[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]

Core Insights - Overton Moore Properties (OMP) has appointed Felix Vollrath as Senior Vice President of Acquisitions and Development to lead industrial investment and development in Southern California and Phoenix [1][2] Company Overview - OMP is a leading real estate investment and development firm in the western U.S., established in 1972, with a focus on delivering long-term value in key industrial markets [5] - The firm has a proven track record of creating value through disciplined execution and market insight [5] Leadership and Experience - Felix Vollrath has over eight years of experience in industrial real estate investment and development, previously serving as Vice President at Rexford Industrial Realty, where he led the acquisition of over $2 billion in industrial real estate in Los Angeles [3][4] - Vollrath holds a Master's degree in Real Estate Development from the University of Southern California and a Bachelor's degree in International Business from Copenhagen Business School [4] Strategic Focus - In his new role, Vollrath will be responsible for sourcing, structuring, and executing industrial investment and development opportunities for OMP's core-plus, value-add, and opportunistic clients and partners [2][3] - The appointment is part of OMP's strategy to grow its business in dynamic industrial markets in the Western U.S. [4]

Merger and Acquisition - California BanCorp completed an all-stock merger with CALB on July 31, 2024, with CALB reporting total loans of $1.43 billion, total assets of $1.91 billion, and total deposits of $1.64 billion at the time of the merger[232]. - The merger with CALB is expected to enhance market share and scale, particularly in Northern California, by adding one full-service branch and four loan production offices[232]. - Net income for Q1 2025 increased by $11.9 million compared to Q1 2024, primarily due to a $21.8 million increase in net interest income from higher average interest-earning assets resulting from the CALB merger[264]. - Total noninterest income for Q1 2025 was $2.6 million, an increase of $1.2 million compared to $1.4 million in Q1 2024, attributed to the impact of the Merger[287]. Financial Performance - For the three months ended March 31, 2025, net interest income was $42.255 million, a decrease from $44.541 million in the previous quarter, while net income increased to $16.853 million from $16.772 million[249]. - The return on average assets for the three months ended March 31, 2025, was 1.71%, compared to 1.60% in the previous quarter, indicating improved efficiency[249]. - Noninterest income rose to $2.566 million for the three months ended March 31, 2025, up from $1.004 million in the previous quarter[249]. - Net income for Q1 2025 was $16.9 million, or $0.52 per diluted share, compared to $16.8 million, or $0.51 per diluted share in Q4 2024, reflecting a $81 thousand increase[263]. - Pre-tax, pre-provision income for Q1 2025 was $19.9 million, an increase of $481 thousand, or 2.5% compared to $19.4 million in Q4 2024[263]. - The efficiency ratio (non-GAAP) for Q1 2025 was 55.6%, compared to 57.4% in Q4 2024[260]. - Total noninterest expense for Q1 2025 was $24.9 million, a decrease of $1.2 million from $26.1 million in the prior quarter, largely due to the decrease in merger-related expenses[291]. Asset and Liability Management - Total assets as of March 31, 2025, were $3,983,090 thousand, a decrease from $4,031,654 thousand as of December 31, 2024[261]. - The tangible common equity to tangible assets ratio improved to 10.34% in Q1 2025 from 9.69% in Q4 2024[261]. - The allowance for loan losses decreased to $45,839 thousand in Q1 2025 from $50,540 thousand in Q4 2024[250]. - Total loans averaged $3,109.7 million in Q1 2025, generating interest income of $50.7 million with a yield of 6.61%[265]. - The cost of deposits decreased to 1.59% for the three months ended March 31, 2025, from 1.87% in the previous quarter, reflecting improved funding costs[249]. - The Company had seven loan modifications totaling $19.9 million for borrowers experiencing financial difficulty during the last twelve months ended March 31, 2025[332]. Credit Quality - The company reported a net charge-off rate of (0.20)% for the three months ended March 31, 2025, compared to (0.02)% in the previous quarter, indicating a slight increase in credit losses[249]. - Delinquent loans totaled $5.1 million, representing 0.17% of total loans held for investment, a decrease from 0.39% at December 31, 2024[327]. - Nonaccrual loans decreased to $22.8 million as of March 31, 2025, down from $26.4 million at December 31, 2024[335]. - The allowance for loan losses to total loans ratio was 1.49% as of March 31, 2025, compared to 1.61% at December 31, 2024[335]. Economic Environment - The Federal Reserve raised interest rates 11 times between March 2022 and September 2023, totaling 525 basis points, impacting the banking industry and economic conditions[236]. - The economic environment has experienced volatility, impacting the forecasting of future economic outcomes, with significant factors including high inflation and aggressive rate hikes by central banks[338]. - Interest rate risk is the primary market risk for the Company, impacting net interest income and net interest margin due to changes in market interest rates[394]. Capital and Liquidity - Total shareholders' equity increased to $531.4 million at March 31, 2025, up from $511.8 million at December 31, 2024, primarily due to net income of $16.9 million[360]. - The leverage capital ratio for the Company was 10.44% and the total risk-based capital ratio was 14.53% at March 31, 2025[365]. - The total liquidity ratio improved to 16.8% at March 31, 2025, compared to 15.7% at December 31, 2024[366]. - The Company and the Bank were in compliance with the capital conservation buffer requirements as of March 31, 2025[387]. Interest Rate Risk Management - The Asset Liability Committee (ALCO) oversees interest rate risk management, reviewing compliance with regulatory guidance and modeling results quarterly[395]. - The Company utilizes a simulation model to measure interest rate risk, including Net Interest Income at Risk (NII at Risk) and Economic Value of Equity (EVE) assessments[398]. - Projected changes in NII at Risk indicate a modest increase in net interest income in all rates-up scenarios as of March 31, 2025, with a decrease expected if interest rates decline[399]. - The modeled EVE results suggest the Company would benefit from an increase in interest rates and be adversely impacted by a decrease[400].

Group 1 - California BanCorp (BCAL) closed at $14.89, with a 19.6% gain over the past four weeks, and a mean price target of $18.67 suggests a 25.4% upside potential [1] - The mean estimate includes three short-term price targets with a standard deviation of $0.58, indicating a low variability among analysts [2] - Analysts have shown increasing optimism regarding BCAL's earnings prospects, with a positive trend in earnings estimate revisions correlating with potential stock price increases [4][11] Group 2 - The Zacks Consensus Estimate for BCAL has increased by 3.3% due to one upward revision in earnings estimates over the last 30 days [12] - BCAL holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate factors, indicating strong potential for upside [13] - While the consensus price target may not be a reliable indicator of the extent of gains, it does provide a directional guide for price movement [13]

Core Viewpoint - California Bancorp has authorized an increase in its share repurchase program to 1.6 million shares, representing approximately 4.9% of its outstanding shares, indicating confidence in its banking strategy and commitment to long-term shareholder value [1][2]. Share Repurchase Program - The share repurchase program was initially set at 550,000 shares when announced on June 15, 2023, and has now been increased to 1.6 million shares [1]. - The repurchase may occur through open market transactions, privately negotiated transactions, or other means, funded by available working capital and cash from operating activities [2]. - The timing and number of shares repurchased will depend on various factors, including price, trading volume, and market conditions [2]. Financial Strategy - The company plans to redeem $18 million of 5.50% Fixed-to-Floating Subordinated Notes due 2030, which were issued on May 28, 2020 [3]. - The strong balance sheet and capital levels of the company provide flexibility for opportunistic capital deployment for share repurchases and debt repayment [2]. Company Overview - California Bancorp is a registered bank holding company headquartered in San Diego, California, with its subsidiary, California Bank of Commerce, offering a range of financial products and services [4]. - The bank operates through 14 branch offices and four loan production offices, focusing on a relationship-based banking approach [4].

Financial Performance - Net income for the first quarter of 2025 was $16.9 million, or $0.52 per diluted share, compared to $16.8 million, or $0.51 per diluted share in the previous quarter[3]. - Net income for Q1 2025 was $16,853,000, slightly up from $16,772,000 in Q4 2024 and significantly higher than $4,935,000 in Q1 2024[36]. - Adjusted net income for Q1 2025 was $16,853,000, compared to $17,225,000 in Q4 2024 and $5,482,000 in Q1 2024[45]. - The company reported a pre-tax, pre-provision income of $19,901 thousand for Q1 2025, compared to $19,420 thousand in Q4 2024 and $6,926 thousand in Q1 2024, highlighting strong operational performance[41]. - Return on average assets increased to 1.71% in Q1 2025 from 1.60% in Q4 2024, indicating enhanced profitability[36]. - Return on average assets increased to 1.71% in Q1 2025 from 1.60% in Q4 2024, reflecting enhanced asset utilization[46]. Asset and Loan Management - Total assets decreased by $48.6 million, or 1.2%, to $3.98 billion at March 31, 2025, primarily due to a decrease in loans[18]. - Total loans held for investment were $3.07 billion, a decrease of $70.4 million from December 31, 2024, with new originations of $69.4 million offset by loan sales and payoffs of $115.1 million[19]. - Total loans held for investment decreased to $3,068,774,000 in Q1 2025 from $3,139,165,000 in Q4 2024[40]. - Non-performing loans decreased to $22.8 million, or 0.74% of total loans held for investment, compared to $26.5 million, or 0.85% at December 31, 2024[23]. - Special mention loans increased by $5.1 million to $74.4 million at March 31, 2025, primarily due to downgrades from Pass loans[25]. Income and Expenses - Net interest income for Q1 2025 was $42,255,000, a decrease of 4.6% from $44,541,000 in Q4 2024 and an increase of 106.5% from $20,494,000 in Q1 2024[36]. - Total interest and dividend income for Q1 2025 was $56,825 thousand, a decrease of 9.3% from $62,558 thousand in Q4 2024 and an increase of 81.5% from $31,264 thousand in Q1 2024[41]. - Total noninterest expense for Q1 2025 was $24,920 thousand, a decrease of 4.4% from $26,125 thousand in Q4 2024 and an increase of 66.5% from $14,981 thousand in Q1 2024[41]. - Noninterest income increased to $2.6 million, up from $1.0 million in the previous quarter, primarily due to a gain on sale of loans[13]. - Noninterest income increased to $2,566,000 in Q1 2025, up 155.5% from $1,004,000 in Q4 2024 and 81.5% from $1,413,000 in Q1 2024[36]. Capital and Equity - Tangible book value per common share increased to $12.29, up $0.58 from the prior quarter[5]. - Tangible book value per common share increased to $12.29 at March 31, 2025, from $11.71 at December 31, 2024, primarily driven by net income of $16.9 million[29]. - Shareholders' equity increased to $531,384,000 in Q1 2025 from $511,836,000 in Q4 2024, reflecting a stronger capital position[37]. - Tangible common equity as a percentage of total tangible assets increased to 10.34% from 9.69% in the prior quarter[29]. - The Company's preliminary capital ratios exceeded the minimums required to be "well-capitalized" at March 31, 2025[30]. Deposits and Funding - Total deposits decreased by $56.3 million, or 1.7%, to $3.34 billion at March 31, 2025[5]. - Total deposits decreased to $3.34 billion as of March 31, 2025, down $56.3 million from December 31, 2024, with noninterest-bearing demand deposits increasing to $1.29 billion, or 38.7% of total deposits[20]. - The cost of deposits decreased to 1.59%, down 28 basis points from the prior quarter, due to a deposit repricing strategy[9]. - Average noninterest-bearing deposits represented 37.37% of average total deposits in Q1 2025, up from 36.27% in Q4 2024 and 34.35% in Q1 2024, showing a positive trend in deposit composition[43]. - Total available borrowing capacity was $1.13 billion at March 31, 2025, including $687.8 million from an FHLB secured line of credit[22]. Credit Quality - The allowance for credit losses totaled $48.3 million at March 31, 2025, down from $53.6 million at December 31, 2024, with net charge-offs of $1.5 million for the quarter[27]. - The allowance for credit losses decreased to $48,324,000 in Q1 2025 from $53,643,000 in Q4 2024, reflecting improved asset quality[38]. - Total non-performing assets decreased to $26.9 million, or 0.68% of total assets, compared to $30.6 million, or 0.76% at December 31, 2024[23]. - The Company recorded a reversal of credit losses of $3.8 million, consistent with the prior quarter, with total net charge-offs of $1.5 million[11].

Core Viewpoint - California BanCorp reported strong financial results for the first quarter of 2025, with net income of $16.9 million, reflecting a slight increase from the previous quarter and a significant rise compared to the same quarter last year. The company continues to focus on derisking its balance sheet and enhancing shareholder value post-merger [2][3]. Financial Performance - Net income for Q1 2025 was $16.9 million, or $0.52 per diluted share, compared to $16.8 million, or $0.51 per diluted share in Q4 2024, and $4.9 million, or $0.26 per diluted share in Q1 2024 [2][5]. - Pre-tax, pre-provision income (non-GAAP) was $19.9 million, an increase of $481 thousand from the prior quarter [5]. - The net interest margin improved to 4.65%, up from 4.61% in the previous quarter, driven by a decrease in the cost of funds [6][9]. Asset Quality - Total non-performing assets decreased to $26.9 million, or 0.68% of total assets, compared to $30.6 million, or 0.76% of total assets at the end of the previous quarter [25][26]. - The allowance for credit losses totaled $48.3 million, down from $53.6 million at the end of the previous quarter, reflecting a reversal of credit losses [29][30]. Balance Sheet Highlights - Total assets at March 31, 2025, were $3.98 billion, a decrease of $48.6 million from December 31, 2024 [19]. - Total loans held for investment were $3.07 billion, a decrease of $70.4 million from the previous quarter [20]. - Total deposits were $3.34 billion, down $56.3 million from December 31, 2024, primarily due to a decrease in brokered deposits [22]. Capital Position - Tangible book value per common share increased to $12.29, up from $11.71 at the end of the previous quarter [31]. - The company's preliminary capital ratios exceed the minimums required to be classified as "well-capitalized" [32]. Noninterest Income and Expenses - Noninterest income rose to $2.6 million, an increase of $1.6 million compared to the previous quarter, driven by gains on loan sales [14]. - Total noninterest expense decreased to $24.9 million, down from $26.1 million in the prior quarter, largely due to a reduction in merger-related expenses [15][16]. Efficiency Metrics - The efficiency ratio (non-GAAP) improved to 55.6%, compared to 57.4% in the previous quarter, indicating better cost management [17].

Financial Overview - As of December 31, 2024, California BanCorp had total consolidated assets of $4.03 billion, total loans of $3.16 billion, total deposits of $3.40 billion, and total shareholders' equity of $511.8 million[24]. - The merger with California BanCorp (CALB) was completed on July 31, 2024, resulting in a combined bank holding company with approximately $4.25 billion in assets and 14 branches across California[34]. - The total aggregate consideration paid for the merger was approximately $216.6 million, which included approximately $74.0 million of preliminary goodwill[34]. - As of July 31, 2024, CALB had total loans of $1.43 billion, total assets of $1.91 billion, and total deposits of $1.64 billion prior to the merger[34]. - Total deposits reached $3.40 billion, including noninterest-bearing demand deposits of $1.26 billion (37.0% of total deposits) and a total deposit cost of 2.01% for the year ended December 31, 2024[66]. Business Strategy - California BanCorp's strategy focuses on serving small to medium-sized businesses, targeting a market with approximately 1.7 million such businesses in California[36]. - The company has expanded its branch network through acquisitions, including the acquisition of Bank of Santa Clarita, completed on October 1, 2021, and the merger with CALB[28]. - The company operates 14 branch offices and four loan production offices, with a focus on key Southern California markets[35]. - The company emphasizes a relationship-based banking approach, providing personalized service to small business owners, which is generally unavailable from larger banks[30]. Loan Portfolio - California BanCorp's lending products primarily include construction and land development loans, commercial real estate loans, commercial and industrial loans, SBA loans, and consumer loans[23]. - As of December 31, 2024, the company had total loans held for investment of $3.14 billion, with non-SBA loans accounting for $2.95 billion (93.9%) and SBA loans for $189.4 million (6.1%)[50]. - The real estate loans portfolio totaled $2.01 billion, representing 64.0% of loans held for investment, with non-owner occupied commercial real estate loans at $1.13 billion and multifamily residential loans at $244.0 million[56]. - The company reported $693.5 million in commercial and industrial loans, which constituted 22.1% of the loans held for investment, with $4.9 million classified as non-performing[58]. - The company had $222.0 million in construction and land development loans, representing 7.1% of the loans held for investment, with $9.7 million classified as non-performing[53]. - As of December 31, 2024, the company had $24.7 million in consumer loans, accounting for 0.7% of total loans held for investment, with $150 thousand in consumer solar loans over 90 days past due[64]. - The company had $189.4 million in SBA loans, which represented 6.1% of total loans held for investment, with $374 thousand classified as non-performing[63]. Capital and Regulatory Compliance - The company maintains a capital conservation buffer of 2.5% of risk-weighted assets, increasing minimum CET1 capital, Tier 1 capital, and total capital ratios to 7.0%, 8.5%, and 10.5% respectively[88]. - Total Capital to Risk-Weighted Assets ratio as of December 31, 2024, was 10.0%, exceeding the minimum required of 8.0%[89]. - Tier 1 Capital to Risk-Weighted Assets ratio was 8.0%, above the minimum requirement of 6.0%[89]. - CET1 Capital to Risk-Weighted Assets ratio was 6.5%, surpassing the minimum requirement of 4.5%[89]. - The company is subject to consolidated capital rules at the bank holding company level starting from the third quarter of 2024[85]. - The company has not elected to be a financial holding company, limiting its activities to those determined by the Federal Reserve[99]. - The company is required to consult with the Federal Reserve before repurchasing shares or paying dividends that exceed its earnings for the quarter[102]. - The company is extensively regulated under federal and state law, primarily by the Federal Reserve and the OCC[82]. Risk Management - The company emphasizes risk reduction in its loan portfolio by maintaining a maximum loan-to-value ratio of 75% for construction and land development loans[53]. - The company faces risks related to economic downturns in California, where it primarily operates, which could adversely affect credit quality and profitability[152]. - A significant portion of the loan portfolio is secured by real estate, making the company vulnerable to downturns in the local real estate market, potentially impacting profitability[154]. - Changes in interest rates could significantly affect net interest income, with potential adverse impacts on loan origination and repayment rates[155][158]. - The company may experience gaps in interest rate sensitivities between assets and liabilities, which could negatively impact earnings if market rates move unfavorably[157]. - The company relies on independent appraisals for real estate values, which may not be realizable in foreclosure situations, increasing credit risk[146]. - The company’s credit risk management practices may not fully prevent losses in its loan portfolio, despite adherence to sound underwriting practices[167]. - The company relies on independent appraisals for real estate securing loans, which may not reflect realizable values, increasing the risk of loss upon foreclosure[168]. Operational and Compliance Risks - The company is subject to various restrictions on capital distributions, including dividends, which can be up to 100% of net income for the year-to-date plus retained net income for the two preceding years without prior OCC approval[115]. - The Bank's ability to make loans is limited to 15% of unimpaired capital and surplus, with a potential increase to 25% if secured by readily marketable collateral[119]. - The Bank received a "satisfactory" overall rating in its most recent Community Reinvestment Act evaluation in 2024, with an "outstanding" rating on Community Development[126]. - The company must comply with anti-money laundering regulations, which include developing policies to monitor compliance and prevent suspicious activities[128]. - The company is subject to the Dodd-Frank Act, which centralizes consumer financial protection responsibilities with the CFPB, affecting compliance costs and operational regulations[134]. - Regulatory changes and increased scrutiny in the financial services industry could lead to higher compliance costs and operational uncertainties[137]. - The company is exposed to risks from severe weather and natural disasters, particularly in California, which could disrupt operations and increase loan defaults[151]. - The company may need to raise additional capital, but availability of such capital is uncertain, posing liquidity risks[146]. - Liquidity is essential for the company's operations, and any substantial changes in liquidity levels could adversely affect its financial condition[179]. - The company plans to pursue acquisitions as part of its growth strategy, which may strain its operational and financial resources[188]. - The integration of CALB with the company may incur unexpected costs and the anticipated benefits may not be realized[190]. - The company has not recorded goodwill impairment as of December 31, 2024, but future impairment could adversely affect its financial condition[191]. - The company's reputation is critical for business success, and any negative impact could materially affect its operations[192]. - Competition in the banking and financial services industry is intense, which may limit the company's growth and profitability[194]. - The company relies heavily on its executive management team, and the loss of key personnel could adversely affect its operations[195]. - The company is subject to stringent capital requirements, and failure to comply could result in regulatory restrictions and affect its financial condition[202]. Technological and Cybersecurity Risks - The financial services industry is experiencing rapid technological changes, with a focus on artificial intelligence and machine learning to enhance customer interactions and data analysis[205]. - Competitors may have greater resources for technological investments, potentially leading to a competitive disadvantage for the company[205]. - Cybersecurity risks, including e-fraud and data breaches, pose significant threats, with potential reputational and financial consequences[209]. - The company relies on robust information security measures, but evolving cyber threats may require additional resources for protection and remediation[208]. - The use of artificial intelligence in products and services carries risks of reputational harm and potential legal liabilities due to flawed algorithms or biased data[211]. - The enterprise risk management framework may not effectively mitigate risks, leading to potential losses and reputational damage[212]. - Operational risks include employee errors and misconduct, which could result in financial losses and regulatory sanctions[213]. - The company is dependent on data and modeling for decision-making, with faulty data potentially leading to adverse outcomes and regulatory scrutiny[216]. Environmental and Compliance Considerations - Compliance with environmental laws has not materially impacted capital expenditures or earnings, with no significant costs associated with environmental regulations identified[135]. - Environmental liabilities may arise from real estate properties securing the loan portfolio, potentially incurring substantial costs[217].