 8.5%, and 10.5% at December 31, 2024.
Effective January 1, 2019, the capital conservation buffer increased by 0.625% to its fully phased-in 2.5%, such that the common equity Tier 1, Tier 1 and total capital ratio minimums inclusive of the capital conservation buffers were 7.0%, 8.5%, and 10.5% at December 31, 2025.
The cost of total funding is calculated as total interest expense divided by average total funding. 63 Table of Contents Rate/Volume Analysis The following table presents the changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities.
The cost of total funding is calculated as total interest expense divided by average total funding. 58 Table of Contents Rate/Volume Analysis The following table presents the changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities.
We receive an equal dollar amount of reciprocal deposits from other participating banks in exchange for the deposits we place into the networks to fully qualify large customer deposits for FDIC insurance. These reciprocal deposits are not required to be treated as brokered deposits up to the lesser of 20% of the Bank’s total liabilities or $5 billion.
We receive an equal dollar amount of deposits (“reciprocal deposits”) from other participating banks in exchange for the deposits we place into the networks to fully qualify large customer deposits for FDIC insurance. These reciprocal deposits are not required to be treated as brokered deposits up to the lesser of 20% of the Bank’s total liabilities or $5.00 billion.
The issuers of these securities have not, to our knowledge, 71 Table of Contents established any cause for default on these securities. As a result, we expect to recover the entire amortized cost basis of these securities. When market interest rates increase, bond prices tend to fall and, consequently, the fair value of our securities may also decrease.
The issuers of these securities have not, to our knowledge, 66 Table of Contents established any cause for default on these securities. As a result, we expect to recover the entire amortized cost basis of these securities. When market interest rates decrease, bond prices tend to increase and, consequently, the fair value of our securities may also increase.
The use of two weighted scenarios is consistent with the methodology used in our ACL model at December 31, 2023. Refer to Note 4 - Loans and Allowances for Credit Losses - Allowance for Credit Losses - Loans included in Item 8. Financial Statements of this annual report for more information.
The use of two weighted scenarios is consistent with the methodology used in our ACL model at December 31, 2025 and December 31, 2024. Refer to Note 4 - Loans and Allowances for Credit Losses - Allowance for Credit Losses - Loans included in Item 8. Financial Statements of this annual report for more information.
This secured borrowing arrangement is collateralized under a blanket lien on qualifying real estate loans and is subject to us providing adequate collateral and continued compliance with the Advances and Security Agreement and other eligibility requirements established by the FHLB. At December 31, 2024, we had pledged qualifying loans with an unpaid principal balance of $1.41 billion for this line.
This secured borrowing arrangement is collateralized under a blanket lien on qualifying real estate loans and is subject to us providing adequate collateral and continued compliance with the Advances and Security Agreement and other eligibility requirements established by the FHLB. At December 31, 2025, we had pledged qualifying loans with an unpaid principal balance of $1.44 billion for this line.
Economic scenarios as well as assumptions within those scenarios can vary based on changes in current and expected economic conditions. The ACL process involves subjective and complex judgments and is reflective of significant uncertainties that could potentially result in materially different results under different assumptions and 54 Table of Contents conditions.
Economic scenarios as well as assumptions within those scenarios can vary based on changes in current and expected economic conditions. The ACL process involves subjective and complex judgments and is reflective of significant uncertainties that could potentially result in materially different results under different assumptions and conditions.
Our ACL model incorporates assumptions for our own historical quarterly prepayment and curtailment experience covering the period starting from February 2021 to estimate the ACL, probability of default (“PD”), and LGD to project each loan’s cash flow throughout its entire life cycle.
Our ACL model incorporates assumptions for our own historical quarterly prepayment and curtailment experience 75 Table of Contents covering the period starting from February 2021 to estimate the ACL, probability of default (“PD”), and LGD to project each loan’s cash flow throughout its entire life cycle.
The risks inherent in the SBA servicing asset relates primarily to changes in prepayments that result from shifts in interest rates and a reduction in the estimated future cash flows.
The risks inherent in the SBA servicing asset relate primarily to changes in prepayments that result from shifts in interest rates and a reduction in the estimated future cash flows.
Credit losses are not estimated for accrued interest receivable, as interest that is deemed uncollectible is written off through interest income. Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts.
Credit losses are not estimated for accrued interest receivable, as interest that is deemed uncollectible is written off through interest income. 48 Table of Contents Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts.
The Bank’s primary sources of liquidity are derived from deposits from customers, principal and interest payments on loans and debt securities, FHLB advances and other borrowings. The Bank’s primary uses of liquidity include customer withdrawals of deposits, extensions of credit to borrowers, operating expenses, and repayment of FHLB advances and other borrowings.
The Bank’s primary sources of liquidity are derived from deposits from customers, principal and interest payments on loans and debt securities, FHLB advances and other borrowings. The Bank’s primary uses of liquidity include customer withdrawals of deposits, extensions of credit to borrowers, operating expenses, repayment of FHLB advances and other borrowings and dividends to the holding company.
Management periodically evaluates economic scenarios, determines whether to utilize multiple probability-weighted scenarios in our ACL model, and, if multiple scenarios are utilized, evaluates and determines the weighting for each scenario used in our ACL model, and thus the scenarios and weightings of each scenario may change in future periods.
Management periodically evaluates economic scenarios, determines whether to utilize multiple probability-weighted scenarios in our ACL model, and, if multiple scenarios are utilized, evaluates and determines the weighting for each scenario used in our ACL model, and thus the 50 Table of Contents scenarios and weightings of each scenario may change in future periods.
Because our loan portfolio, including loans held for sale, contains a number of CRE loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in our levels of nonperforming assets.
Because our loan portfolio, including loans held for sale, contains a number of CRE loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in our levels of non-performing assets.
Effective with these mergers, the corporate names of Southern California Bancorp and Bank of Southern California, N.A. were changed to California BanCorp and California Bank of Commerce, N.A., respectively. The merger expands the Company’s footprint into Northern California and provides an opportunity for building scale and increasing market share through complementary business models with a strong deposit base.
Effective with these mergers, the corporate names of Southern California Bancorp and Bank of Southern California, N.A. were changed to California BanCorp and California Bank of Commerce, N.A., respectively. The merger expanded the Company’s footprint into Northern California and provided an opportunity for building scale and increasing market share through complementary business models with a strong deposit base.
At December 31, 2024, the net unamortized fair value discount was $2.7 million. The net unamortized fair value discount is netted against the balance and recorded in borrowings in the consolidated balance sheets. The amortization of the fair value discount is recorded in interest expense in the consolidated statements of income.
At December 31, 2025 and 2024, the net unamortized fair value discount was $1.2 million and $2.7 million, respectively. The net unamortized fair value discount is netted against the balance and recorded in borrowings in the consolidated balance sheets. The amortization of the fair value discount is recorded in interest expense in the consolidated statements of income.
There was no similar activity in the comparable 2023 period. (3) Includes an initial provision for credit losses for unfunded commitments acquired in the Merger of $2.7 million for the year ended December 31, 2024. There was no similar activity in the comparable 2023 period.
There was no similar activity in the comparable 2025 period. (2) Includes an initial provision for credit losses for unfunded commitments acquired in the Merger of $2.7 million for the year ended December 31, 2024. There was no similar activity in the comparable 2025 period.
Our financing cash flows are primarily comprised of inflows and outflows of deposits, borrowing activity, proceeds from the issuance of common shares, and to a lesser extent, repurchases of common shares and cash flows from share-based compensation arrangements.
Our financing cash flows are primarily comprised of inflows and outflows of deposits, borrowing activity, proceeds from the issuance of common shares, and to a lesser extent, repurchases of common shares, dividends on common stock and cash flows from share-based compensation arrangements.
We measure the ACL on loans using a discounted cash flow 52 Table of Contents methodology, which utilizes pool-level assumptions and cash flow projections on an individual loan basis, which is then aggregated at the portfolio segment level and supplemented by a qualitative reserve that is applied to each portfolio segment level.
We measure the ACL on loans using a discounted cash flow methodology, which utilizes pool-level assumptions and cash flow projections on an individual loan basis, which is then aggregated at the portfolio segment level and supplemented by a qualitative reserve that is applied to each portfolio segment level.
Applying a 100% probability weighting to the downside scenario rather than using the probability-weighted two scenario approach would result in an increase in ACL by approximately $7.2 million, or an additional 23 basis points to the ALL to total loans held for investment ratio.
Applying a 100% probability weighting to the downside scenario rather than using the probability-weighted two scenario approach would result in an increase in ACL by approximately $6.9 million, or an additional 23 basis points to the ALL to total loans held for investment ratio.
The net of tax unrealized loss on available-for-sale debt securities is reflected in accumulated other comprehensive loss. The effective duration of this portfolio was 4.60 years and 5.13 years at December 31, 2024 and 2023, respectively.
The net of tax unrealized loss on available-for-sale debt securities is reflected in accumulated other comprehensive loss. The effective duration of this portfolio was 5.21 years and 4.60 years at December 31, 2025 and 2024, respectively.
Recent Developments Merger with the former California BanCorp (“CALB”) On July 31, 2024, we completed its all-stock merger with CALB on the terms set forth in the Agreement and Plan of Merger and Reorganization, dated January 30, 2024, by and between us and CALB.
Recent Developments Merger with California BanCorp (“CALB”) On July 31, 2024, the Company completed its all-stock merger with CALB on the terms set forth in the Agreement and Plan of Merger and Reorganization, dated January 30, 2024, by and between the Company and CALB.
Interest income includes accretion of net deferred loan fees and net discounts on acquired loans of $12.3 million and $2.0 million for the years ended December 31, 2024 and 2023, respectively. (2) Tax-exempt debt securities yields are presented on a tax equivalent basis using a 21% tax rate.
Interest income included accretion of net deferred loan fees and net discounts on acquired loans of $21.3 million, $12.3 million for the years ended December 31, 2025 and 2024, respectively. (2) Tax-exempt debt securities yields are presented on a tax equivalent basis using a 21% tax rate.
In addition, at December 31, 2024, we used $27.0 million of our secured FHLB borrowing capacity to have the FHLB issue letters of credit to meet collateral requirements for deposits from the State of California and other public agencies. There were no overnight borrowings at December 31, 2024.
In addition, at December 31, 2025, we used $65.0 million of our secured FHLB borrowing capacity to have the FHLB issue letters of credit to meet collateral requirements for deposits from the State of California and other public agencies. There were no borrowings at December 31, 2025.
The increase in interest income was primarily driven by the higher average total interest-earning assets and the mix of interest-earning assets added by the Merger and the impact of the accretion and amortization of fair value marks.
The increase in interest income was primarily driven by the mix of interest-earning assets added by the Merger and the impact of the accretion and amortization of fair value marks.
Our deposit products consist primarily of demand deposit, money market, and certificates of deposit. In addition, we are a participant in the Certificate of Deposit Account Registry Service (“CDARS”), IntraFi Network Insured Cash Sweep (“ICS”), and Reich & Tang Deposit Solutions (“R&T”) networks.
Our deposit products consist primarily of demand deposit, money market, and certificates of deposit. In addition, we are a participant in the Certificate of Deposit Account Registry Service (“CDARS”) and IntraFi Network Insured Cash Sweep (“ICS”) networks.
We also pledged available-for-sale debt securities with an amortized cost of $3.0 million as collateral for secured public deposits and for other purposes as required by law or contract provisions. We had no discount window borrowings at December 31, 2024. We have four overnight unsecured credit lines from correspondent banks totaling $90.5 million at December 31, 2024.
The Company also pledged available-for-sale debt securities with an amortized cost of $27.6 million as collateral for secured public deposits and for other purposes as required by law or contract provisions. We had no discount window borrowings at December 31, 2025. We have four overnight unsecured credit lines from correspondent banks totaling $90.5 million at December 31, 2025.
Capital Resources Maintaining adequate capital is always an important objective of the Company. Abundant and high quality capital helps weather economic downturns and market volatility, protect depositors’ funds, and support growth, such as expanding operations or making acquisitions. Capital is also a source of funds for loan demand and enables the Company to effectively manage its assets and liabilities.
Abundant and high quality capital helps weather economic downturns and market volatility, protect depositors’ funds, and support growth, such as expanding operations or making acquisitions. Capital is also a source of funds for loan demand and enables the Company to effectively manage its assets and liabilities.
Accretion income from the net purchase accounting discounts on acquired loans increased the yield on average total loans by 43 basis points for the year ended December 31, 2024. Total cost of funds for the year ended December 31, 2024 was 2.12%, an increase of 66 basis points from 1.46% for the year ended December 31, 2023.
Accretion income from the net purchase accounting discounts on acquired loans increased the yield on average total loans by 43 basis points for the year ended December 31, 2024. Total cost of funds for the year ended December 31, 2025 was 1.66%, a decrease of 46 basis points from 2.12% for the year ended December 31, 2024.
The servicing asset activity includes additions from loan sales with servicing retained and acquired servicing rights and reductions from amortization as the serviced loans are repaid and servicing fees are earned. Loans serviced for others totaled $138.0 million and $58.8 million at December 31, 2024 and 2023, respectively.
The servicing asset activity includes additions from loan sales with servicing retained and acquired servicing rights and reductions from amortization as the serviced loans are repaid and servicing fees are earned. Loans serviced for others totaled $113.5 million and $138.0 million at December 31, 2025 and 2024, respectively.
Prior to the Merger with CALB during the third quarter of 2024, the holding company qualified for treatment under the Small Bank Holding Company Policy Statement (Regulation Y, Appendix C) and, therefore, was not subject to consolidated capital rules at the bank holding company level.
Prior to the Merger, the holding company qualified for treatment under the Small Bank Holding Company Policy Statement (Regulation Y, Appendix C) and, therefore, was not subject to consolidated capital rules at the bank holding company level. Beginning in the third quarter of 2024, the holding company became subject to the consolidated capital rules at the bank holding company level.
The effective duration of the held-to-maturity debt securities was 6.52 years and 5.58 years at December 31, 2024 and 2023, respectively. We have the 69 Table of Contents intent and ability to hold the securities classified as held to maturity until they mature, at which time we will receive full value for the securities.
The effective duration of the held-to-maturity debt securities was 5.94 years and 6.52 years at December 31, 2025 and 2024, respectively. We have the intent and ability to hold the securities classified as held to maturity until they mature, at which time we will receive full value for the securities.
The decrease was primarily related to a 66 basis point increase in the cost of funds, partially offset by a 57 basis point increase in the total interest-earning assets yield resulting from higher market interest rates and a change in our interest-earning asset mix.
The increase was primarily related to a 46 basis point decrease in the cost of funds, partially offset by a 17 basis point decrease in the total interest-earning assets yield resulting from lower market interest rates and a change in our interest-earning asset mix.
At December 31, 2024, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities was $909 thousand and $826 thousand, respectively. All of these available-for-sale municipal debt securities rated AA and above totaled $1.7 million.
All of these available-for-sale municipal debt securities were rated AA and above at December 31, 2025. At December 31, 2024, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities was $909 thousand and $826 thousand, respectively. All of these available-for-sale municipal debt securities were rated AA and above at December 31, 2024.
(3) Average noninterest-bearing deposits represent 34.10%, and 40.83% of average total deposits for the years ended December 31, 2024 and 2023, respectively . (4) Net interest income divided by average interest-earning assets. (5) Total deposits is the sum of interest-bearing deposits and noninterest-bearing deposits.
(3) Average noninterest-bearing deposits represent 35.95%, and 34.10% of average total deposits for the years ended December 31, 2025 and 2024, respectively . (4) Net interest income divided by average interest-earning assets. (5) Total deposits is the sum of interest-bearing deposits and noninterest-bearing deposits.
Accretion income from the net purchase accounting discounts on acquired loans was $10.4 million and the amortization expense impact on interest expense was $750 thousand, which increased the net interest margin by 34 basis points for the year ended December 31, 2024.
Accretion income from the net purchase accounting discounts on acquired loans was $10.4 million and the net amortization expense from the purchase accounting discounts on acquired subordinated debt and time deposit premium impact on interest expense was $750 thousand, the combination of which increased the net interest margin by 34 basis points for the year ended December 31, 2024.
Refer to Note 2 - Business Combinations of the Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplemental Data of this filing for more information regarding business combinations and related activity.
Refer to Note 2 - Business Combinations of the Notes to Consolidated Financial Statements included in Item 8 of this annual report for more information regarding business combinations and related activity.
They may also impact financial institutions. 49 Table of Contents We have a strong consolidated balance sheet with diversified deposit and loan portfolios, with very little sector or individual customer concentration, other than our CRE concentration. Our relationship-based business banking model is founded on strong, ongoing relationships with our commercial clients, which represent a broad variety of industries.
We have a strong consolidated balance sheet with diversified deposit and loan portfolios, with very little sector or individual customer concentration, other than our CRE concentration. Our relationship-based business banking model is founded on strong, ongoing relationships with our commercial clients, which represent a broad variety of industries.
At December 31, 2024 and 2023, the total held-to-maturity debt securities rated AA and above was $44.7 million and $47.0 million, respectively, and rated AA- was $3.2 million and $3.4 million, respectively.
At December 31, 2025 and 2024, the total held-to-maturity debt securities rated AA and above was $46.0 million and $44.7 million, respectively, and rated AA- was $3.3 million and $3.2 million, respectively.
All held-to-maturity debt securities were municipal securities, and historically have had limited credit loss experience with them. At December 31, 2024 and 2023, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities was $463 thousand and $478 thousand, respectively, and $47.4 million and $50.0 million, respectively.
All held-to-maturity debt securities were municipal securities, and historically we have had limited credit loss experience with them. At December 31, 2025 and 2024, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities was $492 thousand and $463 thousand, respectively, and $48.8 million and $47.4 million, respectively.
On June 14, 2023, we announced an authorized share repurchase plan, providing for the repurchase of up to 550,000 shares of our outstanding common stock, or approximately 3% of our then outstanding shares.
On June 14, 2023, we announced an authorized share repurchase plan, providing for the repurchase of up to 550,000 shares of our outstanding common stock, or approximately 3% of our then outstanding shares. On May 1, 2025, we announced an increase in the number of shares authorized for repurchase to 1,600,000 shares.
Net cash flows from operating cash flows were $50.3 million for the year ended December 31, 2024, compared to $33.1 million for the same 2023 period.
Net cash flows from operating cash flows were $57.3 million for the year ended December 31, 2025, compared to $50.3 million for the same 2024 period.
During the year ended December 31, 2024, total loan interest income increased $46.0 million, of which $10.4 million was related to accretion income from the net purchase accounting discounts on acquired loans, total debt securities income increased $1.9 million, and interest and dividend income from other financial institutions and other interest-earning assets increased $8.4 million.
During the year ended December 31, 2025, total loan interest income increased $36.0 million, of which $19.1 million was related to accretion income from the net purchase accounting discounts on acquired loans, total debt securities income increased $2.0 million, and interest and dividend income from other financial institutions and other interest-earning assets increased $8.3 million.
For additional information, see Note 11 — Income Taxes of the Notes to Consolidated Financial Statements included in Item 8 of this annual report. Financial Condition Summary Total assets at December 31, 2024 were $4.03 billion, an increase of $1.67 billion from $2.36 billion at December 31, 2023.
For additional information, see Note 11 — Income Taxes of the Notes to Consolidated Financial Statements included in Item 8 of this annual report. Financial Condition Summary Total assets at December 31, 2025 were $4.03 billion, an increase of $1.7 million or 0.04% from December 31, 2024.
Net interest margin for the year ended December 31, 2024 was 4.28%, compared with 4.33% for the year ended December 31, 2023.
Net interest margin for the year ended December 31, 2025 was 4.55%, compared with 4.28% for the year ended December 31, 2024.
The Bank paid dividends to the Company of $2.0 million during the year ended December 31, 2023. The Federal Reserve limits the amount of dividends that bank holding companies may pay on common stock to income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition.
The Federal Reserve limits the amount of dividends that bank holding companies may pay on common stock to income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition.
This includes SBA loans serviced for others of $33.2 million and $35.4 million at December 31, 2024 and 2023, respectively, for which there was a related servicing 83 Table of Contents asset of $344 thousand and $546 thousand, respectively. The fair value of the servicing asset approximated its carrying value at December 31, 2024 and 2023.
This includes SBA loans serviced for others of $35.6 million and $33.2 million at December 31, 2025 and 2024, respectively, for which there was a related servicing asset of $346 thousand and $344 thousand, respectively. The fair value of the servicing asset approximated its carrying value at December 31, 2025 and 2024.
Balance includes loans held for sale and loans held for investment. (2) Weighted average loan-to-value (“LTV”) is based on the current loan balance as of December 31, 2024, and collateral value at origination or renewal.
Balance includes loans held for sale and loans held for investment. (2) Weighted average loan-to-value (“LTV”) is based on the current loan balance as of December 31, 2025, and collateral value at origination or renewal. (3) Other includes gas station and retirement properties.
At December 31, 2024, the Company was in compliance with all covenants and terms of these notes. At December 31, 2024, consolidated cash and cash equivalents totaled $388.2 million, an increase of $301.4 million from $86.8 million at December 31, 2023.
At December 31, 2025, the Company was in compliance with all covenants and terms of these notes. At December 31, 2025, consolidated cash and cash equivalents totaled $399.9 million, an increase of $11.8 million from $388.2 million at December 31, 2024.
We attempt to maintain a total liquidity ratio (liquid assets, including cash and due from banks, federal funds sold, fully disbursed loans held for sale, investments maturing one year or less, and available-for-sale debt securities not pledged as collateral expressed as a percentage of total deposits and short term debt) above approximately 10.0%.
We attempt to maintain a total liquidity ratio (liquid 82 Table of Contents assets, including federal funds sold, short term interest-bearing due from banks, fully disbursed loans held for sale, and available-for-sale debt securities not pledged as collateral expressed as a percentage of total deposits and short term debt) above approximately 10.0%.
The allowance for off-balance sheet commitments totaled $3.1 million and $933 thousand at December 31, 2024 and 2023, respectively.
The allowance for off-balance sheet commitments totaled $2.1 million and $3.1 million at December 31, 2025 and 2024, respectively.
Consideration for each SBA loan sale includes the cash received and the fair value of the related servicing asset. The significant assumptions used in the valuation of the SBA servicing asset at December 31, 2024 included a weighted average discount rate of 14.3% and a weighted average prepayment speed assumption of 20.5%.
Consideration for each SBA loan sale includes the cash received and the fair value of the related servicing asset. The significant assumptions used in the valuation of the SBA servicing asset at December 31, 2025 included a weighted average discount rate of 12.0% and a weighted average prepayment speed assumption of 19.9%.
(2) Average balance outstanding includes average net unamortized issuance costs and average fair value adjustments for the periods presented. (3) Weighted average interest rate includes issuance costs and fair value adjustments for the periods presented. Shareholders’ Equity Total shareholders’ equity was $511.8 million at December 31, 2024, compared to $288.2 million at December 31, 2023.
(2) Average balance outstanding includes average net unamortized issuance costs and average fair value adjustments for the periods presented. (3) Weighted average interest rate includes issuance costs and fair value adjustments during the periods presented. 81 Table of Contents Shareholders’ Equity Total shareholders’ equity was $576.6 million at December 31, 2025, compared to $511.8 million at December 31, 2024.
These loans are made to finance operations, to provide working capital, or for specific purposes such as to finance the purchase of assets or equipment or to finance accounts receivable and inventory. The Company’s C&I loans may be secured (other than by real estate) or unsecured. They may take the form of single payment, installment, or lines of credit.
These loans are made to finance operations, to provide working capital, or for specific purposes such as to finance the purchase of assets or equipment or 49 Table of Contents to finance accounts receivable and inventory. The Company’s C&I loans may be secured (other than by real estate) or unsecured.
We have no meaningful exposure to cryptocurrency or venture capital business models, our accumulated other comprehensive loss on our available-for-sale debt securities is manageable, and our capital position is strong. We have a highly skilled and experienced lending production team and credit administration team.
We have no meaningful exposure to cryptocurrency or venture capital business models, our accumulated other comprehensive loss on our available-for-sale debt securities is manageable, and our capital position is strong.
Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements.
The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements.
At December 31, 2024, we had credit availability of $318.5 million at the Federal Reserve discount window to the extent of collateral pledged. At December 31, 2024, we had pledged held-to-maturity debt securities with an amortized cost of $53.3 million and qualifying loans with an unpaid principal balance of $379.8 million as collateral through the Borrower-in-Custody (“BIC”) program.
At December 31, 2025, we had credit availability of $327.8 million at the Federal Reserve discount window to the extent of collateral pledged. At December 31, 2025, we had pledged our held-to-maturity debt securities with an amortized cost of $52.9 million and qualifying loans with an unpaid principal balance of $351.7 million as collateral through the Borrower-in-Custody (“BIC”) program.
We determined that the increase in unrealized losses related to each available-for-sale debt security at December 31, 2024 was primarily attributable to factors other than credit related, including general volatility in market conditions. Our available-for-sale debt securities consisted of U.S.
The changes in the net unrealized losses on our available-for-sale debt securities affects our total and tangible shareholders’ equity. We determined that the unrealized losses related to each available-for-sale debt security at December 31, 2025 was primarily attributable to factors other than credit related, including general volatility in market conditions. Our available-for-sale debt securities consisted of U.S.
Accrued interest receivable on loans receivable, net, totaled $11.7 million and $6.4 million at December 31, 2024 and 2023, respectively, and is included within accrued interest receivable and other assets in the accompanying consolidated balance sheets.
Accrued interest receivable on loans receivable, net, totaled $9.8 million and $11.7 million at December 31, 2025 and 2024, respectively, and is included within accrued interest receivable and other assets in the accompanying consolidated balance sheets. Accrued interest receivable is excluded from the ACL.
At December 31, 2024 and 2023, debt securities with an amortized cost of $56.2 million and $53.6 million, respectively, were pledged to the Federal Reserve as collateral for secured public deposits and for other purposes as required by law or contract provisions, in addition to collateral securing a line of credit with the Federal Reserve.
At December 31, 2025 and 2024, available-for-sale debt securities with an amortized cost of $27.6 million and $3.0 million, respectively, were pledged to the Federal Reserve as collateral for secured public deposits and for other purposes as required by law or contract provisions, in addition to held-to-maturity debt securities with an amortized cost of $52.9 million and $53.3 million, respectively, pledged as collateral for a secured a line of credit with the Federal Reserve.
Federal bank regulatory agencies have authority to prohibit banking institutions from paying dividends if those agencies determine that, based on the financial condition of the bank, such payment will constitute an unsafe or unsound practice. 92 Table of Contents During the year ended December 31, 2024, there were no dividends paid by the Bank to the Company.
Federal bank regulatory agencies have authority to prohibit banking institutions from paying dividends if those agencies determine that, based on the financial condition of the bank, such payment will constitute an unsafe or unsound practice. During the years ended December 31, 2025, and 2024, dividends paid by the Bank to the Company were $60.0 million and zero, respectively.
The increase in loans secured by real estate was primarily driven by a $743.5 million increase in commercial real estate and other loans, a $22.7 million increase in multifamily residential loans, a $20.5 million increase in 1-4 family residential loans, partially offset by a $16.2 million decrease in construction and land development loans.
The increase in loans secured by real estate was primarily driven by a $52.7 million increase in commercial real estate and other loans and a $80.1 million increase in multifamily residential loans, partially offset by an $88.4 million decrease in construction and land development loans and a $22.0 million decrease in 1-4 family residential loans.
These are generally based on the financial strength and integrity of the borrower and guarantor(s) and generally (with some exceptions) are collateralized by short-term assets such as accounts receivable, inventory, 53 Table of Contents equipment, or a borrower’s other business assets.
They may take the form of single payment, installment, or lines of credit. These are generally based on the financial strength and integrity of the borrower and guarantor(s) and generally (with some exceptions) are collateralized by short-term assets such as accounts receivable, inventory, equipment, or a borrower’s other business assets.
Treasury, U.S. government and agency and government sponsored enterprise securities, and municipals which are issued, guaranteed, or supported by the U.S. government, and historically have had limited credit loss experience. In addition, we reviewed the credit rating of the municipal securities.
Treasury, U.S. government and agency and government sponsored enterprise securities, and municipals which are issued, guaranteed, or supported by the U.S. government, and historically have had limited credit loss experience. In addition, we reviewed the credit rating of the municipal securities. At December 31, 2025, the total fair value of taxable municipal debt securities was $938 thousand.
The yield on total interest-earning assets during the year ended December 31, 2024 was 6.26%, compared with 5.69% for the year ended December 31, 2023. The yield on average total loans during the year ended December 31, 2024 was 6.55%, a 61 basis point increase from 5.94% for the year ended December 31, 2023.
The yield on total earning assets during the year ended December 31, 2025 was 6.09%, compared with 6.26% for the year ended December 31, 2024. The yield on average total loans during the year ended December 31, 2025 was 6.50%, a 5 basis point decrease from 6.55% for the year ended December 31, 2024.
Beginning September 30, 2025, the interest rate changes to a quarterly variable rate equal to the then current 90-day SOFR plus 4.88%, until maturity, unless redeemed early, at the Company’s option, after the end of the fixed-rate period. The subordinated debt was initially recognized with a fair value discount of $794 thousand.
Beginning August 17, 2026, the interest rate changes to a quarterly variable rate equal to the then current 90-day SOFR plus 2.86%, until maturity, unless redeemed early, at our option, after the end of the fixed-rate period. The subordinated debt was initially recognized with a fair value discount of $3.4 million.
These ratios differ from the regulatory capital ratios principally in that the numerator excludes goodwill and other intangible assets. 57 Table of Contents The following tables present a reconciliation of non-GAAP financial measures to GAAP measures for the periods indicated: For the Year Ended December 31, (dollars in thousands) 2024 2023 Efficiency Ratio Noninterest expense $ 97,791 $ 59,746 Less: Merger and related expenses 16,288 — Adjusted noninterest expense $ 81,503 $ 59,746 Net interest income 122,984 94,138 Noninterest income 4,760 3,379 Total net interest income and noninterest income $ 127,744 $ 97,517 (1) Efficiency ratio (non-GAAP) 76.6 % 61.3 % (1) Adjusted efficiency ratio (non-GAAP) 63.8 % 61.3 % Pre-tax Pre-provision Income Net interest income $ 122,984 $ 94,138 Noninterest income 4,760 3,379 Total net interest income and noninterest income 127,744 97,517 Less: Noninterest expense 97,791 59,746 (2) Pre-tax pre-provision income (non-GAAP) $ 29,953 $ 37,771 Add: Merger and related expenses 16,288 — (2) Adjusted pre-tax pre-provision income (non-GAAP) $ 46,241 $ 37,771 Return on Average Assets, Equity, and Tangible Equity Net income $ 5,433 $ 25,910 Add: After-tax Day1 provision for non PCD loans and unfunded loan commitments (1) 14,978 — Add: After-tax merger and related expenses (1) 11,988 — (3) Adjusted net income (non-GAAP) $ 32,399 $ 25,910 Average assets $ 3,095,916 $ 2,306,233 Average shareholders’ equity 379,816 273,346 Less: Average intangible assets 79,564 39,195 (4) Average tangible common equity (non-GAAP) $ 300,252 $ 234,151 Return on average assets 0.18 % 1.12 % (5) Adjusted return on average assets (non-GAAP) 1.05 % 1.12 % Return on average equity 1.43 % 9.48 % (5) Adjusted return on average equity (non-GAAP) 8.53 % 9.48 % (6) Return on average tangible common equity (non-GAAP) 1.81 % 11.07 % (6) Adjusted return on average tangible common equity (non-GAAP) 10.79 % 11.07 % (1) After-tax Day 1 provision for non-PCD loans and unfunded loan commitments and merger and related expenses are presented using a 29.56% tax rate. 58 Table of Contents December 31, (dollars in thousands, except per share amounts) 2024 2023 Tangible Common Equity Ratio/Tangible Book Value Per Share Shareholders’ equity $ 511,836 $ 288,152 Less: Intangible assets 134,058 38,998 (7) Tangible common equity (non-GAAP) $ 377,778 $ 249,154 Total assets $ 4,031,654 $ 2,360,252 Less: Intangible assets 134,058 38,998 (7) Tangible assets (non-GAAP) $ 3,897,596 $ 2,321,254 Equity to asset ratio 12.70 % 12.21 % (8) Tangible common equity to tangible asset ratio (non-GAAP) 9.69 % 10.73 % Book value per share $ 15.86 $ 15.69 (9) Tangible book value per share (non-GAAP) $ 11.71 $ 13.56 Shares outstanding 32,265,935 18,369,115 59 Table of Contents Financial Highlights The following table sets forth certain of our financial highlights as of and for each of the years presented.
These ratios differ from the regulatory capital ratios principally in that the numerator excludes goodwill and other intangible assets. 53 Table of Contents The following tables present a reconciliation of non-GAAP financial measures to GAAP measures for the periods indicated: For the Year Ended December 31, (dollars in thousands) 2025 2024 Efficiency Ratio Noninterest expense $ 101,043 $ 97,791 Less: Merger and related expenses — 16,288 Adjusted noninterest expense $ 101,043 $ 81,503 Net interest income 169,092 122,984 Noninterest income 11,085 4,760 Total net interest income and noninterest income $ 180,177 $ 127,744 (1) Efficiency ratio (non-GAAP) 56.1 % 76.6 % (1) Adjusted efficiency ratio (non-GAAP) 56.1 % 63.8 % Pre-tax Pre-provision Income Net interest income $ 169,092 $ 122,984 Noninterest income 11,085 4,760 Total net interest income and noninterest income 180,177 127,744 Less: Noninterest expense 101,043 97,791 (2) Pre-tax pre-provision income (non-GAAP) $ 79,134 $ 29,953 Add: Merger and related expenses — 16,288 (2) Adjusted pre-tax pre-provision income (non-GAAP) $ 79,134 $ 46,241 Return on Average Assets, Equity, and Tangible Equity Net income $ 63,058 $ 5,433 Add: After-tax Day1 provision for non PCD loans and unfunded loan commitments (1) — 14,978 Add: After-tax merger and related expenses (1) — 11,988 (3) Adjusted net income (non-GAAP) $ 63,058 $ 32,399 Average assets $ 4,020,949 $ 3,095,916 Average shareholders’ equity 545,315 379,816 Less: Average intangible assets 131,703 79,564 (4) Average tangible common equity (non-GAAP) $ 413,612 $ 300,252 Return on average assets 1.57 % 0.18 % (5) Adjusted return on average assets (non-GAAP) 1.57 % 1.05 % Return on average equity 11.56 % 1.43 % (5) Adjusted return on average equity (non-GAAP) 11.56 % 8.53 % (6) Return on average tangible common equity (non-GAAP) 15.25 % 1.81 % (6) Adjusted return on average tangible common equity (non-GAAP) 15.25 % 10.79 % (1) After-tax Day 1 provision for non-PCD loans and unfunded loan commitments and after-tax merger and related expenses are presented using a 29.56% tax rate. 54 Table of Contents December 31, (dollars in thousands, except per share amounts) 2025 2024 Tangible Common Equity Ratio/Tangible Book Value Per Share Shareholders’ equity $ 576,586 $ 511,836 Less: Intangible assets 129,414 134,058 (7) Tangible common equity (non-GAAP) $ 447,172 $ 377,778 Total assets $ 4,033,386 $ 4,031,654 Less: Intangible assets 129,414 134,058 (7) Tangible assets (non-GAAP) $ 3,903,972 $ 3,897,596 Equity to asset ratio 14.30 % 12.70 % (8) Tangible common equity to tangible asset ratio (non-GAAP) 11.45 % 9.69 % Book value per share $ 17.79 $ 15.86 (9) Tangible book value per share (non-GAAP) $ 13.79 $ 11.71 Shares outstanding 32,418,182 32,265,935 55 Table of Contents Financial Highlights The following table sets forth certain of our financial highlights as of and for each of the years presented.
For additional information regarding our operating, investing, and financing cash flows, see “Consolidated Statements of Cash Flows” in our audited consolidated financial statements contained in Item 8 of this annual report. California Bank of Commerce, N.A.
Our total liquidity ratios were 16.9% at December 31, 2025 and 15.7% at December 31, 2024. For additional information regarding our operating, investing, and financing cash flows, see “Consolidated Statements of Cash Flows” in our audited consolidated financial statements contained in Item 8 of this annual report. California Bank of Commerce, N.A.
The increase in interest income and interest expense primarily relates to increases in total average interest-earning assets and total average interest-bearing liabilities from the Merger during the third quarter of 2024, coupled with an increase in yields on interest-earnings assets and an increase in cost of funds.
The increase in interest income and interest expense primarily relates to increases in total average interest-earning assets and total average interest-bearing liabilities from the Merger during the third quarter of 2024, partially offset by lower yields on interest earning assets and lower interest bearing liabilities costs.
Total unfunded loan commitments increased $514.5 million to $925.3 million at December 31, 2024, from $410.8 million at December 31, 2023. Servicing Asset and Loan Servicing Portfolio We sell loans in the secondary market and, for certain loans, retain the servicing responsibility.
Total unfunded loan commitments decreased $38.9 million to $886.4 million at December 31, 2025, from $925.3 million at December 31, 2024. Servicing Asset and Loan Servicing Portfolio We sell loans in the secondary market and, for certain loans, retain the servicing responsibility.
Net cash used in financing activities was $273.6 million for the year ended December 31, 2024, compared to net cash provided by financing activities of $45.9 million for the same 2023 period.
Net cash used in financing activities was $75.3 million for the year ended December 31, 2025, compared to $273.6 million for the same 2024 period.
Year Ended December 31, ($ in thousands except share and per share data) 2024 2023 EARNINGS Net interest income $ 122,984 $ 94,138 Provision for credit losses $ 21,690 $ 915 Noninterest income $ 4,760 $ 3,379 Noninterest expense $ 97,791 $ 59,746 Income tax expense $ 2,830 $ 10,946 Net income $ 5,433 $ 25,910 Pre-tax pre-provision income (1) $ 29,953 $ 37,771 Adjusted pre-tax pre-provision income (1) $ 46,241 $ 37,771 Diluted earnings per share $ 0.22 $ 1.39 Ending shares outstanding 32,265,935 18,369,115 PERFORMANCE RATIOS Return on average assets 0.18 % 1.12 % Adjusted return on average assets (1) 1.05 % 1.12 % Return on average common equity 1.43 % 9.48 % Adjusted return on average common equity (1) 8.53 % 9.48 % Yield on loans 6.55 % 5.94 % Yield on earning assets 6.26 % 5.69 % Cost of deposits 2.01 % 1.37 % Cost of funds 2.12 % 1.46 % Net interest margin 4.28 % 4.33 % Efficiency ratio (1) 76.6 % 61.3 % Adjusted efficiency ratio (1) 63.8 % 61.3 % CAPITAL Tangible equity to tangible assets (1) 9.69 % 10.73 % Book value (BV) per common share $ 15.86 $ 15.69 Tangible BV per common share (1) $ 11.71 $ 13.56 ASSET QUALITY Allowance for loan losses (ALL) $ 50,540 $ 22,569 Reserve for unfunded loan commitments 3,103 933 Allowance for credit losses (ACL) $ 53,643 $ 23,502 ALL to nonperforming loans 190.5 % 173.6 % ALL to total loans 1.61 % 1.15 % ACL to total loans 1.71 % 1.20 % Net charge-offs to average loans held-for-investment (0.11) % (0.07) % 60 Table of Contents Year Ended December 31, ($ in thousands except share and per share data) 2024 2023 30-89 days past due, excluding nonaccrual loans $ 12,082 $ 19 Over 90 days past due, excluding nonaccrual loans $ 150 $ — Special mention loans $ 69,339 $ 2,996 Special mention loans to total loans held for investment 2.21 % 0.15 % Substandard loans $ 117,598 $ 19,502 Substandard loans to total loans held for investment 3.75 % 1.00 % Nonperforming loans $ 26,536 $ 13,004 Other real estate owned 4,083 — Nonperforming assets $ 30,619 $ 13,004 Nonperforming assets to total assets 0.76 % 0.55 % END OF PERIOD BALANCES Total loans, including loans held for sale $ 3,156,345 $ 1,964,791 Total assets $ 4,031,654 $ 2,360,252 Deposits $ 3,398,760 $ 1,943,556 Loans to deposits 92.9 % 101.1 % Shareholders' equity $ 511,836 $ 288,152 (1) Refer to Non-GAAP Financial Measures, included in the Management's Discussion and Analysis of Financial Condition and Results of Operations of this annual report.
Year Ended December 31, ($ in thousands except share and per share data) 2025 2024 EARNINGS Net interest income $ 169,092 $ 122,984 (Reversal of) provision for credit losses $ (8,823) $ 21,690 Noninterest income $ 11,085 $ 4,760 Noninterest expense $ 101,043 $ 97,791 Income tax expense $ 24,899 $ 2,830 Net income $ 63,058 $ 5,433 Pre-tax pre-provision income (1) $ 79,134 $ 29,953 Adjusted pre-tax pre-provision income (1) $ 79,134 $ 46,241 Diluted earnings per share $ 1.93 $ 0.22 Ending shares outstanding 32,418,182 32,265,935 PERFORMANCE RATIOS Return on average assets 1.57 % 0.18 % Adjusted return on average assets (1) 1.57 % 1.05 % Return on average common equity 11.56 % 1.43 % Adjusted return on average common equity (1) 11.56 % 8.53 % Yield on loans 6.50 % 6.55 % Yield on earning assets 6.09 % 6.26 % Cost of deposits 1.55 % 2.01 % Cost of funds 1.66 % 2.12 % Net interest margin 4.55 % 4.28 % Efficiency ratio (1) 56.1 % 76.6 % Adjusted efficiency ratio (1) 56.1 % 63.8 % Net charge-offs to average loans held-for-investment (0.28) % (0.11) % December 31, 2025 2024 CAPITAL Tangible equity to tangible assets (1) 11.45 % 9.69 % Book value (BV) per common share $ 17.79 $ 15.86 Tangible BV per common share (1) $ 13.79 $ 11.71 ASSET QUALITY Allowance for loan losses (ALL) $ 34,348 $ 50,540 Reserve for unfunded loan commitments 2,105 3,103 Allowance for credit losses (ACL) $ 36,453 $ 53,643 ALL to non-performing loans 213.5 % 190.5 % ALL to total loans 1.13 % 1.61 % 56 Table of Contents December 31, 2025 2024 ACL to total loans 1.20 % 1.71 % 30-89 days past due, excluding nonaccrual loans $ 14,735 $ 12,082 Over 90 days past due, excluding nonaccrual loans $ — $ 150 Special mention loans $ 72,407 $ 69,339 Special mention loans to total loans held for investment 2.39 % 2.21 % Substandard loans $ 60,681 $ 117,598 Substandard loans to total loans held for investment 2.00 % 3.75 % Non-performing loans $ 16,086 $ 26,536 Other real estate owned — 4,083 Non-performing assets $ 16,086 $ 30,619 Non-performing assets to total assets 0.40 % 0.76 % END OF PERIOD BALANCES Total loans, including loans held for sale $ 3,058,992 $ 3,156,345 Total assets $ 4,033,386 $ 4,031,654 Deposits $ 3,370,581 $ 3,398,760 Loans to deposits 90.8 % 92.9 % Shareholders' equity $ 576,586 $ 511,836 (1) Refer to Non-GAAP Financial Measures, included in the Management's Discussion and Analysis of Financial Condition and Results of Operations of this annual report.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table presents the projected changes in NII at Risk and EVE that would occur upon an immediate change in interest rates based on independent analysis, but without giving effect to any steps that management might take to counteract that change at December 31, 2024: Change in Interest Rates in Basis Points (bps) Market Value of Equity Net Interest Income (NII) (Dollars in thousands) Amount Change ($) Change (%) Amount Change ($) Change (%) December 31, 2024 +300bps $ 635.2 $ 40.3 6.8 % $ 179.8 3.5 2.0 % +200bps 627.6 32.7 5.5 % 178.9 2.6 1.5 % +100bps 615.0 20.1 3.4 % 177.7 1.5 0.8 % Base case 594.9 176.2 -100bps 566.6 (28.3) (4.8) % 172.7 (3.5) (2.0) % -200bps 527.0 (67.9) (11.4) % 168.6 (7.6) (4.3) % -300bps 475.2 (119.7) (20.1) % 163.4 (12.8) (7.3) % December 31, 2023 +300bps $ 359.1 $ 37.1 11.5 % $ 86.9 (0.4) (0.4) % +200bps 351.1 29.1 9.0 % 87.6 0.3 0.3 % +100bps 339.5 17.5 5.4 % 87.7 0.4 0.5 % Base case 322.0 87.3 -100bps 295.4 (26.6) (8.3) % 84.4 (2.9) (3.3) % -200bps 252.8 (69.2) (21.5) % 83.1 (4.2) (4.8) % -300bps 186.7 (135.3) (42.0) % 82.0 (5.3) (6.0) % The modeled NII results at December 31, 2024 and 2023 indicate we would sustain a decrease in NII if interest rates declined due primarily to adjustable-rate loans repricing lower and at a faster pace than the decline in deposit rates.
Biggest changeThe following table presents the projected changes in NII at Risk and EVE that would occur upon an immediate change in interest rates based on independent analysis, but without giving effect to any steps that management might take to counteract that change at December 31, 2025: 88 Table of Contents Change in Interest Rates in Basis Points (bps) Market Value of Equity Net Interest Income (NII) (Dollars in thousands) Amount Change ($) Change (%) Amount Change ($) Change (%) December 31, 2025 +300bps $ 635.0 $ 45.2 7.7 % $ 165.7 $ 1.2 0.7 % +200bps 626.1 36.3 6.2 % 165.6 1.0 0.6 % +100bps 611.9 22.1 3.7 % 165.1 0.6 0.3 % Base case 589.8 164.6 -100bps 557.2 (32.6) (5.5) % 161.0 (3.5) (2.2) % -200bps 512.5 (77.3) (13.1) % 155.5 (9.1) (5.5) % -300bps 454.5 (135.3) (22.9) % 154.7 (9.9) (6.0) % December 31, 2024 +300bps $ 635.2 $ 40.3 6.8 % $ 179.8 $ 3.5 2.0 % +200bps 627.6 32.7 5.5 % 178.9 2.6 1.5 % +100bps 615.0 20.1 3.4 % 177.7 1.5 0.8 % Base case 594.9 176.2 -100bps 566.6 (28.3) (4.8) % 172.7 (3.5) (2.0) % -200bps 527.0 (67.9) (11.4) % 168.6 (7.6) (4.3) % -300bps 475.2 (119.7) (20.1) % 163.4 (12.8) (7.3) % The modeled NII results at December 31, 2025 and 2024 indicate we would sustain a decrease in NII if interest rates declined due primarily to adjustable-rate loans repricing lower and at a faster pace than the decline in deposit rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Management Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Management Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity 87 Table of Contents prices, and credit spreads.
Changes that vary significantly from our assumptions and estimates significantly affect our earnings and EVE profiles. 95 Table of Contents
Changes that vary significantly from our assumptions and estimates significantly affect our earnings and EVE profiles. 89 Table of Contents
In order to model and evaluate interest rate risk, we use two approaches: Net Interest Income at Risk (“NII at Risk”), and Economic Value of Equity (“EVE”).
The simulated interest rate scenarios include an instantaneous parallel shift in the yield curve. In order to model and evaluate interest rate risk, we use two approaches: Net Interest Income at Risk (“NII at Risk”), and Economic Value of Equity (“EVE”).
The changes in NII in a rising rate environment are attributed to the adjustable-rate loans repricing higher, offset by the higher costs associated with increasing deposit costs. The modeled EVE results at December 31, 2024 and 2023 indicate we would benefit from an increase in interest rates and would be adversely impacted by a decrease in interest rates.
In the current rate environment at December 31, 2025 and 2024, our NII results indicated there would be a minimal to modest increase in the net interest income in all rates-up scenarios. The changes in NII in a rising rate environment are attributed to the adjustable-rate loans repricing higher, offset by the higher costs associated with increasing deposit costs.
Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market 93 Table of Contents expectations, and policy constraints.
Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints. Changes in interest rates may result in interest-earning assets and interest-bearing liabilities maturing or repricing at different times, on a different basis or in unequal amounts.
Additionally, prepayments of loans and early withdrawals of certificates of deposit could cause interest sensitivities to vary. Our interest rate risk exposure is measured and monitored through various risk management tools, including a simulation model that performs interest rate sensitivity analysis under multiple scenarios.
Our interest rate risk exposure is measured and monitored through various risk management tools, including a simulation model that performs interest rate sensitivity analysis under multiple scenarios. The simulation model is based on the actual maturities and re-pricing characteristics of the Bank’s interest-rate sensitive assets and liabilities.
The results of these analyses do not contemplate all of the actions that we may undertake in response to changes in interest rates.
The modeled EVE results at December 31, 2025 and 2024 indicate we would benefit from an increase in interest rates and would be adversely impacted by a decrease in interest rates. The results of these analyses do not contemplate all of the actions that we may undertake in response to changes in interest rates.
Changes in interest rates may result in interest-earning assets and interest-bearing liabilities maturing or repricing at different times, on a different basis or in unequal amounts. In addition, it is not uncommon for rates on certain assets or liabilities to lag behind changes in the market rates of interest.
In addition, it is not uncommon for rates on certain assets or liabilities to lag behind changes in the market rates of interest. Additionally, prepayments of loans and early withdrawals of certificates of deposit could cause interest sensitivities to vary.
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The simulation model is based on the actual maturities and re-pricing characteristics of the Bank’s interest-rate sensitive assets and liabilities. The simulated interest rate scenarios include an instantaneous parallel shift in the yield curve.
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In the current rate environment at December 31, 2024, our NII results indicated there would be a modest increase in the net interest income in all rates-up scenarios, compared to an increase in net interest income in the +100 and +200 rate shock scenarios, and a slight decrease in 94 Table of Contents net interest income in the +300 rate shock scenario at December 31, 2023.

Other BCAL 10-K year-over-year comparisons