Core Insights - Three stocks with strong momentum and buy rankings are highlighted for investors: Phibro Animal Health, Seanergy Maritime Holdings, and California BanCorp Company Summaries - **Phibro Animal Health (PAHC)**: A leading global diversified animal health and mineral nutrition company, providing a wide range of products for food animals. The Zacks Consensus Estimate for its current year earnings increased by 7.4% over the last 60 days. The stock gained 33.3% over the last three months, outperforming the S&P 500's gain of 3.8%. The company has a Momentum Score of A [1][2]. - **Seanergy Maritime Holdings (SHIP)**: A prominent pure-play Capesize ship-owner providing marine dry bulk transportation services through a modern fleet. The Zacks Consensus Estimate for its current year earnings increased by 66.7% over the last 60 days. The stock gained 25.9% over the last three months, also outperforming the S&P 500's gain of 3.8%. The company has a Momentum Score of A [2][3]. - **California BanCorp (BCAL)**: A registered bank holding company offering a range of financial products and services to individuals and small to medium-sized businesses. The Zacks Consensus Estimate for its current year earnings increased by 6.3% over the last 60 days. The stock gained 12.7% over the last three months, again outperforming the S&P 500's gain of 3.8%. The company has a Momentum Score of B [3][4].

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Merger and Expansion - California BanCorp completed an all-stock merger with CALB on July 31, 2024, resulting in CALB's total loans of $1.43 billion, total assets of $1.91 billion, and total deposits of $1.64 billion[217]. - The merger expanded California BanCorp's footprint into Northern California, adding one full-service bank branch and four loan production offices, increasing the total to 14 branches[217]. - The merger with CALB, completed on July 31, 2024, significantly impacted financial results, contributing to higher average interest-earning assets[249]. Financial Performance - Net income for Q3 2025 was $15.7 million, or $0.48 per diluted share, compared to $14.1 million, or $0.43 per diluted share in Q2 2025, reflecting a $2.4 million increase in pre-tax, pre-provision income[250]. - For Q3 2025 compared to Q3 2024, net income increased by $32.1 million, primarily due to a $5.6 million rise in net interest income and a $23.0 million decrease in the provision for credit losses[251]. - For the nine months ended September 30, 2025, net income was $46.6 million, or $1.42 per diluted share, compared to a net loss of $11.3 million, marking a $58.0 million increase in net income year-over-year[252]. - The company reported a net income of $15,684,000 for the three months ended September 30, 2025, compared to a net loss of $16,464,000 in the same period of 2024[236]. - The efficiency ratio improved to 51.7% for the three months ended September 30, 2025, compared to 98.9% in the same period of 2024[236]. - Adjusted net income (non-GAAP) for Q3 2025 was $15.7 million, compared to $9.1 million for the same period in 2024[251]. Asset and Loan Management - Total loans, including loans held for sale, were $2,996,984,000 as of September 30, 2025, down from $3,156,345,000 as of December 31, 2024[237]. - The total loans held for investment decreased to $2.99 billion at September 30, 2025, a decline of $148.9 million from $3.14 billion at December 31, 2024, representing 72.9% of total assets[330]. - Loan originations for the nine months ended September 30, 2025, totaled $334.1 million, offset by net paydowns of $79.2 million and charge-offs of $7.6 million[330]. - The total balance of commercial real estate loans was $1,759.7 million, with the largest segments being industrial (29.2%) and retail (15.7%)[334]. - The weighted average loan-to-value (LTV) ratio for the total CRE portfolio was 48% as of September 30, 2025[335]. - Delinquent loans amounted to $3.2 million, representing 0.11% of total loans held for investment, a decrease from 0.39% at December 31, 2024[339]. Credit Quality and Risk Management - California BanCorp's credit risk in the total loan portfolio has improved, reflected in the reversal of provision for loan losses over three consecutive quarters[228]. - Nonperforming loans decreased to $15,600,000 as of September 30, 2025, from $26,536,000 as of December 31, 2024[237]. - The allowance for loan losses decreased to $41,292,000 as of September 30, 2025, from $50,540,000 as of December 31, 2024[237]. - The allowance for loan losses (ACL) was $43.57 million at the end of the period, reflecting a decrease from $53.64 million at the beginning of the nine months ended September 30, 2025[354]. - The company had no consumer solar loans over 90 days past due as of September 30, 2025, compared to $150 thousand as of December 31, 2024[339]. - Special mention loans increased by $29.1 million to $98.4 million as of September 30, 2025, primarily due to $63.0 million in downgrades from pass rated loans[341]. Deposits and Funding - Total deposits increased to $3.46 billion at September 30, 2025, from $3.40 billion at December 31, 2024, with a weighted average interest rate of 1.5%[367]. - Noninterest-bearing demand deposits accounted for 35.8% of total deposits at September 30, 2025, compared to 37.0% at December 31, 2024[367]. - Average total deposits for the three months ended September 30, 2025, were $3.39 billion with a weighted average rate of 1.59%, compared to $3.07 billion and 2.09% for the same period in 2024[374]. - Total interest-bearing liabilities for the three months ended September 30, 2025, were $2,261,376 thousand, with total interest expense of $14,673 thousand[253]. - The cost of deposits was 1.59% for the three months ended September 30, 2025, with total deposits of $3,391,737 thousand[253]. Capital and Liquidity - Total shareholders' equity rose to $564.7 million at September 30, 2025, an increase of $52.9 million from $511.8 million at December 31, 2024, primarily due to net income of $46.6 million[379]. - The tangible book value per common share increased to $13.39 at September 30, 2025, compared to $11.71 at December 31, 2024[381]. - The total liquidity ratio was 21.7% at September 30, 2025, significantly higher than 15.7% at December 31, 2024[384]. - The company had total available borrowing capacity of $1.19 billion at September 30, 2025[390]. - The leverage capital ratio and total risk-based capital ratio were 11.17% and 14.74%, respectively, at September 30, 2025[383]. Income and Expense - Total noninterest income for the nine months ended September 30, 2025 was $8.1 million, an increase of 113% compared to $3.8 million for the same period in 2024[290]. - Total noninterest expense for Q3 2025 was $23.4 million, a decrease of $1.5 million from $24.8 million in Q2 2025[293]. - Total noninterest expense for Q3 2025 decreased by $14.3 million compared to $37.7 million in Q3 2024, mainly due to the absence of $14.6 million in merger-related costs[295]. - Income tax expense for Q3 2025 was $6.1 million, with an effective rate of 28.1%, compared to an income tax benefit of $6.1 million in Q3 2024[307]. - The company repurchased 89,500 shares at a weighted average market price of $15.22, totaling $1.4 million during the three and nine months ended September 30, 2025[381].

Financial Performance - Net income for Q3 2025 was $15.7 million, or $0.48 per diluted share, up from $14.1 million, or $0.43 per diluted share in Q2 2025, and a net loss of $16.5 million in Q3 2024[3]. - Net interest income for Q3 2025 was $42.5 million, an increase from $41.4 million in the prior quarter, driven by a $1.4 million rise in total interest and dividend income[10]. - The efficiency ratio (non-GAAP) improved to 51.75% in Q3 2025, compared to 56.09% in the prior quarter[19]. - The return on average assets for the three months ended September 30, 2025, was 1.54%, compared to 1.45% in the previous quarter[42]. - Adjusted net income for Q3 2025 was $15,684,000, compared to $14,099,000 in Q2 2025, and $9,090,000 in Q3 2024[54]. - Net interest income increased to $42,515,000 in Q3 2025 from $41,417,000 in Q2 2025, and $36,942,000 in Q3 2024[54]. - Total net interest income and noninterest income reached $45,183,000 in Q3 2025, compared to $44,273,000 in Q2 2025, and $38,116,000 in Q3 2024[54]. - The company reported a net income of $15,684,000 in Q3 2025, compared to a net loss of $(16,464,000) in Q3 2024[54]. Asset and Deposit Growth - Total assets reached $4.10 billion at September 30, 2025, an increase of $147.5 million, or 3.7%, from June 30, 2025[21]. - Total deposits increased by $147.4 million, or 4.4%, to $3.46 billion at September 30, 2025, compared to $3.31 billion at June 30, 2025[11]. - Total deposits rose to $3,459,661 thousand as of September 30, 2025, compared to $3,312,278 thousand at June 30, 2025, marking an increase of 4.44%[46]. - Total assets increased to $4,101,209 thousand as of September 30, 2025, compared to $3,953,717 thousand at the end of the previous quarter[43]. Credit Quality - Non-performing assets to total assets ratio improved to 0.38% at September 30, 2025, down from 0.46% at June 30, 2025[11]. - Total non-performing assets decreased to $15.6 million, or 0.38% of total assets, compared to 0.46% at June 30, 2025[27]. - The allowance for credit losses totaled $43.6 million at September 30, 2025, unchanged from June 30, 2025, with a provision for credit losses of $221 thousand during the quarter[32]. - The Company had no loans over 90 days past due and still accruing interest as of September 30, 2025[31]. Shareholder Returns - The Company repurchased 89,500 shares of common stock at an average price of $15.22, totaling $1.4 million under the stock repurchase program[11]. - Tangible book value per common share increased to $13.39 from $12.82 at June 30, 2025, driven by net income of $15.7 million[34]. - Book value per share increased to $17.41 in Q3 2025 from $16.87 in Q2 2025, and $15.86 in Q3 2024[55]. Interest and Cost Metrics - The cost of funds decreased to 1.69% in Q3 2025, down from 1.73% in the prior quarter[13]. - The cost of deposits for the nine months ended September 30, 2025, was $3,336,921 thousand, with an expense of $39,680 thousand, resulting in a cost of 1.59%[51]. - The net interest margin for the three months ended September 30, 2025, was 4.52%[49].

Core Viewpoint - California BanCorp reported a net income of $15.7 million for Q3 2025, reflecting a strong performance compared to previous quarters and a significant recovery from a net loss in Q3 2024 [2][9]. Financial Performance - Net income for Q3 2025 was $15.7 million, or $0.48 per diluted share, compared to $14.1 million, or $0.43 per diluted share in Q2 2025, and a net loss of $16.5 million, or $0.59 per diluted share in Q3 2024 [2][9]. - Pre-tax, pre-provision income for Q3 was $21.8 million, an increase of $2.4 million from the prior quarter [9]. - Total noninterest income decreased to $2.7 million in Q3 2025, down from $2.9 million in Q2 2025 [17]. Asset Quality - The non-performing assets to total assets ratio improved to 0.38% at September 30, 2025, down from 0.46% at June 30, 2025 [28]. - Total non-performing loans decreased to $15.6 million, or 0.52% of total loans held for investment, compared to 0.61% in the prior quarter [28][34]. Capital and Shareholder Value - The tangible book value per common share increased to $13.39 at September 30, 2025, up from $12.82 at June 30, 2025 [35]. - The company repurchased 89,500 shares of common stock at an average price of $15.22, totaling $1.4 million under the stock repurchase program [37]. Deposits and Loans - Total deposits rose to $3.46 billion, an increase of $147.4 million or 4.4% from $3.31 billion at June 30, 2025 [24]. - Total loans held for investment were $2.99 billion, a slight decrease of $1.3 million compared to the previous quarter [22]. Interest Income and Margin - Net interest income for Q3 2025 was $42.5 million, up from $41.4 million in Q2 2025 [10]. - The net interest margin decreased to 4.52% from 4.61% in the prior quarter, primarily due to a decrease in the yield on total interest-earning assets [11]. Credit Losses - The company recorded a reversal of provision for credit losses of $15 thousand in Q3 2025, compared to a reversal of $634 thousand in the prior quarter [14]. - The allowance for credit losses was 1.46% of total loans held for investment at September 30, 2025 [34].

Core Insights - Sentinel Holdings has entered into an asset purchase agreement for OPSEC Specialized Protection, a prominent security solutions provider in Southern California [1] - This acquisition will enable Sentinel Holdings to secure a significant contract with one of California's largest fast-food chains, along with various service contracts with municipal entities in the region [1]

[PART I — FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This part provides the unaudited interim consolidated financial information, including financial statements, management's discussion, market risk disclosures, and controls [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited interim consolidated financial statements of California BanCorp and its subsidiary for the period ended June 30, 2025, including balance sheets, statements of operations, comprehensive income (loss), changes in shareholders' equity, and cash flows, along with detailed notes to these financial statements [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and shareholders' equity at specific reporting dates Consolidated Balance Sheet Highlights (dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | **ASSETS** | | | | Total cash and cash equivalents | $430,137 | $388,162 | | Debt securities available-for-sale | $188,167 | $142,001 | | Loans held for investment, net | $2,950,450 | $3,088,625 | | Total assets | $3,953,717 | $4,031,654 | | **LIABILITIES** | | | | Total deposits | $3,312,278 | $3,398,760 | | Total liabilities | $3,406,124 | $3,519,818 | | **SHAREHOLDERS' EQUITY** | | | | Total shareholders' equity | $547,593 | $511,836 | - Total assets decreased by **$77.9 million (1.9%)** from December 31, 2024, primarily due to a decrease in loans, partially offset by an increase in cash and cash equivalents[14](index=14&type=chunk)[303](index=303&type=chunk) - Total liabilities decreased by **$113.7 million**, mainly driven by an **$86.5 million** decrease in total deposits and a **$16.8 million** decrease in borrowings[14](index=14&type=chunk)[304](index=304&type=chunk) - Total shareholders' equity increased by **$35.8 million**, primarily due to net income, a decrease in net unrealized losses on available-for-sale debt securities, and stock-based compensation[14](index=14&type=chunk)[305](index=305&type=chunk) [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) This section details the company's financial performance over specific periods, including interest income and expense, net income, and earnings per share Consolidated Statements of Operations Highlights (dollars in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest and dividend income | $55,786 | $31,849 | $112,611 | $63,113 | | Total interest expense | $14,369 | $10,842 | $28,939 | $21,612 | | Net interest income | $41,417 | $21,007 | $83,672 | $41,501 | | (Reversal of) provision for credit losses | $(634) | $2,893 | $(4,410) | $2,562 | | Total noninterest income | $2,856 | $1,169 | $5,422 | $2,582 | | Total noninterest expense | $24,833 | $19,005 | $49,753 | $33,986 | | Net income | $14,099 | $190 | $30,952 | $5,125 | | Diluted EPS | $0.43 | $0.01 | $0.95 | $0.27 | - Net income for the three months ended June 30, 2025, increased significantly to **$14.1 million** from **$190 thousand** in the prior year, primarily due to higher net interest income and a reversal of credit losses[16](index=16&type=chunk)[244](index=244&type=chunk) - Net interest income for the three months ended June 30, 2025, increased by **$20.4 million** year-over-year, driven by higher average interest-earning assets from the Merger[16](index=16&type=chunk)[259](index=259&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section presents the company's total comprehensive income or loss, including net income and other comprehensive income (loss) items Consolidated Statements of Comprehensive Income (Loss) Highlights (dollars in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $14,099 | $190 | $30,952 | $5,125 | | Total other comprehensive income (loss), net of tax | $679 | $(348) | $2,909 | $(2,028) | | Total comprehensive income (loss), net of tax | $14,778 | $(158) | $33,861 | $3,097 | - Total comprehensive income, net of tax, significantly increased to **$14.8 million** for the three months ended June 30, 2025, compared to a loss of **$(158) thousand** in the prior year, primarily due to higher net income and an unrealized gain on securities available for sale[18](index=18&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This section details the changes in the company's shareholders' equity over specific periods, including net income, stock-based compensation, and other comprehensive income Consolidated Statements of Changes in Shareholders' Equity Highlights (dollars in thousands) | Metric | Balance at Dec 31, 2024 | Net Income (6M 2025) | Stock-based Compensation (6M 2025) | Stock Options Exercised (6M 2025) | Repurchase of Shares (6M 2025) | Other Comprehensive Income (6M 2025) | Balance at June 30, 2025 | | :-------------------------- | :-------------------- | :------------------- | :--------------------------------- | :------------------------------- | :----------------------------- | :----------------------------------- | :----------------------- | | Common Stock Amount | $442,469 | — | $3,005 | $101 | $(1,210) | — | $444,365 | | Retained Earnings | $76,008 | $30,952 | — | — | — | — | $106,960 | | Accumulated Other Comprehensive Loss | $(6,641) | — | — | — | — | $2,909 | $(3,732) | | Total Shareholders' Equity | $511,836 | $30,952 | $3,005 | $101 | $(1,210) | $2,909 | $547,593 | - Shareholders' equity increased by **$35.8 million** from December 31, 2024, to June 30, 2025, primarily driven by net income of **$31.0 million** and other comprehensive income of **$2.9 million**[21](index=21&type=chunk)[305](index=305&type=chunk)[370](index=370&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section reports the company's cash inflows and outflows from operating, investing, and financing activities over specific periods Consolidated Statements of Cash Flows Highlights (dollars in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $20,405 | $8,362 | | Net cash provided by investing activities | $127,123 | $77,202 | | Net cash used in financing activities | $(105,553) | $(67,624) | | Net change in cash and cash equivalents | $41,975 | $17,940 | | Cash and cash equivalents at end of period | $430,137 | $104,733 | - Net cash provided by operating activities increased by **$12.0 million**, primarily due to higher net income and increased deferred income taxes[25](index=25&type=chunk)[387](index=387&type=chunk)[388](index=388&type=chunk) - Net cash provided by investing activities increased by **$49.9 million**, driven by increased net loan repayments and proceeds from debt securities maturities, partially offset by decreased debt securities purchases[25](index=25&type=chunk)[389](index=389&type=chunk) - Net cash used in financing activities increased by **$37.9 million**, mainly due to a net decrease in deposit cash flows and the redemption of subordinated notes, partially offset by decreased FHLB advance repayments[25](index=25&type=chunk)[390](index=390&type=chunk) [NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes the company's business operations, the basis of financial statement presentation, and significant accounting policies, including recent accounting guidance and legislative impacts - California BanCorp operates as a bank holding company for California Bank of Commerce, N.A., offering financial products and services to individuals, professionals, and small- to medium-sized businesses through **14 branch offices** in California[31](index=31&type=chunk)[32](index=32&type=chunk) - The Company completed an all-stock merger with the former California BanCorp (CALB) on **July 31, 2024**, expanding its footprint into Northern California and retaining banking offices of both entities[33](index=33&type=chunk)[50](index=50&type=chunk) - The Company operates as a single reportable segment: commercial banking, with its chief operating decision makers monitoring revenue streams and significant expenses at an aggregated level[38](index=38&type=chunk) - Recent accounting guidance adoptions (ASU 2023-07 Segment Reporting, ASU 2023-09 Income Taxes) did not have a significant or material impact on the consolidated financial statements[39](index=39&type=chunk)[41](index=41&type=chunk) - California Senate Bill 132, enacted **June 27, 2025**, mandates a single-sales-factor apportionment formula for state income tax, resulting in a **$269 thousand** income tax expense adjustment for the three and six months ended June 30, 2025[48](index=48&type=chunk) - The One Big Beautiful Bill Act, signed **July 4, 2025**, includes broad tax reform provisions but does not affect the Company's consolidated financial statements as of the **June 30, 2025** reporting date[49](index=49&type=chunk) [NOTE 2 – BUSINESS COMBINATIONS](index=16&type=section&id=NOTE%202%20%E2%80%93%20BUSINESS%20COMBINATIONS) This note details the company's merger activities, including the acquisition of CALB and the resulting goodwill and acquired loan portfolio - The Company completed an all-stock merger with CALB on **July 31, 2024**, valued at approximately **$216.6 million**, resulting in the issuance of about **13.5 million shares** of the Company's common stock[50](index=50&type=chunk)[51](index=51&type=chunk) - The merger expanded the Company's presence into Northern California, adding CALB's one full-service branch and four loan production offices to the Bank's existing **13 branches**[50](index=50&type=chunk) - Goodwill recognized from the merger was **$73.1 million** as of June 30, 2025, after a **$1.6 million** decrease due to adjustments related to acquired trade name, low-income housing tax credit investments, and deferred tax adjustments[53](index=53&type=chunk)[55](index=55&type=chunk) PCD Loans Acquired as of Acquisition Date (dollars in thousands) | Metric | Amount | | :-------------------------------- | :----- | | Unpaid principal balance | $111,720 | | Allowance for credit losses - PCD loans | $(11,216) | | Non-credit discount amount | $(5,107) | | Loans previously charged-off by CALB | $(10,171) | | PCD loans acquired | $85,226 | [NOTE 3 - INVESTMENT SECURITIES](index=20&type=section&id=NOTE%203%20-%20INVESTMENT%20SECURITIES) This note provides details on the company's debt securities portfolio, including held-to-maturity and available-for-sale classifications, fair values, and unrealized gains or losses Debt Securities Held-to-Maturity (dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Amortized Cost | $53,108 | $53,280 | | Estimated Fair Value | $47,538 | $47,823 | | Gross Unrecognized Losses | $(5,570) | $(5,457) | Debt Securities Available-for-Sale (dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Amortized Cost | $193,465 | $151,429 | | Estimated Fair Value | $188,167 | $142,001 | | Gross Unrealized Losses | $(6,404) | $(9,572) | - The Company's total debt securities portfolio increased by **$46.0 million** to **$241.3 million** at June 30, 2025, primarily due to purchases of available-for-sale securities and reductions in net unrealized losses[306](index=306&type=chunk)[307](index=307&type=chunk) - Net unrealized loss on available-for-sale debt securities, net of taxes, decreased to **$3.7 million** at June 30, 2025, from **$6.6 million** at December 31, 2024, reflecting a decrease in the 10-Year Treasury Bond yield[76](index=76&type=chunk)[225](index=225&type=chunk) - The Company determined that unrealized losses on debt securities were primarily due to interest rate changes, not credit-related factors, and thus recorded no provision for credit losses for these securities[79](index=79&type=chunk)[225](index=225&type=chunk)[316](index=316&type=chunk) [NOTE 4 - LOANS AND ALLOWANCE FOR CREDIT LOSSES](index=24&type=section&id=NOTE%204%20-%20LOANS%20AND%20ALLOWANCE%20FOR%20CREDIT%20LOSSES) This note provides a detailed breakdown of the company's loan portfolio, including various loan types, the allowance for credit losses, and information on nonaccrual and modified loans Loans Held for Investment (dollars in thousands) | Loan Type | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Construction and land development | $184,744 | $227,325 | | Real estate - other: 1-4 family residential | $139,855 | $164,401 | | Real estate - other: Multifamily residential | $258,395 | $243,993 | | Real estate - other: Commercial real estate and other | $1,777,940 | $1,767,727 | | Commercial and industrial | $607,836 | $710,970 | | Consumer | $22,790 | $24,749 | | Total Loans held for investment | $2,991,560 | $3,139,165 | | Allowance for credit losses | $(41,110) | $(50,540) | | Loans held for investment, net | $2,950,450 | $3,088,625 | - Total loans held for investment decreased by **$147.6 million** to **$2.99 billion** at June 30, 2025, primarily due to the Company's derisking strategy, including reducing exposure in the Sponsor Finance portfolio and criticized loans[321](index=321&type=chunk) - The Allowance for Loan Losses (ALL) decreased by **$9.4 million** to **$41.1 million** at June 30, 2025, driven by net charge-offs of **$5.6 million** and changes in qualitative risk factors[347](index=347&type=chunk) Nonaccrual Loans (dollars in thousands) | Loan Type | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Construction and land development | $14,659 | $9,659 | | Commercial real estate and other | $1,705 | $8,915 | | Commercial and industrial | $1,990 | $4,917 | | Total nonaccrual loans | $18,354 | $26,386 | - Nonaccrual loans decreased by **$8.0 million** to **$18.4 million** at June 30, 2025, due to loan sales, payoffs, and upgrades to accrual status, partially offset by new downgrades[333](index=333&type=chunk)[341](index=341&type=chunk) - The Company modified **12 loans** totaling **$16.3 million** for borrowers experiencing financial difficulty during the six months ended June 30, 2025, primarily involving term extensions and payment delays[111](index=111&type=chunk)[337](index=337&type=chunk) [NOTE 5 - TRANSFERS AND SERVICING OF FINANCIAL ASSETS](index=39&type=section&id=NOTE%205%20-%20TRANSFERS%20AND%20SERVICING%20OF%20FINANCIAL%20ASSETS) This note describes the company's activities related to servicing loans for others, including SBA loans, and the associated servicing asset - Loans serviced for others increased to **$144.4 million** at June 30, 2025, from **$138.0 million** at December 31, 2024, including SBA loans serviced for others of **$37.4 million**[132](index=132&type=chunk)[354](index=354&type=chunk) SBA Servicing Asset Activity (dollars in thousands) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------------- | :------------------------------- | :----------------------------- | | Balance, beginning of period | $452 | $344 | | Additions | — | $164 | | Amortization | $(46) | $(102) | | Balance, end of period | $406 | $406 | - SBA 7(a) loans sold during the six months ended June 30, 2025, totaled **$9.0 million**, generating **$577 thousand** in gains on sale, an increase from **$415 thousand** in the prior year[135](index=135&type=chunk)[285](index=285&type=chunk) [NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS](index=40&type=section&id=NOTE%206%20-%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) This note provides information on the company's goodwill and other intangible assets, including changes due to merger adjustments and amortization - Goodwill decreased by **$853 thousand** to **$110.9 million** at June 30, 2025, due to adjustments related to the CALB merger, including recoveries on acquired PCD loans and deferred tax adjustments[138](index=138&type=chunk)[139](index=139&type=chunk)[355](index=355&type=chunk) - Intangible assets, net, decreased to **$20.4 million** at June 30, 2025, from **$22.3 million** at December 31, 2024, primarily due to amortization during the period[142](index=142&type=chunk)[356](index=356&type=chunk) - The weighted-average remaining amortization period for intangible assets was approximately **8.8 years** at June 30, 2025[140](index=140&type=chunk)[356](index=356&type=chunk) [NOTE 7 - DEPOSITS](index=41&type=section&id=NOTE%207%20-%20DEPOSITS) This note details the composition of the company's deposit base, including noninterest-bearing, interest-bearing, and time deposits, and changes in their balances Deposit Composition (dollars in thousands) | Deposit Type | June 30, 2025 Amount | June 30, 2025 % of Total | December 31, 2024 Amount | December 31, 2024 % of Total | | :-------------------------- | :------------------- | :----------------------- | :----------------------- | :----------------------- | | Noninterest-bearing demand | $1,218,072 | 36.8% | $1,257,007 | 37.0% | | Interest-bearing NOW accounts | $783,410 | 23.7% | $673,589 | 19.8% | | Money market and savings accounts | $1,146,548 | 34.6% | $1,182,927 | 34.8% | | Time deposits | $164,248 | 4.8% | $285,237 | 8.4% | | Total deposits | $3,312,278 | 100.0% | $3,398,760 | 100.0% | - Total deposits decreased by **$86.5 million** to **$3.31 billion** at June 30, 2025, primarily due to a **$117.4 million** decrease in brokered time deposits, partially offset by increases in interest-bearing NOW accounts and reciprocal deposits[304](index=304&type=chunk)[362](index=362&type=chunk) - Reciprocal deposits decreased to **$730.6 million (22.1% of total deposits)** at June 30, 2025, from **$754.4 million (22.2% of total deposits)** at December 31, 2024[144](index=144&type=chunk)[361](index=361&type=chunk) - Total deposits exceeding FDIC insurance limits were **$1.59 billion (48% of total deposits)** at June 30, 2025, compared to **$1.56 billion (46%)** at December 31, 2024[363](index=363&type=chunk) [NOTE 8 - BORROWING ARRANGEMENTS](index=42&type=section&id=NOTE%208%20-%20BORROWING%20ARRANGEMENTS) This note outlines the company's borrowing arrangements, including subordinated notes and available credit lines, and changes in outstanding balances Outstanding Borrowings (dollars in thousands) | Borrowing Type | June 30, 2025 | December 31, 2024 | | :----------------- | :------------ | :---------------- | | FHLB advances | $— | $— | | Subordinated notes | $52,883 | $69,725 | | Total borrowings | $52,883 | $69,725 | - Total borrowings decreased by **$16.8 million** to **$52.9 million** at June 30, 2025, primarily due to the redemption of **$18.0 million** of 5.50% fixed-to-floating rate subordinated notes in the second quarter of 2025[154](index=154&type=chunk)[367](index=367&type=chunk) - The Company had **$682.6 million** available from its **$727.6 million** secured FHLB line of credit and **$320.4 million** credit availability at the Federal Reserve discount window at June 30, 2025[149](index=149&type=chunk)[151](index=151&type=chunk)[378](index=378&type=chunk)[379](index=379&type=chunk) - The Company assumed **$55 million** in subordinated debt through the CALB merger, with fixed-to-floating interest rates and maturities in 2030 and 2031[155](index=155&type=chunk)[156](index=156&type=chunk)[384](index=384&type=chunk)[385](index=385&type=chunk) [NOTE 9 - SHAREHOLDERS' EQUITY](index=43&type=section&id=NOTE%209%20-%20SHAREHOLDERS'%20EQUITY) This note details the changes in shareholders' equity, including the impact of net income, unrealized gains/losses, stock-based compensation, and share repurchase plans - Shareholders' equity increased by **$35.8 million** to **$547.6 million** at June 30, 2025, driven by **$31.0 million** in net income, a **$2.9 million** decrease in net unrealized losses on available-for-sale debt securities, and **$3.0 million** in stock-based compensation[305](index=305&type=chunk)[370](index=370&type=chunk) - The Company increased its authorized share repurchase plan to **1,600,000 shares** on May 1, 2025, but no shares were repurchased during the three and six months ended June 30, 2025[157](index=157&type=chunk)[158](index=158&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk) - Tangible book value per common share increased by **$1.11** to **$12.82** at June 30, 2025, from **$11.71** at December 31, 2024, reflecting net income and other comprehensive income[373](index=373&type=chunk) [NOTE 10 - EARNINGS PER SHARE ("EPS")](index=44&type=section&id=NOTE%2010%20-%20EARNINGS%20PER%20SHARE%20(%22EPS%22)) This note provides a breakdown of the calculation of basic and diluted earnings per share, including net income and weighted average shares outstanding Earnings Per Share (EPS) (dollars in thousands, except share and per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $14,099 | $190 | $30,952 | $5,125 | | Weighted average common shares outstanding - basic | 32,423,935 | 18,537,507 | 32,371,662 | 18,482,177 | | Dilutive effect of outstanding: Stock options and unvested stock grants | 261,197 | 262,006 | 319,981 | 318,437 | | Weighted average common shares outstanding - diluted | 32,685,132 | 18,799,513 | 32,691,643 | 18,800,614 | | Earnings per common share - basic | $0.43 | $0.01 | $0.96 | $0.28 | | Earnings per common share - diluted | $0.43 | $0.01 | $0.95 | $0.27 | - Diluted EPS for the three months ended June 30, 2025, was **$0.43**, a significant increase from **$0.01** in the same period of 2024, reflecting higher net income[159](index=159&type=chunk)[244](index=244&type=chunk) [NOTE 11 - RELATED PARTY TRANSACTIONS](index=44&type=section&id=NOTE%2011%20-%20RELATED%20PARTY%20TRANSACTIONS) This note discloses the company's transactions with related parties, including loans and deposits involving directors and their interests Related Party Loans (dollars in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | | Balance, beginning of period | $27,734 | $5,928 | | Closed | $(1,553) | — | | Repayments | $(1,014) | $(633) | | Balance, end of period | $25,167 | $5,295 | - Related party loans outstanding decreased to **$25.2 million** at June 30, 2025, from **$27.7 million** at the beginning of the six-month period, due to loan closures and repayments[160](index=160&type=chunk) - Directors and related interests' deposits amounted to **$49.5 million** at June 30, 2025, down from **$62.9 million** at December 31, 2024[160](index=160&type=chunk) [NOTE 12 - COMMITMENTS AND CONTINGENCIES](index=45&type=section&id=NOTE%2012%20-%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's outstanding financial commitments and potential contingent liabilities, including legal proceedings and other obligations Outstanding Financial Commitments (dollars in thousands) | Commitment Type | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Commitments to extend credit | $891,521 | $925,076 | | Letters of credit issued to customers | $24,165 | $16,147 | | Commitments to contribute capital to other equity investments | $7,794 | $5,914 | | Total | $923,480 | $947,137 | - Total outstanding financial commitments decreased to **$923.5 million** at June 30, 2025, from **$947.1 million** at December 31, 2024, primarily due to a decrease in commitments to extend credit[166](index=166&type=chunk) - The Company incurred **$247 thousand** and **$494 thousand** in expense for Supplemental Executive Retirement Plan (SERP) agreements for the three and six months ended June 30, 2025, respectively[166](index=166&type=chunk) [NOTE 13 - STOCK-BASED COMPENSATION PLAN](index=45&type=section&id=NOTE%2013%20-%20STOCK-BASED%20COMPENSATION%20PLAN) This note describes the company's stock-based compensation plans, including the cost recognized, unrecognized expense, and details of outstanding stock options and restricted stock units - Total stock-based compensation cost for the three and six months ended June 30, 2025, was **$1.5 million** and **$3.0 million**, respectively, an increase from the prior year[174](index=174&type=chunk) - As of June 30, 2025, there was **$10.6 million** of total unrecognized compensation expense related to outstanding restricted stock units, to be recognized over a weighted-average period of **2.9 years**[181](index=181&type=chunk) Outstanding Stock Options (shares) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Outstanding at end of period | 122,375 | 175,363 | | Options exercisable | 119,275 | 169,163 | Outstanding Unvested Restricted Stock Units (shares) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Unvested at end of period | 964,750 | 661,116 | [NOTE 14 - FAIR VALUE](index=48&type=section&id=NOTE%2014%20-%20FAIR%20VALUE) This note describes the company's fair value measurements for financial instruments, categorizing them into a hierarchy based on observable inputs - The Company uses a fair value hierarchy (Level 1, 2, and 3) to measure financial instruments, maximizing observable inputs[183](index=183&type=chunk)[184](index=184&type=chunk) Fair Value of Financial Instruments (dollars in thousands) | Financial Instrument | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :-------------------------------- | :----------------------- | :----------------------- | | Debt securities available for sale | $188,167 | $142,001 | | Debt securities held to maturity | $47,538 | $47,823 | | Loans held for investment, net | $2,949,454 | $3,080,175 | | Deposits | $3,311,954 | $3,398,447 | | Borrowings | $53,999 | $69,876 | - Collateral-dependent loans measured at fair value on a nonrecurring basis totaled **$9.7 million** at June 30, 2025, down from **$34.7 million** at December 31, 2024[205](index=205&type=chunk) - There was no Other Real Estate Owned (OREO) at June 30, 2025, compared to **$4.1 million** at December 31, 2024, as it was sold in Q2 2025[131](index=131&type=chunk)[203](index=203&type=chunk)[341](index=341&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=54&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, highlighting key performance indicators, the impact of the CALB merger, market trends, and critical accounting policies It also includes a reconciliation of non-GAAP financial measures [Overview](index=54&type=section&id=Overview) This section provides a general description of the company's business model, products, and services offered to its customer base - California BanCorp is a relationship-focused community bank offering a range of financial products and services to individuals, professionals, and small- to medium-sized businesses across California through **14 branch offices**[211](index=211&type=chunk)[212](index=212&type=chunk) - The Bank's lending products include construction and land development, real estate, C&I, and consumer loans, and it is a Preferred SBA Lender[211](index=211&type=chunk) - Deposit products include demand, money market, and certificates of deposit, with participation in CDARS, ICS, and R&T networks for FDIC insurance qualification[211](index=211&type=chunk) [Recent Developments](index=54&type=section&id=Recent%20Developments) This section highlights significant recent events impacting the company, particularly the completion of its all-stock merger with CALB - The Company completed an all-stock merger with CALB on **July 31, 2024**, valued at approximately **$216.6 million**, issuing about **13.6 million shares** of common stock[212](index=212&type=chunk)[213](index=213&type=chunk) - The merger expanded the Company's geographic footprint into Northern California, adding CALB's branches and loan production offices[212](index=212&type=chunk) [Market and Banking Industry Updates](index=55&type=section&id=Market%20and%20Banking%20Industry%20Updates) This section discusses recent legislative changes, Federal Reserve policy, economic conditions, and their potential impact on the company and the banking industry - The One Big Beautiful Bill Act and California's single sales factor apportionment bill are recent legislative changes, with the latter resulting in a **$269 thousand** income tax expense adjustment for the Company[215](index=215&type=chunk) - The Federal Open Market Committee (FOMC) maintained the Fed funds rate between **4.25% and 4.50%** at its **July 30, 2025** meeting, with anticipated rate cuts potentially pressuring net interest margins[216](index=216&type=chunk) - Economic activity has moderated, with Q1 2025 GDP growth at **1.2%**, down from **2.5%** last year, suggesting potential credit risk if conditions weaken further[217](index=217&type=chunk) - California's GDP growth is expected to decelerate to **1.6%** in 2025 and **1.5%** in 2026, with the tech sector experiencing a downturn and building permits declining[219](index=219&type=chunk) - The Company has made significant progress in derisking its balance sheet, reducing Sponsor Finance exposure, decreasing reliance on brokered deposits, and improving credit quality, reflected in a reversal of provision for loan losses and a decrease in non-performing assets to total assets ratio to **0.46%** at June 30, 2025[221](index=221&type=chunk)[222](index=222&type=chunk) [Financial Highlights](index=57&type=section&id=Financial%20Highlights) This section presents key financial performance indicators and balance sheet metrics for various reporting periods, offering a quick overview of the company's financial health Key Financial Highlights (dollars in thousands, except per share data) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--------------------------------------- | :------ | :------ | :------ | :------- | :------- | | Net interest income | $41,417 | $42,255 | $21,007 | $83,672 | $41,501 | | Net income | $14,099 | $16,853 | $190 | $30,952 | $5,125 | | Diluted earnings per share | $0.43 | $0.52 | $0.01 | $0.95 | $0.27 | | Return on average assets | 1.45% | 1.71% | 0.03% | 1.58% | 0.45% | | Net interest margin | 4.61% | 4.65% | 3.94% | 4.63% | 3.87% | | Efficiency ratio | 56.1% | 55.6% | 85.7% | 55.8% | 77.1% | | ALL to total loans | 1.37% | N/A | N/A | 1.37% | N/A | | Nonperforming assets to total assets | 0.46% | N/A | N/A | 0.46% | N/A | | Total assets | $3,953,717 | N/A | N/A | $3,953,717 | N/A | | Total deposits | $3,312,278 | N/A | N/A | $3,312,278 | N/A | | Shareholders' equity | $547,593 | N/A | N/A | $547,593 | N/A | - Net income for Q2 2025 was **$14.1 million**, a significant increase from **$190 thousand** in Q2 2024, driven by higher net interest income and a reversal of credit losses[229](index=229&type=chunk)[244](index=244&type=chunk) - The net interest margin improved to **4.61%** in Q2 2025 from **3.94%** in Q2 2024, reflecting higher yields on earning assets and lower cost of funds[229](index=229&type=chunk)[261](index=261&type=chunk) [Non-GAAP Financial Measures](index=59&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the company's use of non-GAAP financial measures and provides reconciliations to their most directly comparable GAAP financial measures - The Company uses non-GAAP financial measures like efficiency ratio, pre-tax pre-provision income, adjusted net income, and tangible common equity ratios to provide additional insights into its financial performance and capital adequacy[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk)[238](index=238&type=chunk) Non-GAAP Financial Measures Reconciliation (dollars in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--------------------------------------- | :------ | :------ | :------ | :------- | :------- | | Adjusted noninterest expense | $24,833 | $24,920 | $18,514 | $49,753 | $32,946 | | Adjusted efficiency ratio | 56.1% | 55.6% | 83.5% | 55.8% | 74.7% | | Adjusted pre-tax pre-provision income | $19,440 | $19,901 | $3,662 | $39,341 | $11,137 | | Adjusted net income | $14,099 | $16,853 | $602 | $30,952 | $6,084 | | Adjusted return on average assets | 1.45% | 1.71% | 0.11% | 1.58% | 0.53% | | Tangible common equity | $416,284 | N/A | N/A | $416,284 | N/A | | Tangible common equity to tangible asset ratio | 10.89% | N/A | N/A | 10.89% | N/A | | Tangible book value per share | $12.82 | N/A | N/A | $12.82 | N/A | [Results of Operations](index=61&type=section&id=Results%20of%20Operations) This section details the Company's financial performance, including net income, net interest income and margin, provision for credit losses, noninterest income, noninterest expense, and income taxes, with comparisons to prior periods [Net Income](index=61&type=section&id=Net%20Income) This section analyzes the company's net income and diluted earnings per share, highlighting key drivers of period-over-period changes Net Income and Diluted EPS (dollars in thousands, except per share data) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :---------------- | :------ | :------ | :------ | :------- | :------- | | Net income | $14,099 | $16,853 | $190 | $30,952 | $5,125 | | Diluted EPS | $0.43 | $0.52 | $0.01 | $0.95 | $0.27 | - Net income for Q2 2025 decreased by **$2.8 million** from Q1 2025, primarily due to a **$3.1 million** decrease in the reversal of provision for loan losses and an **$838 thousand** decrease in net interest income[243](index=243&type=chunk) - Net income for Q2 2025 increased by **$13.9 million** year-over-year, driven by a **$20.4 million** increase in net interest income and a **$3.5 million** decrease in provision for credit losses, partially offset by higher noninterest expense[244](index=244&type=chunk) - Year-to-date net income for June 30, 2025, increased by **$25.8 million** to **$31.0 million** compared to the prior year, mainly due to a **$42.2 million** increase in net interest income and a **$7.0 million** decrease in provision for credit losses[245](index=245&type=chunk) [Net Interest Income and Margin](index=63&type=section&id=Net%20Interest%20Income%20and%20Margin) This section examines the company's net interest income and net interest margin, analyzing the factors influencing changes in interest-earning assets and interest-bearing liabilities Net Interest Income and Margin (dollars in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------- | :------ | :------ | :------ | :------- | :------- | | Net interest income | $41,417 | $42,255 | $21,007 | $83,672 | $41,501 | | Net interest margin | 4.61% | 4.65% | 3.94% | 4.63% | 3.87% | | Yield on earning assets | 6.21% | 6.26% | 5.97% | 6.24% | 5.88% | | Cost of funds | 1.73% | 1.72% | 2.21% | 1.73% | 2.19% | - Net interest income for Q2 2025 decreased by **$838 thousand** from Q1 2025, primarily due to a **$1.0 million** decrease in total interest and dividend income, partially offset by a **$201 thousand** decrease in total interest expense[255](index=255&type=chunk) - Net interest margin for Q2 2025 was **4.61%**, a **4 basis point** decrease from Q1 2025, mainly due to a **5 basis point** decrease in the total interest-earning assets yield and a **1 basis point** increase in the cost of funds[256](index=256&type=chunk) - Year-over-year, net interest income for Q2 2025 increased by **$20.4 million**, and net interest margin improved by **67 basis points**, driven by higher average interest-earning assets from the Merger and lower cost of funds[259](index=259&type=chunk)[261](index=261&type=chunk) [(Reversal of) Provision for Credit Losses](index=70&type=section&id=(Reversal%20of)%20Provision%20for%20Credit%20Losses) This section discusses the company's provision or reversal of provision for credit losses, including net charge-offs and the factors influencing these amounts (Reversal of) Provision for Credit Losses (dollars in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--------------------------------------- | :------ | :------ | :------ | :------- | :------- | | (Reversal of) provision for credit losses | $(634) | $(3,776) | $2,893 | $(4,410) | $2,562 | | Net charge-offs | $(4,066) | N/A | $(1,456) | $(5,609) | $(1,457) | - The Company recorded a reversal of credit losses of **$634 thousand** in Q2 2025, compared to a **$3.8 million** reversal in Q1 2025, and a **$2.9 million** provision in Q2 2024[273](index=273&type=chunk)[275](index=275&type=chunk) - Total net charge-offs were **$4.1 million** in Q2 2025, resulting from the strategy to derisk the balance sheet by reducing exposure to criticized loans[273](index=273&type=chunk) - Year-to-date, a **$4.4 million** reversal of credit losses was recorded for June 30, 2025, compared to a **$2.6 million** provision in the prior year, driven by decreased loan balances, portfolio composition changes, and qualitative factors[277](index=277&type=chunk)[279](index=279&type=chunk) [Noninterest Income](index=71&type=section&id=Noninterest%20Income) This section analyzes the company's noninterest income, including service charges, gains on loan sales, and other fees, and the factors contributing to changes in these revenue streams Noninterest Income (dollars in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--------------------------------------- | :------ | :------ | :------ | :------- | :------- | | Service charges and fees on deposit accounts | $802 | $776 | $378 | $1,578 | $740 | | Gain on sale of loans | — | $577 | — | $577 | $415 | | Income from bank-owned life insurance | $503 | $463 | $266 | $966 | $527 | | Other charges and fees | $1,073 | $199 | $359 | $1,272 | $498 | | Total noninterest income | $2,856 | $2,566 | $1,169 | $5,422 | $2,582 | - Total noninterest income for Q2 2025 increased by **$290 thousand** from Q1 2025, primarily due to higher income from equity investments in 'Other charges and fees', despite no gain on sale of SBA 7A loans[282](index=282&type=chunk) - Year-over-year, noninterest income for Q2 2025 increased by **$1.7 million**, mainly due to the impact of the Merger, which boosted service charges, ATM income, bank-owned life insurance income, and other charges and fees[283](index=283&type=chunk) - Year-to-date gain on sale of loans increased by **$162 thousand** to **$577 thousand** for June 30, 2025, driven by higher SBA 7(a) loan sales[285](index=285&type=chunk) [Noninterest Expense](index=72&type=section&id=Noninterest%20Expense) This section analyzes the company's noninterest expenses, including salaries, amortization, and other operating costs, and their impact on the efficiency ratio Noninterest Expense (dollars in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--------------------------------------- | :------ | :------ | :------ | :------- | :------- | | Salaries and employee benefits | $15,293 | $15,864 | $8,776 | $31,157 | $18,386 | | Intangible assets amortization | $948 | $948 | $65 | $1,896 | $130 | | Other real estate owned expenses | $862 | $68 | $4,935 | $930 | $5,023 | | Total noninterest expense | $24,833 | $24,920 | $19,005 | $49,753 | $33,986 | | Efficiency ratio | 56.1% | 55.6% | 85.7% | 55.8% | 77.1% | - Total noninterest expense for Q2 2025 slightly decreased by **$87 thousand** from Q1 2025, with a **$571 thousand** decrease in salaries and employee benefits, partially offset by an **$862 thousand** loss on sale of OREO[287](index=287&type=chunk) - Year-over-year, noninterest expense for Q2 2025 increased by **$5.8 million**, primarily due to higher costs from the Merger, including a **$6.5 million** increase in salaries and employee benefits and an **$883 thousand** increase in core deposit intangible amortization[289](index=289&type=chunk)[290](index=290&type=chunk)[291](index=291&type=chunk) - The efficiency ratio for Q2 2025 was **56.1%**, a significant improvement from **85.7%** in Q2 2024, despite the negative impact of OREO sale losses[293](index=293&type=chunk) [Income Taxes](index=74&type=section&id=Income%20Taxes) This section analyzes the company's income tax expense and effective tax rate, explaining the factors influencing these amounts Income Tax Expense and Effective Rate (dollars in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :---------------- | :------ | :------ | :------ | :------- | :------- | | Income tax expense | $5,975 | $6,824 | $88 | $12,799 | $2,410 | | Effective tax rate | 29.8% | 28.8% | 31.7% | 29.3% | 32.0% | - Income tax expense for Q2 2025 was **$6.0 million**, with an effective tax rate of **29.8%**, an increase from Q1 2025's **28.8%** due to equity award vesting and exercise[300](index=300&type=chunk) - Year-over-year, income tax expense for Q2 2025 increased significantly from **$88 thousand** in Q2 2024, while the effective tax rate decreased from **31.7%** to **29.8%**, primarily due to the impact of non-tax-deductible merger expenses[301](index=301&type=chunk) [Financial Condition](index=74&type=section&id=Financial%20Condition) This section analyzes the Company's balance sheet, including changes in assets, liabilities, and equity, and provides detailed breakdowns of debt securities, loans, deposits, and borrowings, along with asset quality metrics [Summary](index=74&type=section&id=Summary) This section provides a high-level overview of the company's balance sheet changes, including total assets, liabilities, and shareholders' equity - Total assets decreased by **$77.9 million (1.9%)** to **$3.95 billion** at June 30, 2025, primarily due to a **$158.7 million** decrease in loans, partially offset by a **$42.0 million** increase in cash and cash equivalents[303](index=303&type=chunk) - Total liabilities decreased by **$113.7 million** to **$3.41 billion**, mainly driven by an **$86.5 million** decrease in total deposits and a **$16.8 million** decrease in borrowings[304](index=304&type=chunk) - Shareholders' equity increased by **$35.8 million** to **$547.6 million**, primarily due to **$31.0 million** in net income and a **$2.9 million** decrease in net unrealized losses on available-for-sale debt securities[305](index=305&type=chunk) [Debt Securities](index=74&type=section&id=Debt%20Securities) This section provides a detailed analysis of the company's debt securities portfolio, including changes in balances, unrealized gains/losses, and credit quality assessments - The total debt securities portfolio increased by **$46.0 million** to **$241.3 million** at June 30, 2025, with available-for-sale securities increasing by **$46.2 million** to **$188.2 million**[306](index=306&type=chunk)[307](index=307&type=chunk)[312](index=312&type=chunk) - Net unrealized losses on available-for-sale debt securities decreased to **$6.4 million** at June 30, 2025, from **$9.6 million** at December 31, 2024, influenced by a decrease in the 10-Year Treasury Bond yield[313](index=313&type=chunk)[314](index=314&type=chunk) - All held-to-maturity and available-for-sale debt securities with unrealized losses were deemed not credit-related, and no allowance for credit loss was recorded[311](index=311&type=chunk)[316](index=316&type=chunk) [Loans Held for Sale](index=79&type=section&id=Loans%20Held%20for%20Sale) This section details the company's loans held for sale, including their composition and fair value, and changes in these balances - Loans held for sale decreased to **$6.1 million** at June 30, 2025, consisting solely of SBA 7(a) loans, down from **$17.2 million** at December 31, 2024, which included C&I loans[319](index=319&type=chunk) - The fair value of loans held for sale was **$6.4 million** at June 30, 2025, compared to **$17.9 million** at December 31, 2024[319](index=319&type=chunk) [Loans Held for Investment](index=79&type=section&id=Loans%20Held%20for%20Investment) This section analyzes the company's loans held for investment, including changes in total balances and specific loan categories, reflecting its derisking strategy - Total loans held for investment decreased by **$147.6 million** to **$2.99 billion** at June 30, 2025, representing **75.7%** of total assets, down from **77.9%** at December 31, 2024[321](index=321&type=chunk) - The decrease was partly due to the Company's derisking strategy, with loan originations of **$175.7 million** offset by **$248.8 million** in payoffs and sales during the six months ended June 30, 2025[321](index=321&type=chunk) - Commercial and industrial loans decreased by **$103.1 million** to **$607.8 million**, while real estate secured loans decreased by **$42.5 million**, primarily in construction and 1-4 family residential loans[322](index=322&type=chunk)[323](index=323&type=chunk) [Loan Concentrations](index=80&type=section&id=Loan%20Concentrations) This section provides an overview of the company's loan concentrations, particularly in commercial real estate, and its strategies for managing associated risks - Commercial real estate (CRE) loans constituted approximately **59.3%** of the total loan portfolio at June 30, 2025, with an average loan-to-value (LTV) of **48%**[325](index=325&type=chunk)[326](index=326&type=chunk) Commercial Real Estate Loan Composition by Type (dollars in thousands) | CRE Type | June 30, 2025 Amount | % of CRE Portfolio | Average Loan Size | Weighted Average LTV | | :-------------------------- | :------------------- | :----------------- | :---------------- | :------------------- | | Industrial | $516,800 | 29.1% | $1,879 | 48% | | Office | $272,600 | 15.3% | $1,990 | 51% | | Retail | $284,700 | 16.0% | $1,686 | 47% | | Hotel | $169,500 | 9.5% | $10,591 | 46% | - Office loans within the CRE portfolio totaled **$382.8 million** at June 30, 2025, with a weighted average LTV of **51%**, managed with an emphasis on LTV and debt service ratios to mitigate credit risk[329](index=329&type=chunk) [Delinquent Loans](index=82&type=section&id=Delinquent%20Loans) This section reports on the company's delinquent loans, including past due and nonaccrual loans, and changes in their balances and classifications - Past due loans still accruing decreased to **$546 thousand (0.02% of total loans)** at June 30, 2025, from **$12.2 million (0.39%)** at December 31, 2024[331](index=331&type=chunk) - Early stage delinquencies (30-89 days past due) decreased by **$11.5 million**, driven by loan charge-offs, sales, payments, and upgrades to current status[331](index=331&type=chunk) Delinquent Loans (dollars in thousands) | Loan Type | June 30, 2025 Past Due | December 31, 2024 Past Due | | :-------------------------------- | :--------------------- | :----------------------- | | Construction and land development | $— | $4,104 | | Commercial real estate and other | $194 | $195 | | Commercial and industrial | $67 | $2,979 | | Consumer | $285 | $445 | | Total Past Due | $546 | $12,232 | - Special mention loans decreased by **$4.1 million** to **$65.3 million**, and substandard loans decreased by **$36.1 million** to **$81.5 million** at June 30, 2025, reflecting downgrades, upgrades, payoffs, and sales[334](index=334&type=chunk)[335](index=335&type=chunk) [Loan Modifications](index=84&type=section&id=Loan%20Modifications) This section provides information on the company's loan modifications for borrowers experiencing financial difficulty, including the types and amounts of modifications - The Company had **12 loan modifications** totaling **$16.3 million** for borrowers experiencing financial difficulty as of June 30, 2025, with **$16.0 million** of these loans being current[337](index=337&type=chunk) - Modifications included term extensions and payment delays for owner-occupied CRE and C&I loans, providing short-term cash relief to borrowers[337](index=337&type=chunk) - At December 31, 2024, there were **six loan modifications** totaling **$24.1 million**, with **$2.0 million** past due[338](index=338&type=chunk) [Non-performing Assets](index=84&type=section&id=Non-performing%20Assets) This section reports on the company's non-performing assets, including nonaccrual loans and other real estate owned, and the ratio of non-performing assets to total assets Nonperforming Assets (dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Total nonaccrual loans | $18,354 | $26,386 | | Total nonperforming loans | $18,354 | $26,536 | | Other real estate owned | $— | $4,083 | | Total nonperforming assets | $18,354 | $30,619 | | Nonperforming assets to total assets | 0.46% | 0.76% | - Total nonperforming assets decreased by **$12.3 million** to **$18.4 million** at June 30, 2025, from **$30.6 million** at December 31, 2024[340](index=340&type=chunk) - The nonperforming assets to total assets ratio improved to **0.46%** at June 30, 2025, from **0.76%** at December 31, 2024[340](index=340&type=chunk) - The decrease was driven by the sale of a **$7.2 million** commercial real estate loan, payoffs of C&I loans, and a 1-4 family residential loan upgraded to accrual status, along with the sale of **$4.1 million** in OREO[341](index=341&type=chunk) [Allowance for Credit Losses](index=85&type=section&id=Allowance%20for%20Credit%20Losses) This section explains the company's methodology for estimating the Allowance for Credit Losses (ACL) and details changes in the allowance for loans held for investment - The Allowance for Credit Losses (ACL) is an estimate of expected lifetime credit losses for loans, maintained through specific, quantitative, and qualitative allowances, and for off-balance sheet commitments[342](index=342&type=chunk) Allowance for Credit Losses (dollars in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--------------------------------------- | :------ | :------ | :------ | :------- | :------- | | ALL, beginning of period | $45,839 | $22,254 | $50,540 | $22,569 | | (Reversal of) provision for credit losses | $(663) | $2,990 | $(3,821) | $2,676 | | Net charge-offs | $(4,066) | $(1,456) | $(5,609) | $(1,457) | | ALL, end of period | $41,110 | $23,788 | $41,110 | $23,788 | | ALL to total loans held for investment | 1.37% | N/A | 1.37% | N/A | - The ALL decreased by **$9.4 million** to **$41.1 million** at June 30, 2025, driven by **$5.6 million** in net charge-offs, changes in qualitative risk factors, and decreases in classified loans[347](index=347&type=chunk) - The Company uses a probability-weighted two-scenario forecast (**80% base-case, 20% downside**) for ACL estimation, reflecting economic outlook and market uncertainties[345](index=345&type=chunk) [Allowance for Credit Losses on Off-Balance Sheet Commitments](index=88&type=section&id=Allowance%20for%20Credit%20Losses%20on%20Off-Balance%20Sheet%20Commitments) This section discusses the allowance for credit losses related to off-balance sheet commitments, including unfunded loan commitments - The allowance for off-balance sheet commitments decreased to **$2.5 million** at June 30, 2025, from **$3.1 million** at December 31, 2024[352](index=352&type=chunk) - This decrease was due to a **$589 thousand** reversal of credit losses on unfunded loan commitments, driven by lower unfunded loan commitment balances and reduced loss rates[352](index=352&type=chunk) - Total unfunded loan commitments decreased by **$24.1 million** to **$901.2 million** at June 30, 2025[352](index=352&type=chunk) [Servicing Asset and Loan Servicing Portfolio](index=88&type=section&id=Servicing%20Asset%20and%20Loan%20Servicing%20Portfolio) This section provides details on the company's loan servicing portfolio and the related servicing asset, including fair value and key assumptions - Loans serviced for others increased to **$144.4 million** at June 30, 2025, from **$138.0 million** at December 31, 2024, including **$37.4 million** in SBA loans[354](index=354&type=chunk) - The related SBA servicing asset was **$406 thousand** at June 30, 2025, with a weighted average discount rate of **16.2%** and a prepayment speed assumption of **19.6%**[354](index=354&type=chunk) - The fair value of the servicing asset approximated its carrying value at both June 30, 2025, and December 31, 2024[354](index=354&type=chunk) [Goodwill and Intangibles Assets, Net](index=89&type=section&id=Goodwill%20and%20Intangibles%20Assets,%20Net) This section details the company's goodwill and other intangible assets, including changes due to merger-related adjustments and amortization - Goodwill decreased by **$853 thousand** to **$110.9 million** at June 30, 2025, due to post-merger adjustments related to acquired low-income housing tax credit investments and PCD loan recoveries[355](index=355&type=chunk) - Intangible assets, net, decreased to **$20.4 million** at June 30, 2025, from **$22.3 million** at December 31, 2024, primarily due to amortization[356](index=356&type=chunk) Intangible Assets, Net (dollars in thousands) | Intangible Asset | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Core deposit intangible | $20,213 | $22,033 | | Trade name | $162 | $238 | | Total | $20,375 | $22,271 | [Deposits](index=90&type=section&id=Deposits) This section analyzes the company's deposit portfolio, including changes in total deposits, composition by type, and the weighted average rate - Total deposits decreased by **$86.5 million** to **$3.31 billion** at June 30, 2025, from **$3.40 billion** at December 31, 2024[362](index=362&type=chunk) - The decrease was driven by a **$117.4 million** decrease in brokered time deposits, partially offset by increases in interest-bearing NOW accounts and reciprocal deposits[362](index=362&type=chunk) - Noninterest-bearing demand deposits totaled **$1.22 billion (36.8% of total deposits)** at June 30, 2025[363](index=363&type=chunk) - The weighted average rate on total deposits decreased to **1.59%** at June 30, 2025, from **2.12%** at June 30, 2024, due to deposit repricing and peer bank competition[365](index=365&type=chunk) [Borrowings](index=91&type=section&id=Borrowings) This section details the company's outstanding borrowings, including subordinated notes and available credit lines, and the factors influencing changes in these balances - Total borrowings decreased by **$16.8 million** to **$52.9 million** at June 30, 2025, from **$69.7 million** at December 31, 2024[367](index=367&type=chunk) - This decrease was primarily due to the redemption of **$18.0 million** of 5.50% fixed-to-floating rate subordinated notes in Q2 2025[367](index=367&type=chunk) Outstanding Borrowings (dollars in thousands) | Borrowing Type | June 30, 2025 Outstanding Balance | December 31, 2024 Outstanding Balance | | :----------------- | :-------------------------------- | :------------------------------------ | | FHLB Advances | $— | $— | | Subordinated Notes | $55,000 | $73,000 | [Shareholders' Equity](index=92&type=section&id=Shareholders'%20Equity) This section analyzes the company's shareholders' equity, including changes due to net income, unrealized gains/losses, stock-based compensation, and share repurchase activities - Total shareholders' equity increased by **$35.8 million** to **$547.6 million** at June 30, 2025, driven by net income, decreased unrealized losses on debt securities, and stock-based compensation[370](index=370&type=chunk) - The Company increased its authorized share repurchase plan to **1,600,000 shares**, but no repurchases occurred during the three and six months ended June 30, 2025[371](index=371&type=chunk)[372](index=372&type=chunk) - Tangible book value per common share increased by **$1.11** to **$12.82** at June 30, 2025, from **$11.71** at December 31, 2024[373](index=373&type=chunk) [Liquidity and Market Risk Management](index=93&type=section&id=Liquidity%20and%20Market%20Risk%20Management) This section discusses the Company's liquidity position, including sources and uses of cash, available borrowing capacity, and contractual obligations, for both the Bank and the holding company [Liquidity](index=93&type=section&id=Liquidity) This section assesses the company's liquidity position, including its liquidity ratio, available borrowing capacity, and changes in cash and cash equivalents - The Company's total liquidity ratio was **18.2%** at June 30, 2025, an increase from **15.7%** at December 31, 2024, exceeding the internal target of **10.0%**[375](index=375&type=chunk) - The Bank had **$1.09 billion** in total available borrowing capacity at June 30, 2025, including **$682.6 million** from FHLB, **$320.4 million** from the Federal Reserve discount window, and **$90.5 million** from unsecured credit lines[378](index=378&type=chunk)[379](index=379&type=chunk)[380](index=380&type=chunk) - Consolidated cash and cash equivalents increased by **$42.0 million** to **$430.1 million** at June 30, 2025, driven by operating and investing cash flows, partially offset by financing activities[386](index=386&type=chunk) [Commitments and Contractual Obligations](index=95&type=section&id=Commitments%20and%20Contractual%20Obligations) This section outlines the company's significant commitments and contractual obligations, categorized by maturity periods Commitments and Contractual Obligations (dollars in thousands) | Obligation Type | One Year or Less | Over One Year to Three Years | Over Three Years to Five Years | More than Five Years | Total | | :--------------------------------------- | :--------------- | :--------------------------- | :----------------------------- | :------------------- | :------ | | Commitments to extend credit | $602,420 | $204,026 | $25,710 | $59,365 | $891,521 | | Letters of credit issued to customers | $22,656 | $771 | $738 | $— | $24,165 | | Subordinated notes | $— | $— | $— | $55,000 | $55,000 | | Certificates of deposit | $163,251 | $872 | $125 | $— | $164,248 | | Lease obligations | $4,222 | $7,081 | $3,838 | $1,574 | $16,715 | | Total contractual obligations | $167,473 | $7,953 | $3,963 | $56,574 | $235,963 | - Total commitments to extend credit were **$891.5 million** at June 30, 2025, with the majority maturing in one year or less[392](index=392&type=chunk) - The Company also had unfunded commitments of **$7.8 million** for other equity investments at June 30, 2025[393](index=393&type=chunk) [Capital Resources](index=96&type=section&id=Capital%20Resources) This section outlines the Company's and the Bank's regulatory capital ratios and compliance with capital requirements, including the capital conservation buffer, and discusses dividend restrictions - Both California BanCorp and California Bank of Commerce, N.A. exceeded all regulatory capital requirements to be considered 'well capitalized' at June 30, 2025[399](index=399&type=chunk) Regulatory Capital Ratios (June 30, 2025, dollars in thousands) | Capital Ratio | California BanCorp Actual Amount | California BanCorp Actual Ratio | Bank Actual Amount | Bank Actual Ratio | | :--------------------------------------- | :------------------------------- | :------------------------------ | :----------------- | :---------------- | | Total Capital (to Risk-Weighted Assets) | $511,692 | 14.75% | $496,111 | 14.30% | | Tier 1 Capital (to Risk-Weighted Assets) | $421,351 | 12.14% | $458,653 | 13.22% | | CET1 Capital (to Risk-Weighted Assets) | $421,351 | 12.14% | $458,653 | 13.22% | | Tier 1 Capital (to Average Assets) | $421,351 | 11.14% | $458,653 | 12.13% | - The Bank paid **$30.0 million** in dividends to the Company during the three and six months ended June 30, 2025, while no dividends were declared to shareholders by the Company[403](index=403&type=chunk)[405](index=405&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=98&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the Company's management of market risk, primarily interest rate risk, through various tools like simulation models and sensitivity analyses (NII at Risk and EVE) to assess the impact of interest rate changes [Interest Rate Risk Management](index=98&type=section&id=Interest%20Rate%20Risk%20Management) This section describes the company's approach to managing interest rate risk, including the use of simulation models and sensitivity analyses to assess potential impacts on net interest income and economic value of equity - The Company's primary market risk is interest rate risk, managed by the Asset Liability Committee (ALCO) through monitoring loan and deposit flows, investment, and funding activities[406](index=406&type=chunk)[407](index=407&type=chunk)[408](index=408&type=chunk) - Interest rate risk is measured using Net Interest Income at Risk (NII at Risk) and Economic Value of Equity (EVE) simulation models, which project impacts under various interest rate scenarios[409](index=409&type=chunk) Projected Changes in NII at Risk and EVE (dollars in thousands) | Scenario | June 30, 2025 EVE Change (%) | June 30, 2025 NII Change (%) | December 31, 2024 EVE Change (%) | December 31, 2024 NII Change (%) | | :---------------- | :--------------------------- | :--------------------------- | :------------------------------- | :------------------------------- | | +300bps | 9.6% | 2.4% | 6.8% | 2.0% | | +200bps | 7.6% | 1.8% | 5.5% | 1.5% | | +100bps | 4.5% | 1.0% | 3.4% | 0.8% | | Base case | — | — | — | — | | -100bps | (6.1)% | (2.1)% | (4.8)% | (2.0)% | | -200bps | (14.3)% | (4.7)% | (11.4)% | (4.3)% | | -300bps | (24.6)% | (7.8)% | (20.1)% | (7.3)% | - Modeled results indicate a decrease in NII if interest rates decline, due to adjustable-rate loans repricing faster than deposit rates, while rising rates show a modest increase in NII[411](index=411&type=chunk) [Item 4. Controls and Procedures](index=100&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[414](index=414&type=chunk) - There were no material changes in the Company's internal control over financial

[Executive Summary & Company Overview](index=1&type=section&id=Executive%20Summary%20%26%20Company%20Overview) California BanCorp reported strong Q2 2025 earnings, derisking its balance sheet and focusing on organic business banking growth [Q2 2025 Financial Performance Summary](index=1&type=section&id=Q2%202025%20Financial%20Performance%20Summary) California BanCorp reported Q2 2025 net income of $14.1 million ($0.43 diluted EPS), a sequential decrease but significant year-over-year increase, with key performance ratios also declining sequentially | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :----------------------------- | :------ | :------ | :------ | | Net Income | $14.1M | $16.9M | $0.19M | | Diluted EPS | $0.43 | $0.52 | $0.01 | | Net Interest Margin | 4.61% | 4.65% | | | Return on Average Assets | 1.45% | 1.71% | | | Return on Average Common Equity| 10.50% | 13.18% | | | Efficiency Ratio (non-GAAP) | 56.1% | 55.6% | | [Strategic Initiatives and Management Commentary](index=1&type=section&id=Strategic%20Initiatives%20and%20Management%20Commentary) Management emphasized strong Q2 earnings post-merger, continuing balance sheet derisking by reducing Sponsor Finance exposure and brokered deposits, while focusing on organic relationship-based business banking growth - The company reported **strong second quarter earnings of $14.1 million**, marking the third consecutive strong quarter since the merger last July[4](index=4&type=chunk) - Strategy to derisk the consolidated balance sheet by decreasing exposure in the Sponsor Finance portfolio, reducing reliance on brokered deposits, and improving overall credit quality; the Sponsor Finance portfolio continued to decline, and brokered deposits were successfully wound down[5](index=5&type=chunk)[6](index=6&type=chunk) - Future focus is on organic loan and deposit growth through relationship-based business banking in California's small to medium-sized business markets[6](index=6&type=chunk) [Second Quarter Operating Results](index=2&type=section&id=Second%20Quarter%20Operating%20Results) This section details California BanCorp's Q2 2025 operating results, covering net income, net interest income, credit loss reversals, noninterest items, and income tax [Net Income and Earnings Per Share](index=2&type=section&id=Net%20Income%20and%20Earnings%20Per%20Share) Q2 2025 net income was $14.1 million ($0.43 diluted EPS), a decrease from Q1 2025, mainly due to lower net interest income after credit loss reversals, partially offset by higher noninterest income | Metric | Q2 2025 | Q1 2025 | Change (QoQ) | | :------------------- | :------ | :------ | :----------- | | Net Income | $14.1M | $16.9M | -$2.8M | | Diluted EPS | $0.43 | $0.52 | -$0.09 | - The decrease in net income and diluted EPS was largely driven by **lower net interest income after reversal of credit losses**, partially offset by higher noninterest income[10](index=10&type=chunk) [Net Interest Income and Net Interest Margin](index=2&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net interest income decreased to $41.4 million in Q2 2025, driven by lower interest and dividend income, while net interest margin slightly declined to 4.61% due to lower asset yields and increased cost of funds | Metric | Q2 2025 | Q1 2025 | Change (QoQ) | | :---------------------- | :------ | :------ | :----------- | | Net Interest Income | $41.4M | $42.3M | -$0.9M | | Net Interest Margin | 4.61% | 4.65% | -4 bps | | Total Interest Income | | | -$1.0M | | Total Interest Expense | | | -$0.2M | | Yield on Avg Total Loans| 6.58% | 6.61% | -3 bps | | Cost of Funds | 1.73% | 1.72% | +1 bp | - Decrease in net interest income primarily due to a **$1.0 million decrease in total interest and dividend income**, partially offset by a **$201 thousand decrease in total interest expense**[11](index=11&type=chunk) - The decrease in interest income was mainly due to decreases in average total loan balances, while the decrease in interest expense was primarily due to a decrease in interest expense on interest-bearing deposits[11](index=11&type=chunk) [Reversal of Credit Losses](index=3&type=section&id=Reversal%20of%20Credit%20Losses) Q2 2025 saw a $634 thousand reversal of credit losses, a significant decrease from Q1, with $4.1 million in net charge-offs reflecting the strategy to derisk criticized loans | Metric | Q2 2025 | Q1 2025 | Change (QoQ) | | :-------------------------- | :------ | :------ | :----------- | | Reversal of Credit Losses | $634K | $3.8M | -$3.166M | | Total Net Charge-offs | $4.1M | | | - **Net charge-offs of $4.1 million** resulted from the Company's continuing strategy to derisk the consolidated balance sheet by reducing exposure to criticized loans[16](index=16&type=chunk) - The decrease in reversal of credit losses for loans held for investment was driven primarily by the decrease in loan balances, changes in loan composition, and qualitative factors, partially offset by net charge-offs and changes in economic outlook for California[17](index=17&type=chunk) [Noninterest Income](index=3&type=section&id=Noninterest%20Income) Noninterest income increased to $2.9 million in Q2 2025, primarily due to higher equity investment income, despite no gains from SBA 7A loan sales | Metric | Q2 2025 | Q1 2025 | Change (QoQ) | | :------------------- | :------ | :------ | :----------- | | Noninterest Income | $2.9M | $2.6M | +$0.3M | | Other Charges and Fees | | | +$0.874M | | Gain on Sale of SBA 7A Loans | $0 | $0.577M | -$0.577M | - Other charges and fees increased **$874 thousand** in the second quarter due primarily to **higher income from equity investments**[18](index=18&type=chunk) [Noninterest Expense](index=4&type=section&id=Noninterest%20Expense) Total noninterest expense slightly decreased to $24.8 million in Q2 2025, with lower salaries and regulatory assessments, but an $862 thousand loss on OREO sale negatively impacted the efficiency ratio | Metric | Q2 2025 | Q1 2025 | Change (QoQ) | | :-------------------------- | :------ | :------ | :----------- | | Total Noninterest Expense | $24.8M | $24.9M | -$0.087M | | Salaries & Employee Benefits| $15.3M | | -$0.571M | | Regulatory Assessments | $0.545M | | -$0.177M | | Loss on Sale of OREO | $0.862M | $0 | +$0.862M | | Efficiency Ratio (non-GAAP) | 56.1% | 55.6% | +0.5% | - The **$862 thousand loss on sale of other real estate owned** negatively impacted the efficiency ratio by **1.9%** during the second quarter of 2025[20](index=20&type=chunk) [Income Tax Expense](index=4&type=section&id=Income%20Tax%20Expense) Q2 2025 income tax expense was $6.0 million, a decrease from Q1, while the effective tax rate increased to 29.8% due to equity award vesting and stock price changes | Metric | Q2 2025 | Q1 2025 | Change (QoQ) | | :------------------- | :------ | :------ | :----------- | | Income Tax Expense | $6.0M | $6.8M | -$0.8M | | Effective Tax Rate | 29.8% | 28.8% | +1.0% | - The increase in the effective tax rate was primarily attributable to the vesting and exercise of equity awards combined with changes in the Company's stock price over time[21](index=21&type=chunk) [Balance Sheet Analysis](index=4&type=section&id=Balance%20Sheet%20Analysis) This section analyzes California BanCorp's balance sheet at June 30, 2025, detailing changes in assets, loans, deposits, and borrowings [Assets](index=4&type=section&id=Assets) Total assets decreased slightly to $3.95 billion at June 30, 2025, primarily due to lower loans, cash, and OREO, partially offset by increased available-for-sale debt securities | Metric | June 30, 2025 | March 31, 2025 | Change (QoQ) | | :------------------- | :------------ | :------------- | :----------- | | Total Assets | $3.95B | $3.98B | -$29.4M | - The decrease in total assets was primarily related to a decrease in loans (**$75.8 million**), cash and cash equivalents (**$9.1 million**), and OREO (**$4.1 million**), partially offset by an increase in available-for-sale debt securities (**$56.6 million**)[

Company Overview - California BanCorp has a market capitalization of $533 million [11] - The company possesses total assets of $40 billion and deposits of $33 billion as of June 30, 2025 [11] - The company has a 5-year asset CAGR of 207% and a 5-year deposit CAGR of 234% [11] Balance Sheet and Loan Portfolio - Total loans held for investment were $30 billion at June 30, 2025, compared to $31 billion at March 31, 2025, and $19 billion at June 30, 2024 [10] - Noninterest-bearing deposits accounted for 368% of total deposits as of June 30, 2025 [10] - As of June 30, 2025, total multifamily loans amounted to $2585 million, representing 86% of total loans [66] Financial Performance - Net income for Q2 2025 was $141 million, with diluted EPS at $043 [25] - The return on average assets for Q2 2025 was 145%, and the return on average common equity was 1050% [25] - The net interest margin for Q2 2025 was 461% [25] - The efficiency ratio for Q2 2025 was 561% [25] - Non-performing assets to total assets stood at 046% for Q2 2025 [25] - The allowance for credit losses to total loans held for investment was 146% as of June 30, 2025 [25]

Core Insights - California BanCorp reported a net income of $14.1 million, or $0.43 per diluted share, for Q2 2025, a decrease from $16.9 million, or $0.52 per diluted share in Q1 2025, and a significant increase from $190 thousand, or $0.01 per diluted share in Q2 2024 [2][9] - The company has successfully integrated operations post-merger and is focusing on organic growth while reducing credit risk in its loan portfolio [3][5] Financial Performance - Net interest income for Q2 2025 was $41.4 million, down from $42.3 million in the prior quarter, primarily due to a decrease in total interest and dividend income [10] - The net interest margin decreased to 4.61% from 4.65% in the previous quarter, attributed to a decline in the yield on total average interest-earning assets [11] - The company recorded a reversal of credit losses of $634 thousand in Q2 2025, compared to $3.8 million in the prior quarter [14] Asset Quality - Non-performing assets to total assets ratio improved to 0.46% at June 30, 2025, down from 0.68% at March 31, 2025, indicating better asset quality [28] - Total loans held for investment decreased to $2.99 billion, a reduction of $77.2 million from the previous quarter [22] - The allowance for loan losses was $41.1 million, or 1.37% of total loans held for investment, down from $45.8 million, or 1.49% in the prior quarter [33] Deposits and Borrowings - Total deposits decreased to $3.31 billion, a decline of $30.2 million from March 31, 2025, with noninterest-bearing demand deposits decreasing by 5.8% [24] - The company redeemed $18 million of subordinated notes, contributing to a decrease in total borrowings to $52.9 million [27] Capital and Ratios - Tangible book value per common share increased to $12.82 at June 30, 2025, from $12.29 at March 31, 2025 [35] - The company's preliminary capital ratios exceed the minimums required to be classified as "well-capitalized" [36]