Financial Overview - As of December 31, 2025, California BanCorp had total consolidated assets of $4.03 billion, total loans of $3.06 billion, total deposits of $3.37 billion, and total shareholders' equity of $576.6 million[23]. - The merger with California BanCorp (CALB) closed on July 31, 2024, resulting in a combined entity with approximately $4.25 billion in assets and 14 branches across California[30]. - The total aggregate consideration paid for the merger was approximately $216.6 million, which resulted in approximately $73.1 million of goodwill[30]. - Total deposits reached $3.37 billion, including noninterest-bearing demand deposits of $1.18 billion, or 35.0% of total deposits, with a total deposit cost of 1.55% for the year ended December 31, 2025[64]. - The company reported $589.0 million in commercial and industrial loans, which is 19.4% of the loans held for investment, with $2.2 million classified as non-performing[53]. - The company had $175.7 million in SBA loans, representing 5.9% of total loans held for investment, with $473 thousand classified as non-performing[58]. - The debt securities portfolio included $52.9 million classified as held-to-maturity and $234.9 million as available-for-sale, representing 1.31% and 5.82% of total assets, respectively[60]. - The company had 288 full-time equivalent employees as of December 31, 2025, with no collective bargaining agreements in place[71]. Loan Portfolio Composition - The bank's loan portfolio composition as of December 31, 2025, included 60.0% in commercial real estate and other loans, 20.0% in commercial and industrial loans, and 4.6% in construction and land development loans[45]. - The real estate loans portfolio totaled $2.13 billion, accounting for 70.3% of the loans held for investment, with $1.15 billion secured by non-owner occupied commercial real estate[50]. - As of December 31, 2025, the company's commercial real estate (CRE) loans represented 469.3% of its total risk-based capital, indicating a high concentration risk[153]. - Total loans secured by CRE under construction and land development accounted for 28.0% of the company's total risk-based capital as of December 31, 2025[153]. - The company's construction and land development loans totaled $134.3 million, representing 4.4% of the loans held for investment portfolio as of December 31, 2025[159]. Strategic Focus and Growth - California BanCorp's strategy focuses on serving small to medium-sized businesses, capitalizing on the 70% decrease in banks in California over the last 23 years, creating a significant market opportunity[27]. - The bank operates 14 branch offices and 11 commercial banking offices throughout California, emphasizing a relationship-based approach to banking[22][31]. - The bank has expanded its footprint through strategic acquisitions, including the acquisition of Bank of Santa Clarita and the merger with CALB, enhancing its market presence in Southern California[25][29]. - The bank's management team is focused on organic growth while remaining opportunistic for strategic acquisitions that align with its business model[26]. Community Engagement - The bank's community support initiatives include philanthropic giving and employee involvement in local nonprofits, reinforcing its commitment to the communities it serves[21]. Capital and Regulatory Compliance - The Company is subject to minimum capital requirements, including a capital conservation buffer of 2.5% of risk-weighted assets, increasing minimum CET1 capital to 7.0%[81]. - As of December 31, 2025, the total capital ratio required to be well-capitalized is 10.0%[82]. - The Company qualified for treatment under the Small Bank Holding Company Policy Statement prior to the merger in Q3 2024, exempting it from consolidated capital rules[79]. - The federal banking agencies have established minimum risk-based capital requirements, including Tier 1 capital and CET1 capital[80]. - The Company must maintain a capital conservation buffer to avoid restrictions on capital distributions, including dividends and share repurchases[81]. - The ability of the Bank to pay cash dividends or fees to the Company is limited by law and regulation[98]. - The Bank is subject to supervision and regulation by the OCC and the FDIC, ensuring compliance with federal laws[100]. - As of December 31, 2025, the Bank's capital levels exceeded the minimum required to be considered "well-capitalized," with a common equity Tier 1 capital ratio of 6.5% or higher, a Tier I risk-based capital ratio of 8.0% or higher, and a total risk-based capital ratio of 10.0% or higher[101]. - The Bank's total assets were reported at $4.03 billion as of December 31, 2025, which exempted it from a special assessment imposed by the FDIC for recovery of losses to the Deposit Insurance Fund[114]. Dividend and Shareholder Returns - The Company declared its first quarterly cash dividend of $0.10 per share on its common stock in December 2025[97]. - The Company repurchased 211,928 shares at a weighted average market price of $15.89, totaling $3.4 million under its share repurchase plan during the year ended December 31, 2025[97]. - The Bank paid $60.0 million in dividends to the Company in 2025, compared to zero in 2024[98]. - The Bank paid dividends of $60.0 million to the holding company in 2025, compared to zero in 2024, indicating a significant increase in capital distribution[107]. - The company initiated the payment of a quarterly dividend in Q4 2025, but future dividends may be reduced, suspended, or eliminated, potentially affecting the market price of its common stock[208]. Risk Factors - The company is particularly vulnerable to economic downturns in California, which could adversely impact credit quality and business expansion[140]. - A downturn in the local real estate market could negatively impact profitability due to the significant number of loans secured by real estate[143]. - The company relies heavily on the dividends and return of capital from its Bank subsidiary, which could be affected by liquidity issues[133]. - The company may not be able to measure and limit credit risk adequately, leading to unexpected losses in its loan portfolio[149]. - Regulatory policies regarding commercial real estate loans could limit the company's ability to leverage capital and adversely affect growth and profitability[151]. - The allowance for credit losses (ACL) may not be adequate to cover actual losses, potentially impacting net income and capital[150]. - Changes in interest rates could negatively affect net interest income, loan origination volume, and overall results of operations[144]. - Liquidity is essential for the company's operations, and any lack of liquidity could materially impair its ability to fund operations and meet obligations[161]. - The company may need to raise additional capital in the future, but access to capital markets will depend on its financial condition and market state[169]. - The company relies on deposits, loan repayments, and cash flows from investment securities for liquidity, with alternative funding sources being more expensive[166]. - The company faces risks associated with new lines of business and products, which may not be successful and could require more resources than anticipated[177]. - Competition in the banking and financial services industry is intense, with competitors having greater resources and lending limits[178]. - The company’s reputation is critical to its success, and any negative impact could materially affect its performance[176]. - The company relies heavily on its executive management team and key personnel for successful operations, and their unexpected loss could adversely affect performance[179]. Regulatory Environment - The company operates in a highly regulated environment, facing extensive regulations from agencies like the Federal Reserve and the OCC, which could impose additional operating costs and affect results if not complied with[180]. - The company is subject to capital adequacy guidelines, and failure to meet these requirements could restrict business activities and result in regulatory actions that adversely affect financial condition[183]. - The company has dedicated significant resources to its anti-money laundering program, and deficiencies could lead to additional liabilities and restrictions on growth[185]. - The company faces risks from rapid technological changes in the financial services industry, which could impact its competitive position and profitability if it fails to keep pace[187]. - Cybersecurity threats, including hacking and data breaches, pose significant risks that could lead to increased operating costs and reputational damage[190]. - The use of artificial intelligence presents risks that could adversely impact the company's business, including potential legal liabilities and reputational harm[191]. - The company depends on data and modeling for decision-making, and faulty data or modeling approaches could negatively impact outcomes and lead to regulatory scrutiny[197]. - Environmental liabilities may arise from real estate properties securing the loan portfolio, potentially leading to substantial costs and claims that could adversely affect operations[198]. - The company is focused on maintaining effective internal controls over financial reporting, which requires significant resources and management oversight to ensure compliance with accounting principles[200]. - The company is classified as an emerging growth company, allowing it to take advantage of reduced regulatory and reporting requirements, which may make its common stock less attractive to investors[210]. - The company relies on third-party service providers for critical operations, and any failure or interruption in these services could adversely affect its business and financial condition[202]. - Climate change poses significant risks to the company and its clients, including operational, credit, transition, and reputational risks, which are expected to increase over time[205]. - The company's consolidated financial statements are based on estimates and assumptions that, if incorrect, could lead to unexpected losses in the future[207]. - The company may issue additional equity securities, which could dilute existing shareholders' holdings and adversely affect the market price of its common stock[211]. - An investment in the company's common stock is not insured or guaranteed, exposing investors to the risk of losing some or all of their investment[212]. - The company implements a comprehensive Information Security Program to safeguard data and mitigate cybersecurity threats, ensuring compliance with federal regulations[214]. - The company conducts regular assessments and updates of its cybersecurity program, integrating it with its enterprise risk management program to effectively manage risks[215]. - The company has a robust incident response plan activated in case of cybersecurity events, ensuring timely communication and management of incidents[218].
Southern California Bancorp(BCAL) - 2025 Q4 - Annual Report