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美國

證券交易委員會

華盛頓特區 20549

表格 10-Q

（標記一）

T 根據美國證券交易法第13或15(d)條規定提交的季度報告

截至季度結束日期的財務報告2024年9月30日

or

£ 根據1934年證券交易法第13或15(d)節的轉型報告書

在過渡期間從_________到_________

佣金文件號 001-41684

california bancorp

(根據其章程規定的發行人的確切名稱)

加利福尼亞			84-3288397
（設立或組織的其他管轄區域）			（納稅人識別號碼）
12265 El Camino Real, 210號套房 聖地亞哥, 加利福尼亞			92130
(主要行政辦公室地址)			(郵政編碼)

公司電話號碼，包括區號：（844) 265-7622

在法案第12(b)條的規定下注冊的證券：

每個類別的標題

交易標的

在其上註冊的交易所的名稱

CTHR

BCAL

納斯達克股票市場有限責任公司

請通過勾選來指示註冊人是否在過去12個月內（或註冊人被要求提交此類報告的較短期間內）已提交證券交易法第13條或第15(d)條要求的所有報告，以及過去90天內是否一直符合這一提交要求。T 是 £ No

請用複選標記指示，公司註冊者是否在過去的12個月（或者公司註冊者被要求提交這些文件的較短時期內）已按照《規則405》的規定電子遞交了每個互動數據文件。T 是 £ No

請勾選此項，指示註冊人是否爲大型加速申報人、加速申報人、非加速申報人、小型報告公司或新興增長公司。有關「大型加速申報人」、「加速申報人」、「小型報告公司」和「新興增長公司」的定義，請參見《交易法規1.2》條。

大型加速文件管理器			☐			加速過濾器			☐
非加速過濾器			T			規模較小的申報公司			T
						新興成長型公司			T

如果公司無法符合證券交易法第13(a)條規定，使用延長過渡期來遵守任何新的或修訂的財務會計準則，請在複選框中指示。 T

請打勾表明註冊人是否爲殼公司（根據證券交易法規則12b-2定義）。 £ 是T No

截至2024年11月8日，申報人擁有 32,165,188普通股票的流通股爲 ?。

1

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目錄

CALIFORNIA BANCORP

10-Q季度報告表格

2024年9月30日

目錄

						頁面
第一部分 — 財務信息
項目1。			基本報表(未經審計)			6
			合併資產負債表			6
			合併報表 運營			7
			綜合收益（損失）合併報表			8
			股東權益變動表			9
			合併現金流量表			11
			合併財務報表附註			13
項目2。			Management's Discussion and Analysis of Financial Condition and Results of Operations			62
項目3。			有關市場風險的定量和定性披露			106
項目4。			控制和程序			107
第二部分 — 其他信息
項目1。			法律訴訟			107
項目1A。			風險因素			108
項目2。			未註冊的股票股權銷售和籌款用途			108
項目3。			對優先證券的違約			108
項目4。			礦山安全披露			108
項目5。			其他信息			108
項目6。			展示資料			108
簽名						110

2

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目錄

關於前瞻性聲明的警告

在本季度的10-Q表格報告中，"我們"、"我們自己"、"我們的"、"BCAL"或"公司"指的是加利福尼亞bancorp，以前稱爲南加利福尼亞bancorp，以及加利福尼亞商業銀行（N.A.），以前稱爲南加州銀行（N.A.），統稱並按合併基礎。"加利福尼亞bancorp"或"控股公司"指的是單獨的加利福尼亞bancorp。提到的"銀行"指的是加利福尼亞商業銀行（N.A.）。

本季度報告中的聲明包括《1995年私人證券訴訟改革法案》意義下的前瞻性聲明。前瞻性聲明涉及預期、信念、展望、未來計劃和戰略、預期事件或趨勢以及其他非歷史事實。前瞻性聲明的示例包括公司在對先前的california bancorp (「calb」)進行合併以及在2024年7月31日將先前的California Bank of Commerce合併到銀行後的前景和合並後的結果的表述，以及與財務和運營結果或其他經濟績效指標相關的預測。前瞻性聲明反映管理層對未來事件的當前看法，並涉及可能導致實際結果與前瞻性陳述或歷史結果不同的風險和不確定性。前瞻性聲明可根據其不嚴格相關於歷史或當前事實且通常包括諸如「旨在」，「可以」，「可能」，「可能」，「預測」，「應該」，「將」，「會」，「相信」，「預期」，「希望」，「打算」，「計劃」，「潛力」，「項目」，「很可能會產生」的單詞或短語，如「繼續」，「尋找」，「應該」，「可能」，「投影」，「樂觀」和「前景」，以及這些單詞的變體和類似表達。

我們在本季度報告中所作的前瞻性聲明基於我們認爲合理的假設和估計，考慮到目前我們掌握的信息。然而，這些前瞻性聲明面臨重大風險和不確定性，並可能受到許多因素的影響。可能對我們的業務、合併財務狀況、合併經營業績和未來增長前景產生重大不利影響的因素包括但不限於以下：

•近期因金融機構的失敗而面臨的銀行行業的波動性和不確定性；

•與利率期貨上升相關的挑戰以及對我們合併財務控件和合並經營結果的影響；

•我們管理流動性的能力；

•在我們運營的主要地區，特別是在加利福尼亞，了解全國和地區以及我們目標市場的商業和經濟狀況；

•其他金融機構缺乏穩健性；

•對國家、區域或地方信貸和金融市場的干擾；

•我們依賴銀行獲得分紅派息；

•我們貸款組合中商業貸款的集中度較高，這些貸款可能依賴借款人的現金流進行償還，並在某種程度上依賴當地和區域型經濟；

•我們貸款組合中房地產抵押貸款的集中度以及商業和住宅房地產的價格、價值和銷售量變化；

•risks related to construction and land development lending, which involves estimates that may prove to be inaccurate and collateral that may be difficult to sell following foreclosure;

•risks related to Small Business Administration (“SBA”) lending, including the risk that we could lose our designation as an SBA Preferred Lender;

•concentration of our business activities within the geographic area of California;

•credit risks in our loan portfolio, the adequacy of our reserves for credit losses and the appropriateness of our methodology for calculating such allowance for credit losses;

•the impacts of pandemics, natural disasters, including earthquakes, floods, droughts, and fires, particularly in California;

•our ability to manage a contracting balance sheet or revenue consideration;

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•our ability to retain deposits during the integration and conversion activities related to the Merger;

•the possibility that the anticipated benefits of the Merger will not be realized when expected or at all, including as a result of costs being greater than anticipated or cost savings being less than anticipated;    

•    potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the Merger;

•    economic forecast variables that are either materially worse or better than end of quarter projections and deterioration in the economy that exceeds current consensus estimates;

•    our ability to effectively manage problem credits;

•risks related to any future acquisitions, including transaction expenses, the potential distraction of management resources and the possibility that we will not realize anticipated benefits from any future acquisitions;

•interest rate shifts and its impact on our consolidated financial condition and consolidated results of operation;

•disruptions to the credit and financial markets, either nationally or globally;

•competition in the banking industry, nationally, regionally or locally;

•failure to maintain adequate liquidity and regulatory capital and comply with evolving federal and state banking regulations;

•inability of our risk management framework to effectively mitigate credit risk, interest rate risk, liquidity risk, price risk, compliance risk, technology risk, operational risk, strategic risk and reputational risk;

•our dependence on our management and our ability to attract and retain experienced and talented bankers;

•failure to keep pace with technological change or difficulties when implementing new technologies;

•system failures, data security breaches, including as a result of cyber-attacks, or failures to prevent breaches of our network security;

•our reliance on communications and information systems to conduct business and reliance on third parties and their affiliates to provide key components of business structure, any disruptions of which could interrupt operations or increase the costs of doing business;

•fraudulent and negligent acts by our customers, employees or vendors;

•our ability to prevent or detect all errors or fraud with our financial reporting controls and procedures;

•increased loan losses or impairment of goodwill and other intangibles;

•an inability to raise necessary capital to fund our growth strategy, operations, or to meet increased minimum regulatory capital levels;

•the sufficiency of our capital, including sources of such capital and the extent to which capital may be used or required;

•the institution and outcome of litigation and other legal proceedings to which we become subject;

•the impact of recent and future legislative and regulatory changes;

•examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for credit losses, slow the growth of our commercial real estate loans or write-down assets, or otherwise impose restrictions or conditions on our operations, including, but not limited to, our ability to acquire or be acquired;

•our status as an emerging growth company and a smaller reporting company, which reduces our disclosure obligations under the federal securities laws compared to other publicly traded companies;

•the impact of current and future governmental monetary and fiscal policies; and

•other factors and risks described in this quarterly report and from time to time in other documents that we

file or furnish with the Securities and Exchange Commission (“SEC”), including, without limitation, the risks described under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023, that was filed with the SEC on March 15, 2024.

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Because of these risks and other uncertainties, our actual results, performance or achievement, or industry results, may be materially different from the anticipated or estimated results discussed in this filing. Our past results of operations are not necessarily indicative of our future results. You should not rely on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. We undertake no obligation to update these forward-looking statements, even though circumstances may change in the future, except as required under federal securities law. We qualify all of our forward-looking statements by these cautionary statements.

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PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

CALIFORNIA BANCORP (FORMERLY SOUTHERN CALIFORNIA BANCORP) AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)

(Unaudited)

						September 30, 2024						December 31, 2023
ASSETS
Cash and due from banks						$	115,165					$	33,008
Federal funds and interest-bearing balances						499,258						53,785
Total cash and cash equivalents						614,423						86,793
Debt securities available-for-sale, at fair value (amortized cost of $163,384 and $136,366 at September 30, 2024 and December 31, 2023)						159,330						130,035
Debt securities held-to-maturity, at amortized cost (fair value of $49,487 and $50,432 at September 30, 2024 and December 31, 2023)						53,364						53,616
Loans held for sale, at lower of cost or fair value						33,704						7,349
Loans held for investment						3,199,714						1,957,442
Allowance for credit losses on loans						(53,552)						(22,569)
Loans held for investment, net						3,146,162						1,934,873
Restricted stock, at cost						27,394						16,055
Premises and equipment, net						13,996						13,270
Right-of-use asset						15,310						9,291
Other real estate owned, net						4,083						—
Goodwill						112,515						37,803
Core deposit intangible, net						23,031						1,195
Bank owned life insurance						66,180						38,918
Deferred taxes, net						45,644						11,137
Accrued interest receivable and other assets						47,631						19,917
Total assets						$	4,362,767					$	2,360,252
LIABILITIES
Noninterest-bearing demand						$	1,368,303					$	675,098
Interest-bearing NOW accounts						781,125						381,943
Money market and savings accounts						1,149,268						636,685
Time deposits						442,219						249,830
Total deposits						3,740,915						1,943,556
Borrowings						69,142						102,865
Operating lease liability						19,211						12,117
Accrued interest payable and other liabilities						35,435						13,562
Total liabilities						3,864,703						2,072,100
Commitments and contingencies (Note 12)
SHAREHOLDERS’ EQUITY
Preferred stock - 50,000,000 shares authorized, no par value; no shares issued and outstanding at September 30, 2024 and December 31, 2023						—						—
Common stock - 50,000,000 shares authorized, no par value; issued and outstanding 32,142,427 and 18,369,115 at September 30, 2024 and December 31, 2023						441,684						222,036
Retained earnings						59,236						70,575
Accumulated other comprehensive loss - net of taxes						(2,856)						(4,459)
Total shareholders’ equity						498,064						288,152
Total liabilities and shareholders’ equity						$	4,362,767					$	2,360,252

The accompanying notes are an integral part of these consolidated financial statements.

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CALIFORNIA BANCORP (FORMERLY SOUTHERN CALIFORNIA BANCORP) AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)

(Unaudited)

			Three Months Ended												Nine Months Ended
			September 30, 2024												September 30, 2023						September 30, 2024						September 30, 2023
INTEREST AND DIVIDEND INCOME
Interest and fees on loans			$	47,528											$	28,977					$	105,169					$	83,983
Interest on debt securities			1,687												942						4,129						2,506
Interest on tax-exempted debt securities			306												359						918						1,302
Interest on deposits at other financial institutions			4,101												964						5,850						2,473
Interest and dividends on other interest-earning assets			505												242						1,174						689
Total interest and dividend income			54,127												31,484						117,240						90,953
INTEREST EXPENSE
Interest on NOW, money market and savings accounts			11,073												5,922						24,882						13,555
Interest on time deposits			5,087												1,867						11,253						4,373
Interest on borrowings			1,025												434						2,662						1,446
Total interest expense			17,185												8,223						38,797						19,374
Net interest income			36,942												23,261						78,443						71,579
Provision for (reversal of) credit losses			22,963												(96)						25,525						91
Net interest income after provision for (reversal of) credit losses			13,979												23,357						52,918						71,488
NONINTEREST INCOME
Service charges and fees on deposit accounts			842												286						1,582						881
Interchange and ATM income			294												184						647						558
Gain (loss) on sale of loans			8												(54)						423						831
Income from bank owned life insurance			398												238						925						693
Servicing and related income on loans, net			82												61						150						223
Gain on sale of available-for-sale debt securities			—												—						—						34
Loss on sale and disposal of fixed assets			—												—						(19)						—
Other charges and fees			(450)												100						48						261
Total noninterest income			1,174												815						3,756						3,481
NONINTEREST EXPENSE
Salaries and employee benefits			15,385												9,736						33,771						29,651
Occupancy and equipment			2,031												1,579						4,928						4,553
Data processing and communications			1,536												1,144						3,872						3,376
Legal, audit and professional			669												598						1,742						2,050
Regulatory assessments			544												369						1,278						1,188
Director and shareholder expenses			520												215						952						642
Merger and related expenses			14,605												—						15,645						—
Core deposit intangible amortization			687												128						817						309
Other real estate owned expenses			3												—						5,026						—
Other expenses			1,700												1,012						3,635						2,638
Total noninterest expense			37,680												14,781						71,666						44,407
(Loss) income before income taxes			(22,527)												9,391						(14,992)						30,562
Income tax (benefit) expense			(6,063)												2,835						(3,653)						9,064
Net (loss) income			(16,464)												6,556						(11,339)						21,498
(Loss) earnings per share:
Basic			$	(0.59)											$	0.36					$	(0.53)					$	1.18
Diluted			$	(0.59)											$	0.35					$	(0.53)					$	1.15

The accompanying notes are an integral part of these consolidated financial statements.

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CALIFORNIA BANCORP (FORMERLY SOUTHERN CALIFORNIA BANCORP) AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(dollars in thousands)

(Unaudited)

			Three Months Ended												Nine Months Ended
			September 30, 2024												September 30, 2023						September 30, 2024						September 30, 2023
Net (loss) income			$	(16,464)											$	6,556					$	(11,339)					$	21,498
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities available for sale:
Change in net unrealized loss			5,155												(3,809)						2,277						(4,017)
Reclassification of gain recognized in net income			—												—						—						(34)
			5,155												(3,809)						2,277						(4,051)
Income tax expense (benefit):
Change in net unrealized loss			1,524												(1,124)						674						(1,237)
Reclassification of gain recognized in net income			—												—						—						(10)
			1,524												(1,124)						674						(1,247)
Total other comprehensive income (loss), net of tax			3,631												(2,685)						1,603						(2,804)
Total comprehensive (loss) income, net of tax			$	(12,833)											$	3,871					$	(9,736)					$	18,694

The accompanying notes are an integral part of these consolidated financial statements.

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CALIFORNIA BANCORP (FORMERLY SOUTHERN CALIFORNIA BANCORP) AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(dollars in thousands, except share data)

(Unaudited)

						Common Stock												Retained Earnings						Accumulated Other Comprehensive Loss						Total Shareholders’ Equity
						Shares						Amount
Three months ended September 30, 2024:
Balance at June 30, 2024						18,547,352						$	224,006					$	75,700					$	(6,487)					$	293,219
Stock-based compensation						—						2,804						—						—						2,804
Issuance of common stock in business combination1						13,497,091						214,380						—						—						214,380
Restricted stock units vested2						141,263						825						—						—						825
Repurchase of shares in settlement of restricted stock units						(44,779)						(341)						—						—						(341)
Net loss						—						—						(16,464)						—						(16,464)
Other comprehensive income						—						—						—						3,631						3,631
Balance at September 30, 2024						32,142,427						$	441,684					$	59,236					$	(2,856)					$	498,064
Nine months ended September 30, 2024:
Balance at December 31, 2023						18,369,115						$	222,036					$	70,575					$	(4,459)					$	288,152
Stock-based compensation						—						4,695						—						—						4,695
Issuance of common stock in business combination1						13,497,091						214,380						—						—						214,380
Stock options exercised						82,900						716						—						—						716
Restricted stock units vested2						280,051						825						—						—						825
Repurchase of shares in settlement of restricted stock units						(86,730)						(968)						—						—						(968)
Net loss						—						—						(11,339)						—						(11,339)
Other comprehensive income						—						—						—						1,603						1,603
Balance at September 30, 2024						32,142,427						$	441,684					$	59,236					$	(2,856)					$	498,064

1 Includes $1.3 million related to replacement awards granted in connection with the business combination for the three and nine months ended September 30, 2024 (Refer to Note 2 - Business Combinations).

2 The three and nine months ended September 30, 2024 include $825 thousand related to the acceleration of 123,123 replacement awards issued in connection with the business combination for non-continuing directors, executives and employees (Refer to Note 2 - Business Combinations).

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CALIFORNIA BANCORP (FORMERLY SOUTHERN CALIFORNIA BANCORP) AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(dollars in thousands, except share data)

(Unaudited)

						Common Stock												Retained Earnings						Accumulated Other Comprehensive Loss						Total Shareholders’ Equity
						Shares						Amount
Three months ended September 30, 2023:
Balance at June 30, 2023						18,296,365						$	220,702					$	59,607					$	(6,560)					$	273,749
Stock-based compensation						—						992						—						—						992
Restricted stock units vested						17,148						—						—						—						—
Repurchase of shares in settlement of restricted stock units						(4,231)						(62)						—						—						(62)
Net income						—						—						6,556						—						6,556
Other comprehensive loss						—						—						—						(2,685)						(2,685)
Balance at September 30, 2023						18,309,282						$	221,632					$	66,163					$	(9,245)					$	278,550
Nine months ended September 30, 2023:
Balance at December 31, 2022						17,940,283						$	218,280					$	48,516					$	(6,441)					$	260,355
Adoption of ASU No. 2016-13, net of tax						—						—						(3,851)						—						(3,851)
Balance at January 1, 2023 (as adjusted for change in accounting principle)						17,940,283						$	218,280					$	44,665					$	(6,441)					$	256,504
Stock-based compensation						—						3,763						—						—						3,763
Stock options exercised						10,950						93						—						—						93
Restricted stock units vested						390,320						—						—						—						—
Repurchase of shares in settlement of restricted stock units						(32,271)						(504)						—						—						(504)
Net income						—						—						21,498						—						21,498
Other comprehensive loss						—						—						—						(2,804)						(2,804)
Balance at September 30, 2023						18,309,282						$	221,632					$	66,163					$	(9,245)					$	278,550

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CALIFORNIA BANCORP (FORMERLY SOUTHERN CALIFORNIA BANCORP) AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2024 and 2023
(dollars in thousands)

(Unaudited)

						Nine Months Ended September 30,
						2024						2023
OPERATING ACTIVITIES
Net (loss) income						$	(11,339)					$	21,498
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation on premises and equipment						1,216						1,171
Core deposit intangible amortization						817						309
Amortization of (discounts) premiums of debt securities						(605)						258
Gain on sale of loans						(415)						(831)
Loss on sale and disposal of fixed assets						19						—
Loans originated for sale						(5,956)						(2,954)
Proceeds from sales of and principal collected on loans held for sale						6,778						11,887
Provision for credit losses						25,525						91
Deferred income tax expense						(4,960)						1,021
Stock-based compensation						4,695						3,763
Increase in cash surrender value of bank owned life insurance						(925)						(693)
Gain on sale of available-for-sale debt securities						—						(34)
Loss on sale of other real estate owned						4,783						—
Valuation allowance on other real estate owned						614						—
Accretion of net discounts and deferred loan fees						(5,647)						(1,471)
Net decrease in other items						12,062						7,523
Net cash provided by operating activities						26,662						41,538
INVESTING ACTIVITIES
Net cash acquired in business combination						336,298						—
Proceeds from sale of debt securities available for sale						3,400						17,307
Proceeds from maturities and paydowns of debt securities available for sale						15,097						8,339
Purchases of debt securities available for sale						(2,041)						(28,736)
Net change in stock investments						(4,178)						(3,987)
Net repayment (funding) of loans						74,768						(35,427)
Proceeds from sale of loans held for investment						456						50
Proceeds from sale of other real estate owned						8,327						—
Purchases of premises and equipment						(410)						(239)
Net cash provided by (used in) investing activities						431,717						(42,693)
FINANCING ACTIVITIES
Net increase in deposits						154,503						51,927
Proceeds from Federal Home Loan Bank advances						—						15,000
Repayment of Federal Home Loan Bank advances						(85,000)						(57,000)
Proceeds from exercise of stock options						716						93
Repurchase of common shares						(968)						(504)
Net cash provided by financing activities						69,251						9,516
The accompanying notes are an integral part of these consolidated financial statements.

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CALIFORNIA BANCORP (FORMERLY SOUTHERN CALIFORNIA BANCORP) AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

For the nine months ended September 30, 2024 and 2023
(dollars in thousands)

(Unaudited)

						Nine Months Ended September 30,
						2024						2023
Net change in cash and cash equivalents						527,630						8,361
Cash and cash equivalents at beginning of period						86,793						86,760
Cash and cash equivalents at end of period						$	614,423					$	95,121
Supplemental Disclosures of Cash Flow Information:
Interest paid						$	33,935					$	18,941
Taxes paid						4,770						—
Lease liability arising from obtaining right-of-use assets						105						3,193
Loans transferred to loans held for sale						25,900						—
Loans transferred to other real estate owned						17,701						—
Net impact of adoption of ASU 2016-13 on retained earnings						—						3,851
Liabilities assumed in business combination (Note 2):
Fair value of assets acquired						$	1,938,700					—
Fair value of stock and equity award consideration						(215,205)						—
Cash consideration						(1,433)						—
Liabilities assumed						$	1,722,062					—

The accompanying notes are an integral part of these consolidated financial statements.

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CALIFORNIA BANCORP (FORMERLY SOUTHERN CALIFORNIA BANCORP) AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

California BanCorp (formerly Southern California Bancorp) is a California corporation incorporated on October 2, 2019 and is registered with the Board of Governors of the Federal Reserve System as a bank holding company for California Bank of Commerce, N.A. (formerly Bank of Southern California, N.A.) under the Bank Holding Company Act of 1956, as amended. On May 15, 2020, the Company completed a reorganization whereby the Bank. became a wholly-owned subsidiary of the Company. California Bank of Commerce, N.A. began business operations in December 2001 under the name Ramona National Bank. The Bank changed its name to First Business Bank, N.A. in 2006, to Bank of Southern California, N.A. in 2010, and to California Bank of Commerce, N.A. on July 31, 2024. The Bank has a wholly-owned subsidiary, BCAL OREO1, LLC, which was incorporated on February 14, 2024. BCAL OREO1, LLC is used for holding other real estate owned and other assets acquired by foreclosure. The Bank operates under a federal charter and its primary regulator is the Office of the Comptroller of the Currency (“OCC”). The words “we,” “us,” “our,” or the “Company” refer to the new California BanCorp and California Bank of Commerce, N.A. collectively and on a consolidated basis. References herein to “California BanCorp,” or the “holding company” refer to California BanCorp on a stand-alone basis. References to the “Bank” refer to California Bank of Commerce, N.A.

As a relationship-focused community bank, the Bank offers a range of financial products and services to individuals, professionals, and small- to medium-sized businesses through its 14 branch offices serving California. Many of the banking offices have been acquired through a number of acquisitions.

On May 11, 2023, our common stock was listed on the Nasdaq Capital Market under the symbol BCAL. Prior to that date, our common stock was quoted under the same symbol on the OTC Pink Open Market.

Merger with California BanCorp

On January 30, 2024, Southern California Bancorp announced the execution of a definitive merger agreement with the former California BanCorp (“CALB”), the holding company for California Bank of Commerce, pursuant to which CALB would merge into Southern California Bancorp in an all-stock merger. The merger received all required regulatory approvals on May 13, 2024, shareholder approvals on July 17, 2024 and closed on July 31, 2024 (the “merger”). Shareholders of Southern California Bancorp also approved a change of the Company’s name from Southern California Bancorp to California BanCorp. Refer to Note 2 - Business Combinations for additional information. California BanCorp retained the banking offices of both banks, adding California Bank of Commerce’s one full-service bank branch and its four loan production offices in the Bay Area to the Bank’s 13 full-service bank branches located throughout the Southern California region.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to Article 10 of SEC Regulation S-X and other SEC rules and regulations for reporting on the Quarterly Report on Form 10-Q. Accordingly, certain disclosures required by U.S. generally accepted accounting principles (“GAAP”) are not included herein. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in Item 8. Financial Statements and Supplementary Data of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

In the opinion of management of the Company, the accompanying unaudited interim consolidated financial statements reflect all of the adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial condition and consolidated results of operations as of the dates and for the periods presented. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

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Principles of Consolidation

The consolidated financial statements include the accounts of the Company, including its wholly owned subsidiary, the Bank and the Bank’s wholly-owned subsidiary, BCAL OREO1, LLC. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and

expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change are the determination of the allowance for credit losses, the fair value of assets and liabilities acquired in business combinations and related purchase price allocation, the valuation of acquired loans, the valuation of goodwill and separately identifiable intangible assets associated with mergers and acquisitions, loan sales and servicing of financial assets and deferred tax assets and liabilities.

Operating Segments

We operate one reportable segment — commercial banking. The factors considered in making this determination include that: 1) all of the banking products and services offered by the Company are available in each branch of the Company; 2) all branches are located within the same economic environment; 3) management does not allocate resources based on the performance of different lending or transaction activities; and 4) how information is reviewed by the chief executive officer and other key decision makers. As a result, the Company determined that all services we offer will be reported as a single operating segment.

Recently Adopted Accounting Guidance

On January 1, 2023, the Company adopted Accounting Standard Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which replaces the incurred loss impairment methodology with a methodology that reflects current expected credit losses (“CECL”) and requires consideration of historical experience, current conditions and reasonable and supportable forecasts to estimate expected credit losses for financial assets held at the reporting date. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, including loans, held-to-maturity debt securities and off-balance sheet credit exposures. ASU 2016-13 also requires credit losses on available-for-sale debt securities be measured through an allowance for credit losses. If the measurement indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses (“ACL”) is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. In addition, ASU 2016-13 modifies the other-than-temporary impairment (“OTTI”) model for available-for-sale debt securities to require an allowance for credit impairment instead of a direct write-down, which allows for reversal of credit impairments in future periods based on improvements in credit. The Company elected to account for accrued interest receivable separately from the amortized cost of loans and investment securities. The Company elected the CECL phase-in option provided by regulatory capital rules, which delays the impact of CECL on regulatory capital over a three-year transition period.

Concurrent with the adoption of ASU 2016-13, the Company adopted ASU 2022-02, Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings (“TDR”) and Vintage Disclosures, which eliminated TDR accounting prospectively for all loan modifications occurring on or after January 1, 2023 and added additional disclosure requirements for current period gross charge-offs by year of origination. It also prescribes guidance for reporting modifications for certain loan refinancings and restructurings made to borrowers experiencing financial difficulty. Loans that were considered a TDR prior to the adoption of ASU 2022-02 will

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continue to be accounted for under the superseded TDR accounting guidance until the loan is paid off, liquidated, or subsequently modified.

The Company adopted ASU 2016-13 using the modified retrospective transition approach, and recorded a net decrease of $3.9 million to the beginning balance of retained earnings as of January 1, 2023 for the cumulative effect adjustment, reflecting an initial adjustment to the ACL of $5.5 million, which included a $5.0 million increase in the ACL - loans and a $439 thousand increase in reserve for unfunded commitments, net of related deferred tax assets arising from temporary differences of $1.6 million, commonly referred to as the “Day 1” adjustment. This Day 1 adjustment reflects the development of the CECL models to estimate lifetime expected credit losses on the loans held for investment and unfunded commitments primarily using a lifetime loss methodology and management’s current expectation of future economic conditions. Results for reporting periods beginning after January 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with the probable incurred loss accounting standards. As permitted under ASC 326, the Company elected to maintain the same loan segments that it previously identified prior to adoption of CECL.

At adoption of CECL and continuing through September 30, 2024, the Company did not record an ACL on available-for-sale debt securities or held-to-maturity debt securities as these investment portfolios primarily consisted of debt securities explicitly or implicitly backed by the U.S. government or state and local governments, and historically have had no credit loss experience. Refer to Note 3 – Investment Securities, for more information.

The following table presents the impact of adopting ASU 2016-13 on January 1, 2023:

(dollars in thousands)						Pre-CECL Adoption						Impact of CECL Adoption						As Reported under CECL
Assets:
Allowance for credit losses - loans
Construction and land development						$	2,301					$	881					$	3,182
Real estate - other:
1-4 family residential						972						424						1,396
Multifamily residential						1,331						(279)						1,052
Commercial real estate and other						9,388						2,838						12,226
Commercial and industrial						3,079						1,132						4,211
Consumer						28						31						59
						$	17,099					$	5,027					$	22,126
Liabilities:
Allowance for credit losses - unfunded loan commitments						$	1,310					$	439					$	1,749

On January 1, 2024, the Company adopted ASU 2023-01, Leases (Topic 842): Common Control Arrangements. This standard requires entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group. The standard is effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within these fiscal years. The Company did not have any such common control leases, so adoption of this standard had no impact to the consolidated financial statements.

On January 1, 2024, the Company adopted ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, a consensus of the Emerging Issues Task Force. The amendments in this update allow the option for an entity to apply the proportional amortization method of accounting to other equity investments that are made for the primary purpose of receiving tax credits or other income tax benefits, if certain conditions are met. Prior to

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this update, the application of the proportional amortization method of accounting was only limited to low-income housing tax credit (“LIHTC”) structured investments. The proportional amortization method of accounting results in the amortization of applicable investments, as well as the related income tax credits or other income tax benefits received, being presented on a single line in the consolidated statements of operations, income tax expense. Under this update, an entity has the option to apply the proportional amortization method of accounting to applicable investments on a tax-credit-program-by-tax-credit-program basis. In addition, the amendments in this update require that all tax equity investments accounted for using the proportional amortization method use the delayed equity contribution guidance in paragraph 323-740-25-3, requiring a liability be recognized for delayed equity contributions that are unconditional and legally binding or for equity contributions that are contingent upon a future event when that contingent event becomes probable. Under this update, LIHTC structured investments for which the proportional amortization method is not applied can no longer be accounted for using the delayed equity contribution guidance. Further, this update specifies that impairment of LIHTC structure investments not accounted for using the equity method must apply the impairment guidance in Subtopic 323-10 - Investments - Equity Method and Joint Ventures - Overall. This update also clarifies that for LIHTC structure investments not accounted for under the proportional amortization method or the equity method, an entity shall account for them under Topic 321 - Investments - Equity Securities. The amendments in this update also require additional disclosures in interim and annual periods concerning investments for which the proportional amortization method is applied, including (i) the nature of tax equity investments, and (ii) the effect of tax equity investments and related income tax credits and other income tax benefits on the financial position and results of operations. The provisions of this update are effective for the Company for interim and annual periods beginning December 15, 2023. Early adoption is permitted. The adoption of this standard did not have a material impact to the consolidated financial statements.

Significant Accounting Policies

The accounting and reporting policies of the Company are based upon GAAP and conform to predominant practices within the banking industry. We have not made any changes in our significant accounting policies from those disclosed in Item 8. Financial Statements and Supplementary Data of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Allowance for Credit Losses — Held-to-Maturity Debt Securities

An ACL is established for losses on held-to-maturity debt securities at the time of purchase or designation and is updated each period to reflect management’s expectations of CECL as of the date of the consolidated balance sheets. The ACL is estimated collectively for groups of debt securities with similar risk characteristics, and is determined at the individual security level when the Company deems a security to no longer possess shared risk characteristics. Accrued interest receivable on held-to-maturity debt securities is excluded from the estimate of credit losses. For debt securities where the Company has reason to believe the credit loss exposure is remote, a zero credit loss assumption is applied. Such debt securities were municipal securities, and historically have had limited credit loss experience. The Company does not anticipate any credit related losses in this investment portfolio. Changes in the ACL on held-to-maturity debt securities are recorded as a component of the provision for (reversal of) credit losses in the consolidated statements of operations. Losses are charged against the ACL when management believes the uncollectibility of a held-to-maturity debt security is confirmed.

Allowance for Credit Losses — Available-for-Sale Debt Securities

For available-for-sale debt securities, the Company evaluates, on an individual basis, whether a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors. The portion of the decline attributable to credit losses is recognized through an ACL, and changes in the ACL on available-for-sale debt securities are recorded as a component of the provision for (reversal of) credit losses in the consolidated statements of operations. The portion of decline in fair value below the amortized cost basis not attributable to credit is recognized through other comprehensive income (loss), net of applicable taxes.

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Allowance for Credit Losses — Acquired Debt Securities

The Company has acquired debt securities through merger or acquisitions. To the extent acquired debt securities have more than insignificant credit deterioration since origination, they are designated as purchased credit-deteriorated (“PCD”) securities. An ACL is determined using the same methodology as with other debt securities. The sum of a PCD security’s fair value and associated ACL becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the debt security is a noncredit discount or premium, which is amortized into interest income over the life of the security. Subsequent changes to the ACL are recorded through provision for credit losses.

Allowance for Credit Losses — Loans

An ACL is the Company’s estimate of expected lifetime credit losses for its loans held for investment at the time of origination or acquisition and is maintained at a level deemed appropriate by management to provide for expected lifetime credit losses in the portfolio. The ACL consists of: (i) a specific allowance established for current expected credit losses on loans individually evaluated, (ii) a quantitative allowance for current expected credit losses based on the portfolio and expected economic conditions over a reasonable and supportable forecast period that reverts back to long-term trends to cover the expected life of the loan, (iii) a qualitative allowance including management judgment to capture factors and trends that are not adequately reflected in the quantitative allowance, and (iv) the ACL for off-balance sheet credit exposure for unfunded loan commitments (described in Allowance for Credit Losses - Off-Balance Sheet Credit Exposure).

The ACL on loans held for investment represents the portion of the loans’ amortized cost basis that the Company does not expect to collect due to anticipated credit losses over the loans’ contractual life. Amortized cost does not include accrued interest, which management elected to exclude from the estimate of expected credit losses. Provision for credit losses for loans held for investment is included in provision for (reversal of) credit losses in the consolidated statements of operations. Loan charge-offs are recognized when management believes the collectability of the principal balance outstanding is unlikely. Subsequent recoveries, if any, are credited to the ACL. Credit losses are not estimated for accrued interest receivable as interest that is deemed uncollectible is written off through interest income.

Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts. Pools of loans with similar risk characteristics are collectively evaluated while loans that no longer share risk characteristics with loan pools are evaluated individually. The Company measures the ACL using a discounted cash flow methodology, which utilizes pool-level assumptions and cash flow projections on an individual loan basis, which is then aggregated at the portfolio segment level and supplemented by a qualitative reserve that is applied to each portfolio segment level.

The Company’s loan portfolio consists of the following segments, based on regulatory call codes and related risk ratings:

Construction and land development loans are typically adjustable rate residential and commercial construction loans to builders, developers and consumers, with terms generally limited to 12 to 36 months. These loans generally require payment in full upon the sale or refinance of the property. Construction and development loans generally carry a higher degree of risk because repayment depends on the ultimate completion of the project and usually on the subsequent sale or refinance of the property, unless the project is user-owned which would then convert to a conventional term loan. Specific material risks may include (i) unforeseen delays in the building of the project, (ii) cost overruns or inadequate contingency reserves, (iii) poor management of construction process, (iv) inferior or improper construction techniques, (v) changes in the economic environment during the construction period, (vi) a downturn in the real estate market, (vii) rising interest rates which may impact the sale of the property and its price, and (viii) failure to sell or stabilize completed projects in a timely manner. The Company attempts to reduce risks associated with construction and land development loans by obtaining personal guarantees and by keeping the maximum loan-to-value (“LTV”) ratio at or below 75%, depending on the project type. Many of the construction and land development loans include interest reserves built into the loan commitment. For owner-occupied commercial construction loans, periodic cash payments for interest are required from the borrower’s cash flow.

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Real estate loans are secured by single family residential properties (one to four units), multifamily residential properties (five or more units), owner-occupied commercial real estate (“CRE”), and non-owner occupied CRE. Real estate loans are subject to the same general risks as other loans and may also be impacted by changing demographics, collateral maintenance, and product supply and demand. Rising interest rates, as well as other factors arising after a loan has been made, could negatively affect not only property values but also a borrower’s cash flow, creditworthiness, and ability to repay the loan. Increasing interest rates can impact real estate values as rising rates generally cause a similar movement in capitalization rates which can cause real estate collateral values to decline. The Company usually obtains a security interest in real estate, in addition to any other available collateral, in order to increase the likelihood of the ultimate repayment of the loan. The Company does not underwrite closed-end term consumer loans secured by a borrower’s residence. Junior liens may be considered in connection with a consumer home equity line of credit (“HELOC”), or as additional collateral support for SBA and other business loans.

The Company’s commercial and industrial (“C&I”) loans are generally made to businesses located in the Southern and Northern California regions and surrounding communities. These loans are made to finance operations, to provide working capital, or for specific purposes such as to finance the purchase of assets or equipment or to finance accounts receivable and inventory. The Company’s C&I loans may be secured (other than by real estate) or unsecured. They may take the form of single payment, installment, or lines of credit. These are generally based on the financial strength and integrity of the borrower and guarantor(s) and generally (with some exceptions) are collateralized by short-term assets such as accounts receivable, inventory, equipment, or a borrower’s other business assets. Commercial term loans are typically made to provide working capital to finance the acquisition of fixed assets, refinance short-term debt originally used to purchase fixed assets or, in rare cases, to finance the purchase of businesses.

Consumer loans consist of loans to individuals for personal and household purposes, including secured and unsecured installment loans and revolving lines of credit. The Company acquired consumer solar loans from the CALB merger. These loans were originated and serviced by unaffiliated third parties. The remaining average term ranges from 6 to 23 years. Consumer loans are underwritten based on the borrower’s income, current debt level, past credit history, and the availability and value of collateral. Consumer rates are both fixed and variable, with negotiable terms. The Company’s installment loans typically amortize over periods up to 5 years. Although the Company typically requires monthly payments of interest and a portion of the principal on its loan products, the Company will offer consumer loans with a single maturity date when a specific source of repayment is available. Consumer loans are generally considered to have greater risk than first or second mortgages on real estate because they may be unsecured, or, if they are secured, the value of the collateral may be difficult to assess and more likely to decrease in value than real estate.

The Company’s ACL model incorporates assumptions for prepayment/curtailment rates, probability of default (“PD”), and loss given default (“LGD”) to project each loan’s cash flow throughout its entire life cycle. An initial reserve amount is determined based on the difference between the amortized cost basis of each loan and the present value of all future cash flows. The initial reserve amount is then aggregated at the loan segment level to derive the segment level quantitative loss rates. For prepayment and curtailment rates, the Company utilized Abrigo’s benchmark since the adoption on January 1, 2023 through the second quarter of 2023 and switched to the Company’s own historical prepayment and curtailment experience beginning in the third quarter of 2023. Quarterly PD is forecasted using a regression model that incorporates certain economic variables as inputs. The LGD is derived from PD using the Frye-Jacobs index provided by the Company’s third-party model provider. Reasonable and supportable forecasts are used to predict current and future economic conditions. Management elected to use a four quarter reasonable and supportable forecast period followed by an eight quarter straight-line reversion period. After twelve quarters of forecast plus reversion period, the PD is assumed to remain unchanged for the remaining life of the loan.

The Company uses numerous key macroeconomic variables within the economic forecast scenarios from Moody’s Analytics. These economic forecast scenarios are based on past events, current conditions, and the likelihood of future events occurring. These scenarios include a baseline forecast which represents their best estimate of future economic activity. Moody’s Analytics also provides nine alternative scenarios, including five

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direct variations of the baseline scenario and four more extensive departures from their baseline forecast, including a slower growth, a stagflation, a next cycle recession and a low oil price scenario. Management recognizes the non-linearity of credit losses relative to economic performance and believes the use of multiple probability-weighted economic scenarios is appropriate in estimating credit losses over the forecast period. This approach is based on certain assumptions. The first assumption is that no single forecast of the economy, however detailed or complex, is completely accurate over a reasonable forecast timeframe and is subject to revisions over time. By considering multiple scenarios, management believes some of the uncertainty associated with a single scenario approach can be mitigated. Management periodically evaluates economic scenarios, determines whether to utilize multiple probability-weighted scenarios in the Company’s ACL model, and, if multiple scenarios are utilized, evaluates and determines the weighting for each scenario used in the Company’s ACL model, and thus the scenarios and weightings of each scenario may change in future periods. Economic scenarios as well as assumptions within those scenarios can vary based on changes in current and expected economic conditions.

The ACL process involves subjective and complex judgments and is reflective of significant uncertainties that could potentially result in materially different results under different assumptions and conditions. In addition to the aforementioned quantitative model, management periodically considers the need for qualitative adjustments to the ACL. Such qualitative adjustments may be related to and include, but are not limited to factors such as: differences in segment-specific risk characteristics, periods wherein current conditions and reasonable and supportable forecasts of economic conditions differ from the conditions that existed at the time of the estimated loss calculation, model limitations and management’s overall assessment of the adequacy of the ACL. Qualitative risk factors are periodically evaluated by management.

Generally, the measurement of the ACL is performed by collectively evaluating loans with similar risk characteristics. Loans that do not share similar risk characteristics are evaluated individually for credit loss and are not included in the evaluation process discussed above. Expected credit losses on all individually evaluated loans are measured, primarily through the evaluation of estimated cash flows expected to be collected, or collateral values measured by reference to an observable market value, if one exists, or the fair value of the collateral for a collateral-dependent loan. The Company selects the measurement method on a loan-by-loan basis except that collateral-dependent loans for which foreclosure is probable are measured at the net realizable value of the collateral. Cash receipts on individually evaluated loans for which the accrual of interest has been discontinued are applied first to principal and then to interest income. Prior to the adoption of ASC Topic 326, individually evaluated loans were referred to as impaired loans. Amounts are charged-off when available information confirms that specific loans or portions thereof, are uncollectible. This methodology for determining charge-offs is consistently applied to each loan segment.

Loans with terms that have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are evaluated for an ACL utilizing one of the methodologies above.

Allowance for Credit Losses — Acquired Loans

In accordance with ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), loans purchased or acquired in connection with a business combination are recorded at their acquisition date fair value. Any resulting discount or premium recorded on acquired loans is accreted or amortized into interest income over the remaining life of the loans using the interest method. The ACL related to the acquired loan portfolio is not carried over from the acquiree. Acquired loans are classified into two categories based on the credit risk characteristics of the underlying borrowers as either purchased credit deteriorated (PCD) loans, or loans with no evidence of credit deterioration (non-PCD).

PCD loans are those loans or pool of loans that have experienced more-than-insignificant credit deterioration since the origination date. For PCD loans, an initial allowance is established on the acquisition date using the same methodology as other loans held for investment and combined with the fair value of the loan to arrive at acquisition date amortized cost. Accordingly, no provision for credit losses is recognized on PCD loans at the acquisition date. Subsequent to the acquisition date, changes to the allowance are recognized in the provision for credit losses.

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Non-PCD loans are those loans for which there was no evidence of a more-than-insignificant credit deterioration at their acquisition date. Acquired non‑PCD loans, together with originated loans held for investment that share similar risk characteristics, are pooled into segments together. Upon the purchase or acquisition of non-PCD loans, the Company measures and records an ACL based on the Company’s methodology for determining the ACL for its originated loans held for investment. The ACL for non-PCD loans is recorded through a charge to the provision for credit losses in the period in which the loans were purchased or acquired.

Allowance for Credit Losses — Off-Balance Sheet Credit Exposures

The Company also maintains a separate allowance for off-balance sheet commitments. Beginning January 1, 2023, management estimates anticipated losses using expected loss factors consistent with those used for the ACL methodology for loans described above, and utilization assumptions based on historical experience. Provision for credit losses for off-balance sheet commitments is included in provision for (reversal of) credit losses in the consolidated statements of operations and added to the allowance for off-balance sheet commitments, which is included in accrued interest payable and other liabilities in the consolidated balance sheets.

Loan Modifications, Refinancings and Restructurings

Prior to the adoption of ASU 2022-02, a loan was classified as a TDR when the Company granted a concession to a borrower experiencing financial difficulties that it otherwise would not consider under its normal lending policies under ASC Subtopic 310-40, Troubled Debt Restructurings by Creditors. Upon the adoption of ASU 2022-02, the Company applies the general loan modification guidance provided in ASC 310-20 to all loan modifications, including modifications made for borrowers experiencing financial difficulty. The Company considers some of the indicators that a borrower is experiencing financial difficulty to be: currently in payment default on any of their debt, declaring bankruptcy, having issues continuing as a going concern, insufficient cash flow to service all debt service requirements, inability to obtain funds from other sources at a market rate for similar debt to non-troubled borrowers, and currently classified as substandard loans that are categorized as having well-defined weaknesses.

Under the general loan modification guidance, a modification is treated as a new loan only if the following two conditions are met: (1) the terms of the new loan are at least as favorable to the Company as the terms for comparable loans to other customers with similar collection risks; and (2) modifications to the terms of the original loan are more than minor. If either condition is not met, the modification is accounted for as the continuation of the existing loan with any effect of the modification treated as a prospective adjustment to the loan’s effective interest rate. If the refinancing or restructuring is deemed to be a new loan, unamortized net fees or costs from the original loan and any prepayment penalties are recognized in interest income when the new loan is granted. In addition, a new effective interest rate will be determined. If the refinancing or restructuring is deemed to be a modification, the investment in the new loan is comprised of the remaining net investment in the original loan, any additional funds advanced to the borrower, any fees received, and direct loan origination costs associated with the refinancing or restructuring. The effective interest rate of the loan is recalculated based upon the amortized cost basis of the new loan and its revised contractual cash flows.

A modification may vary by program and by borrower-specific characteristics, that may include interest rate reductions, principal forgiveness, term extensions, payment delays and any combination of the above. It is intended to minimize the Company’s economic loss and to avoid foreclosure or repossession of collateral. The Company applies the same credit loss methodology it uses for similar loans that were not modified.

GAAP requires that certain types of modifications be reported, which consist of (1) principal forgiveness; (2) interest rate reduction; (3) other-than-insignificant payment delay; (4) term extension; and any combination of the above. Since adoption of ASU 2022-02 on January 1, 2023, the Company did not have any loan modifications under ASU 2022-02.

Recent Accounting Guidance Not Yet Effective

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-06, Disclosure Improvements–Codification Amendments in Response to the SEC’s Disclosure Update and Simplification

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Initiative (“ASU 2023-06”). The amendments in this update modify the disclosure or presentation requirements for a variety of topics in the codification. Certain amendments represent clarifications to or technical corrections of the current requirements. The following is a summary of the topics included in the update and which pertain to the Company: 1. Statement of cash flows (Topic 230): Requires an accounting policy disclosure in annual periods of where cash flows associated with derivative instruments and their related gains and losses are presented in the statement of cash flows; 2. Accounting changes and error corrections (Topic 250): Requires that when there has been a change in the reporting entity, the entity disclose any material prior-period adjustment and the effect of the adjustment on retained earnings in interim financial statements; 3. Earnings per share (Topic 260): Requires disclosure of the methods used in the diluted earnings-per-share computation for each dilutive security and clarifies that certain disclosures should be made during interim periods, and amends illustrative guidance to illustrate disclosure of the methods used in the diluted earnings per share computation; 4. Commitments (Topic 440): Requires disclosure of assets mortgaged, pledged, or otherwise subject to lien and the obligations collateralized; and 5. Debt (Topic 470): Requires disclosure of amounts and terms of unused lines of credit and unfunded commitments and the weighted-average interest rate on outstanding short-term borrowings. For public business entities, the amendments in ASU 2023-06 are effective on the date which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective. If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation and S-X or Regulation S-K, the pending content of the related amendment will be removed from the codification and will not become effective for any entity. Early adoption is not permitted and the amendments are required to be applied on a prospective basis. The Company expects the adoption of this standard will not have a material impact on its consolidated financial statements.

ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures: In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” to require, among other things, that a public entity that has a single reportable segment provide enhanced disclosures about significant segment expenses. Significant expense categories are derived from expenses that are 1) regularly reported to an entity’s chief operating decision-maker ("CODM"), and 2) included in a segment’s reported measure of profit or loss. The disclosures should include an amount for "other segment items," reflecting the difference between 1) segment revenue less significant segment expenses, and 2) the reportable segment’s profit or loss measures. It requires that a public entity disclose the title and position of the CODM and how the CODM uses the reported measure of profit or loss to assess segment performance and to allocate resources. Further it clarifies that entities with a single reportable segment must disclose both new and existing segment reporting requirements. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments retrospectively to all periods presented in the financial statements. The Company has a single reportable segment and continues to assess ASU 2023-07 and its impact on its accounting and disclosures.

ASU No. 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures: On December 14, 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” to address requests for improved income tax disclosures from investors, lenders, creditors and other allocators of capital that use the financial statements to make capital allocation decisions. This ASU is intended to improve the transparency of tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction, in addition to certain other amendments intended to improve the effectiveness of income tax disclosures. For public business entities, this ASU is effective for annual periods beginning after December 15, 2024. For other entities, this ASU is effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company expects the adoption of this standard will not have a material impact on its consolidated financial statements.

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NOTE 2 – BUSINESS COMBINATIONS

California BanCorp Merger

On July 31, 2024 (the “Merger Date”), the Company completed its merger with California BanCorp (“CALB”) on the terms set forth in the Agreement and Plan of Merger and Reorganization, dated January 30, 2024, by and between the Company and CALB. Immediately following the merger of CALB with and into the Company, California Bank of Commerce, a California state-chartered bank and wholly-owned subsidiary of CALB, merged with and into Bank of Southern California, N.A. Effective with these mergers, the corporate names of Southern California Bancorp and Bank of Southern California, N.A. were changed to California BanCorp and California Bank of Commerce, N.A., respectively. The merger expands the Company’s footprint into Northern California and provides an opportunity for building scale and increasing market share through complementary business models with a strong deposit base. The combined company retained the banking offices of both banks, adding California Bank of Commerce’s one full-service bank branch and its four loan production offices in the Bay Area to the Bank’s 13 full-service bank branches located throughout the Southern California region.

The Merger was an all-stock transaction valued at approximately $216.6 million based on a closing price of the Company’s common stock of $15.79 on July 31, 2024. Under the terms of the Agreement and Plan of Merger and Reorganization, each outstanding share of CALB common stock was exchanged for the right to receive 1.590 shares of the Company’s common stock, resulting in the net issuance of approximately 13,497,091 shares, with cash (without interest) paid in lieu of fractional shares. An additional 82,364 net shares were issued to CALB’s non-continuing directors, officers and employees where the Company had granted and fully accelerated replacement restricted stock units totaling 123,123 shares with a fair value of $1.9 million, of which $825 thousand related to pre-combination vesting and was included in purchase consideration and $1.1 million related to post-combination vesting and was recognized in expense of the combined company at merger closing. The Company also granted replacement awards for 295,512 unvested restricted stock units, with a fair value of $4.7 million, to CALB’s continuing directors, officers and employees. Of this amount, $1.3 million related to pre-combination vesting and was included in purchase consideration and $3.4 million related to post-combination vesting and will be recognized in expense of the combined company over the remaining vesting period. In addition, the Company settled for cash all in-the-money CALB stock options immediately prior to the merger in the amount of $1.7 million.

The Company accounted for the Merger using the acquisition method of accounting in accordance with ASC 805, Business Combinations and accordingly, the acquired assets and assumed liabilities of CALB were recorded at their respective fair values on the date of completion of the merger with certain exceptions. In many cases, the determination of fair value required management to make estimates about discount rates, expected future cash flows, market conditions and other future events that are highly subjective in nature and subject to change. While the Company believes that the information available on the Merger Date provided a reasonable basis for estimating fair value, additional information may be obtained during the measurement period that would result in changes to the estimated fair value amounts. The measurement period ends on the earlier of one year after the Merger Date or the date the Company concludes that all necessary information about the facts and circumstances that existed as of the Merger Date have been obtained. As the final CALB tax return has not yet been completed, initial accounting for taxes was incomplete as of September 30, 2024. The valuation of acquired loans, may also change as additional information for certain loans is obtained subsequent to acquisition. These changes could differ materially from what is presented below.

The following table represents the allocation of the purchase consideration to the preliminary fair value of assets acquired and liabilities assumed of CALB, subject to finalization, as of July 31, 2024:

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(dollars in thousands)									Fair Value
Assets acquired:
Cash and cash equivalents									$	336,298
Debt securities, available-for-sale									42,560
Loans held for investment									1,359,040
Allowance for credit losses - PCD loans									(11,216)
Restricted stock									6,328
Other equity securities									6,437
Premises and equipment									1,670
Operating lease right-of-use asset									7,743
Prepaid expenses									876
Deferred taxes, net									30,221
Bank owned life insurance									26,338
Core deposit intangible									22,653
Other assets									35,040
Total assets acquired									1,863,988
Liabilities assumed:
Deposits									1,642,938
Borrowings									50,832
Operating lease liabilities									9,033
Other liabilities									19,259
Total liabilities assumed									1,722,062
Net assets acquired									$	141,926
Purchase consideration:
Outstanding shares of CALB, July 31, 2024			8,488,829
Restricted stock units vested fully at merger closing(1)			77,436
Shares of CALB common stock exchanged			8,566,265
Exchange ratio			1.590
Shares of BCAL common stock issued to CALB shareholders at closing, before fractional shares			13,620,361
Less: fractional shares			(147)
Shares of BCAL common stock issued to CBC shareholders at closing			13,620,214
BCAL closing price per share, July 31, 2024			$	15.79
Fair value of common shares issued and exchanged									$	215,063
Less: fair value of accelerated restricted stock units attributable to post-combination vesting(2)(3)									(1,119)
Fair value of common shares issued and exchanged attributable to purchase consideration									213,944
Cash paid for outstanding stock options(4)									1,431
Cash paid for fractional shares									2
Restricted stock consideration(5)									1,261
Total purchase consideration									216,638
Goodwill recognized									$	74,712

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(1)Represents 5,596 unvested restricted stock units of non-continuing CALB directors that were automatically fully vested and converted under the merger agreement and 71,840 of unvested restricted shares (replacement awards) for non-continuing executives and employees that were accelerated and fully vested. The portion of the fair value of these awards attributable to pre-combination vesting is included as a component of purchase consideration. The portion of the fair value of these awards attributable to post-combination vesting (See #2 below) was reflected in expense of the combined company upon merger closing

(2)Represents the fair value of the 77,436 CALB restricted stock units (replacement awards) that were accelerated for non-continuing directors, executives and employees that was attributable to post-combination vesting. Upon acceleration, 51,801 net CALB shares were then converted into the right to receive the Company’s common stock after 25,635 of CALB shares were surrendered by certain executives and employees to pay for taxes. The portion of the fair value of these awards attributable to post-combination vesting was recognized as an expense of the combined company upon merger closing.

(3)Included in this amount is $472 thousand related to 31,355 restricted stock units that fully vested due to change in control agreements (double trigger) held by four executives that are no longer employed by the Company upon closing of the Merger.

(4)Represents the payment of (a) $1.3 million for 283,641 vested stock options at a weighted average exercise price of $18.22 and (b) $82 thousand for 92,685 unvested stock options at a weighted average price of $19.03 attributable to pre-combination vesting based on the $22.98 Option Cashout Price. An additional $284 thousand was paid for the portion of unvested stock options attributable to post-combination vesting and was recognized as an expense of the combined company upon merger closing. There were 65,785 unvested stock options at a weighted average price of $23.81 that were out-of-the-money at July 31, 2024 and excluded from stock option consideration as they were cancelled under the terms of the merger agreement.

(5)Represents the fair value of 185,878 unvested restricted stock units (replacement awards) for continuing executives and employees attributable to pre-combination vesting. A forfeiture rate of 3% was applied in determining share-based awards expected to vest.

Goodwill represents the excess of the purchase consideration over the fair value of the net assets acquired and was primarily attributable to the expected synergies and the expansions of economies of scale and new territory from combining the operations of the Company and CALB. Goodwill is not deductible for U.S. income tax purposes and is not amortized. Rather, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, by comparing its carrying value to the reporting unit’s fair value.

The following methods and assumptions were used to estimate the fair value of significant financial instruments:

Cash and cash equivalents. The carrying amounts of cash and cash equivalents approximates fair value due to the short-term nature and liquidity of these instruments.

Debt securities available for sale. The fair values of debt securities was determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.

Loans held for investment. The Company utilized an independent third-party to assist in valuing loans held for investment. The fair value of the acquired loan portfolio was determined by segregating the portfolio into three groups: PCD loans, non-accruing PCD loans and all other loans (“non-PCD loans”). These three categories were further segmented by loan type. For non-PCD loans, the fair value for each individual loan segment consisted of the principal balance adjusted for both an interest component and credit component, which was calculated on a pool basis using a discounted cash flow approach. The discount rates utilized for this approach were based on a weighted average cost of capital, considering the cost of equity and cost of debt and other factors. Expected loan cash flows incorporated default, loss, and prepayment rates based on industry standards.

PCD loans are defined as loans that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. The initial amortized cost basis for PCD loans represents the fair value of the loans plus an allowance for credit losses at the date of acquisition. The fair value for PCD loans incorporated market-based loss rates used to estimate

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expected life of loan credit losses. The noncredit discount resulting from the acquired PCD loans was allocated to each individual asset. At the acquisition date, the initial allowance for credit losses was determined on a collective basis and was allocated to the individual PCD loans. The initial allowance for credit losses for PCD loans includes expected recoveries of amounts previously charged off and expected to be charged off by the Company. The non-credit discount, after the adjustment for the allowance for credit losses, is accreted to interest income using the interest method based on the effective interest rate at acquisition date.

The following table presents the composition of purchased credit-deteriorated (“PCD”) loans as of the acquisition date:

(dollars in thousands)						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

Bank owned life insurance. The carrying amount of bank owned life insurance approximates fair value given the liquidity of these instruments.

Deferred tax assets, net. The fair value of acquired deferred tax assets and liabilities represents the estimated amount of tax benefits for acquired assets and assumed liabilities that the Company expects to be recognized on it tax returns. The Company utilized an effective tax rate of 29.56% in determining the fair value on deferred taxes, net.

Core deposit intangible. The fair value of the core deposit intangible was determined using was determined by evaluating the underlying characteristics of the deposit relationships, including estimated customer attrition, projected deposit interest rates, net maintenance cost of the deposit base, and costs of alternative funding. The value of the after-tax savings on cost of funds is the present value over an estimated fifty-year horizon, using the discount rate applicable to the asset. The core deposit intangible will be amortized over the expected account retention period, which was originally estimated at approximately 10 years or 120 months. The core deposit intangible will be evaluated periodically to determine the reasonableness of the projected amortization period by comparing actual deposit retention to projected retention.

Deposits. The fair values of demand and savings deposits represent the amount payable on demand at acquisition date. The fair value of time deposits was determined using a discounted cash flow approach, which involved determining the present value of the required contractual payments over the remaining life of the time deposits using market-based interest rates.

Borrowings. The fair value of subordinated notes was determined using a discounted cash flow approach, which involved determining the present value of required contractual payments over the estimated life of the notes, factoring in expected redemption dates, discounted at a rate that incorporated market-based interest rates, inclusive of a credit spread and liquidity premium.

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Total merger-related costs, which are reflected as merger and related costs in the accompanying consolidated statements of operations, included the following total amounts for the three and nine months ended September 30, 2024:

						Three Months Ended						Nine Months Ended
(dollars in thousands)						September 30, 2024						September 30, 2024
Financial advisory fees						$	2,326					$	2,576
Legal, accounting, valuation and other professional costs						300						768
Information technology						4,466						4,729
Change in control costs/severance						6,238						6,238
Insurance						919						919
Other						356						415
						$	14,605					$	15,645

The following table presents the total revenue and net income amounts related to CALB’s operations included in the Company’s consolidated statements of operations from the acquisition date of July 31, 2024 through September 30, 2024:

												Three and Nine Months Ended September 30,
(dollars in thousands)												2024
Net interest income and noninterest income(1)												$	11,912
Net income(1)												$	3,429

(1)As the Company has integrated the operations of CALB into its consolidated operating results, the above table reflects identifiable activities attributable to assets acquired and liabilities assumed in the Merger including, but not limited to, interest income on loans and investments, interest expense on deposits and borrowings, branch-level income and expenses and other identifiable activities. The amounts above do not reflect purchase accounting adjustments and other merger-related activity.

The following supplemental pro forma information presents certain financial results for the three and nine months ended September 30, 2024 and 2023 as if the merger of CALB was effective as of January 1, 2023. The supplemental unaudited pro forma financial information included in the table below is based on various estimates and is presented for informational purposes only and does not indicate the results of operations of the combined company that would have been achieved for the periods presented had the transactions been completed as of the date indicated or that may be achieved in the future.

Supplemental unaudited pro forma financial information:						Three Months Ended September 30,												Nine Months Ended September 30,
(dollars in thousands)						2024						2023						2024						2023
Net interest income and noninterest income						$	35,002					$	37,359					$	128,376					$	139,682
Net (loss) income						(5,692)						15,094						6,515						17,500

Pro forma net (loss) income for the three and nine months ended September 30, 2024 were adjusted to exclude merger and related expenses approximately $17.8 million and $20.5 million, respectively. Pro forma net income for the nine months ended September 30, 2023 was adjusted to include the $20.5 million of merger and related expenses. Pro forma net (loss) income for the three and nine months ended September 30, 2024 were also adjusted to exclude the provision of credit losses approximately $21.3 million, comprised of $18.5 million for the initial ACL for non-PCD loans and $2.7 million for the initial ACL for unfunded commitments. Pro forma net income for the nine months ended September 30, 2023 was adjusted to include these amounts.

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NOTE 3 - INVESTMENT SECURITIES

Debt Securities

Debt securities have been classified as either held-to-maturity or available-for-sale in the consolidated balance sheets according to management’s intent. The amortized cost of held-to-maturity debt securities and their approximate fair values at September 30, 2024 and December 31, 2023 were as follows:

(dollars in thousands)						Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value
September 30, 2024
Taxable municipals						$	553					$	—					$	(70)					$	483
Tax exempt bank-qualified municipals						52,811						—						(3,807)						49,004
						$	53,364					$	—					$	(3,877)					$	49,487
December 31, 2023
Taxable municipals						$	551					$	—					$	(73)					$	478
Tax exempt bank-qualified municipals						53,065						25						(3,136)						49,954
						$	53,616					$	25					$	(3,209)					$	50,432

The amortized cost of available-for-sale debt securities and their approximate fair values at September 30, 2024 and December 31, 2023 were as follows:

(dollars in thousands)						Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value
September 30, 2024
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities						$	93,445					$	1,284					$	(2,470)					$	92,259
SBA securities						5,754						12						(82)						5,684
U.S. Treasury						17,552						34						(265)						17,321
U.S. Agency						2,000						—						(257)						1,743
Collateralized mortgage obligations						42,796						180						(2,403)						40,573
Taxable municipals						1,007						1						(85)						923
Tax exempt bank-qualified municipals						830						—						(3)						827
						$	163,384					$	1,511					$	(5,565)					$	159,330
December 31, 2023
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities						$	77,031					$	631					$	(3,228)					$	74,434
SBA securities						5,886						5						(109)						5,782
U.S. Treasury						2,760						—						(343)						2,417
U.S. Agency						2,000						—						(330)						1,670
Collateralized mortgage obligations						46,330						173						(3,002)						43,501
Taxable municipals						1,528						—						(107)						1,421
Tax exempt bank-qualified municipals						831						—						(21)						810
						$	136,366					$	809					$	(7,140)					$	130,035

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During the three and nine months ended September 30, 2024 and 2023, there were no transfers between held-to-maturity and available-for-sale debt securities.

At September 30, 2024 and December 31, 2023, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of our shareholders’ equity.

Accrued interest receivable on held-to-maturity and available-for-sale debt securities totaled $1.1 million and $788 thousand at September 30, 2024 and December 31, 2023, respectively, and is included within accrued interest receivable and other assets in the consolidated balance sheets. Accrued interest receivable is excluded from the ACL.

At September 30, 2024, debt securities with an amortized cost of $56.3 million were pledged to the Federal Reserve Bank (“Federal Reserve”) as collateral for a secured line of credit of $49.7 million to secure deposits of public institutions and for other purposes as required by law or contract provisions, in addition to collateral securing borrowing bases with the Federal Reserve. There were $53.6 million debt securities pledged to the Federal Reserve as collateral for a secured line of credit of $47.3 million at December 31, 2023. See Note 8 – Borrowing Arrangements for additional information regarding the FHLB and Federal Reserve secured lines of credit. The Company also pledged $9.9 million available-for-sale debt securities to another financial institution to support the collateralization requirement against certain customers’ standby lines of credit.

Contractual Maturities

The amortized cost and estimated fair value of all held-to-maturity and available-for-sale debt securities as of September 30, 2024 by contractual maturities are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

						Held-to-Maturity												Available-for-Sale
(dollars in thousands)						Amortized Cost						Estimated Fair Value						Amortized Cost						Estimated Fair Value
September 30, 2024
Due in one year or less						$	—					$	—					$	27,641					$	27,668
Due after one year through five years						—						—						10,246						9,367
Due after five years through ten years						22,282						20,911						17,670						16,579
Due after ten years						31,082						28,576						107,827						105,716
						$	53,364					$	49,487					$	163,384					$	159,330

Realized Gains and Losses

The following table presents gross realized gains and losses for sales and calls of available-for-sale debt securities for the three and nine months ended September 30, 2024 and 2023 follows:

						Three Months Ended												Nine Months Ended
(dollars in thousands)						September 30, 2024						September 30, 2023						September 30, 2024						September 30, 2023
Gross gains on sales and calls						$	—					$	—					$	—					$	181
Gross losses on sales and calls						—						—						—						(147)
Gain on sale of available-for-sale debt securities						—						—						—						34

Unrealized Gains and Losses

The gross unrealized losses and related estimated fair values of all available-for-sale debt securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2024 and December 31, 2023 are summarized as follows:

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						Less than 12 Months												12 Months or Longer												Total
(dollars in thousands)						Unrealized Losses						Estimated Fair Value						Unrealized Losses						Estimated Fair Value						Unrealized Losses						Estimated Fair Value
September 30, 2024:
Available-for-sale debt securities:
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities:						$	(51)					$	9,361					$	(2,419)					$	20,025					$	(2,470)					$	29,386
SBA securities						(1)						167						(81)						3,231						(82)						3,398
U.S. Treasury						—						—						(265)						2,456						(265)						2,456
U.S. Agency						—						—						(257)						1,743						(257)						1,743
Collateralized mortgage obligations						(84)						2,686						(2,319)						31,274						(2,403)						33,960
Taxable municipals						—						—						(85)						422						(85)						422
Tax exempt bank-qualified municipals						—						—						(3)						827						(3)						827
						$	(136)					$	12,214					$	(5,429)					$	59,978					$	(5,565)					$	72,192
December 31, 2023:
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities:						$	(160)					$	23,738					$	(3,068)					$	20,951					$	(3,228)					$	44,689
SBA securities						(8)						2,193						(101)						1,790						(109)						3,983
U.S. Treasury						—						—						(343)						2,417						(343)						2,417
U.S. Agency						—						—						(330)						1,670						(330)						1,670
Collateralized mortgage obligations						(311)						15,684						(2,691)						23,360						(3,002)						39,044
Taxable municipals						—						—						(107)						921						(107)						921
Tax exempt bank-qualified municipals						—						—						(21)						810						(21)						810
						$	(479)					$	41,615					$	(6,661)					$	51,919					$	(7,140)					$	93,534

As of September 30, 2024, the Company had a total of 70 available-for-sale debt securities in a gross unrealized loss position totaling $5.6 million, consisting of 62 securities with total gross unrealized losses of $5.4 million that had been in a continual loss position for twelve months and longer. As of December 31, 2023, the Company had a total of 76 available-for-sale debt securities in a gross unrealized loss position totaling $7.1 million, consisting of 58 securities with total gross unrealized losses of $6.7 million that had been in a continual loss position for twelve months and longer. Such unrealized losses on these investment securities have not been recognized into income.

Unrealized losses on available-for-sale debt securities are recognized in shareholders’ equity as accumulated other comprehensive loss. At September 30, 2024, the Company had a net unrealized loss on available-for-sale debt securities of $4.1 million, or $2.9 million net of tax in accumulated other comprehensive loss, compared to a net unrealized loss of $6.3 million, or $4.5 million net of tax in accumulated other comprehensive loss, at December 31, 2023.

Allowance for Credit Losses on Debt Securities

For available-for-sale debt securities with unrealized losses, management considered the financial condition of the issuer and the Company’s intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. The Company’s available-for-sale debt securities consisted of U.S. Treasury, U.S. government and agency and government sponsored enterprise securities, and municipals, which historically have had limited credit loss experience. In addition, the Company reviewed the credit rating of the municipal securities. At September 30, 2024, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities was $923 thousand and $827 thousand, respectively. At September 30, 2024, all of these securities were rated AA and above. At December 31, 2023, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities was $1.4 million and $810 thousand, respectively. These securities rated AA and above totaled $1.4 million and rated A+ totaled $810 thousand at December 31, 2023.

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At September 30, 2024, 61 held-to-maturity debt securities with fair values totaling $49.5 million had gross unrealized losses totaling $3.9 million, compared to 58 held-to-maturity debt securities with fair values totaling $48.3 million had gross unrealized losses totaling $3.2 million at December 31, 2023. The Company has the intent and ability to hold the securities classified as held-to-maturity until they mature, at which time the Company will receive full value for the securities. At September 30, 2024 and December 31, 2023, fair values of held-to-maturity debt securities rated AA and above totaled $46.2 million and $47.0 million, respectively and rated AA- totaled $3.3 million and $3.4 million, respectively.

Management evaluates securities in an unrealized loss position at least on a quarterly basis, and determined that the unrealized losses at September 30, 2024 and 2023 related to each investment were primarily attributable to factors other than credit related, including changes in interest rates driven by the Federal Reserve’s policy to fight against inflation and general volatility in market conditions. As such, the Company applied a zero credit loss assumption for these securities and no provision for credit losses was recorded for held-to-maturity or available-for-sale debt securities during the three and nine months ended September 30, 2024 and 2023.

Restricted Stock

As a member of the Federal Reserve System, the Company must hold stock of the Federal Reserve in an amount equal to 3% of the Company’s common stock and additional paid-in capital. In addition, as a member of the Federal Home Loan Bank (“FHLB”) of San Francisco, the Company is required to own stock of the FHLB based on the Company’s outstanding mortgage assets and outstanding advances from the FHLB.

The table below summarizes the Company’s restricted stock investments at September 30, 2024 and December 31, 2023:

(dollars in thousands)						September 30, 2024						December 31, 2023
Federal Reserve Bank						$	12,089					$	7,430
Federal Home Loan Bank						15,305						8,625
						$	27,394					$	16,055

In connection with the Merger, the Company acquired $5.9 million of FHLB stock during the three and nine months ended September 30, 2024. Additionally, during the three and nine months ended September 30, 2024, the Company purchased $4.6 million and $4.7 million, respectively, of Federal Reserve stock, and there were no purchases and $820 thousand of purchases, respectively, of FHLB stock.

Other Equity Securities Without A Readily Determinable Fair Value

The Company also has equity securities in the form of capital stock invested in two different banker’s bank stocks which totaled $819 thousand and $351 thousand at September 30, 2024 and December 31, 2023, respectively. The Company acquired $468 thousand of these two banker’s bank stocks in connection with the Merger during the three months ended September 30, 2024. These equity securities are reported in accrued interest receivable and other assets in the consolidated balance sheets. At September 30, 2024 and December 31, 2023, the Company evaluated the carrying value of these equity securities and determined that they were not impaired. During the three and nine months ended September 30, 2024 and 2023, there were no losses related to changes in the fair value of these equity securities.

The Company has other equity investments and investments in a technology venture capital fund focused on the intersection of fintech and community banking. At September 30, 2024 and December 31, 2023, the balance of these investments, which is included in accrued interest receivable and other assets in the consolidated balance sheets, was $7.8 million and $7.0 million, respectively. These equity securities are measured using the equity method of accounting when the Company’s ownership interest in such investments exceeds 5%, or carried at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same issuer. Cash distributions considered return of capital are recorded as a reduction of the Company’s investment. During the three and nine months ended September 30, 2024, the Company received $1.4 million and $1.3 million, respectively, of net capital distributions

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from these equity investments. During the three and nine months ended September 30, 2023, the Company made $219 thousand and $2.3 million, respectively, of net capital contributions to these equity investments. At September 30, 2024 and December 31, 2023, the Company evaluated the carrying value of these equity investments and determined they were not impaired. During the three and nine months ended September 30, 2024 and 2023, there were no losses recognized related to changes in the fair value.

The Company has also invested in and acquired limited partnerships that operate affordable housing projects that qualify for and have received an allocation of federal and/or state low-income housing tax credits. These tax credit investments are reported in accrued interest receivable and other assets in the consolidated balance sheets, and are recorded net of accumulated amortization, using the proportional amortization method. At September 30, 2024, the aggregate funding commitment for these investments was $15.7 million, of which $13.1 million was acquired from the Merger. At December 31, 2023, the aggregate funding commitment for these investments was $2.0 million. The unfunded portion of these investments totaled $1.9 million and $1.5 million at September 30, 2024 and December 31, 2023, respectively, and is included in accrued interest payable and other liabilities in the consolidated balance sheets. The following table presents activity in qualifying low income housing projects for the three and nine months ended September 30, 2024 and 2023 follows:

						Three Months Ended												Nine Months Ended
(dollars in thousands)						September 30, 2024						September 30, 2023						September 30, 2024						September 30, 2023
Proportional amortization						$	(187)					$	—					$	(238)					$	—
Tax credits						257						—						393						—
Contributions						62						208						217						208

At September 30, 2024 and December 31, 2023, the Company evaluated the carrying value of these tax credit equity investments and determined they were not impaired, and no loss was recognized related to changes in the fair value.

NOTE 4 - LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loans Held for Investment

The Company’s loan portfolio consists primarily of loans to borrowers within its Southern and Northern California markets effective July 31, 2024. Although the Company seeks to avoid concentrations of loans to a single industry or based upon a single class of collateral, real estate and real estate associated businesses are among the principal industries in the Company’s market area. The Company’s loan portfolio in real estate secured credit represented 75% and 83% of total loans at September 30, 2024 and December 31, 2023, respectively. The Company also originates SBA loans either for sale to institutional investors or for retention in the loan portfolio. Loans identified as held for sale are carried at the lower of cost or market value and separately designated as such in the consolidated financial statements. A portion of the Company’s revenues are from origination of loans guaranteed by the SBA under its various programs and sale of the guaranteed portions of the loans. Funding for these loans depends on annual appropriations by the U.S. Congress.

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The composition of the Company’s loan portfolio at September 30, 2024 and December 31, 2023 was as follows:

(dollars in thousands)						September 30, 2024						December 31, 2023
Construction and land development						$	247,934					$	243,521
Real estate - other:
1-4 family residential						152,540						143,903
Multifamily residential						252,134						221,247
Commercial real estate and other						1,755,908						1,024,243
Commercial and industrial						765,472						320,142
Consumer						25,726						4,386
Loans held for investment (1)						3,199,714						1,957,442
Allowance for credit losses						(53,552)						(22,569)
Loans held for investment, net						$	3,146,162					$	1,934,873

(1)Loans held for investment includes net unearned fees of $1.6 million and $2.3 million and net unearned discounts on acquired loans of $66.0 million and $1.4 million at September 30, 2024 and December 31, 2023, respectively. The Company recognized $4.2 million and $4.3 million, respectively, in interest accretion for acquired loans for the three and nine months ended September 30, 2024.

The Company has pledged $2.20 billion of loans with the FHLB under a blanket lien, of which an unpaid principal balance of $1.44 billion was considered as eligible collateral under this secured borrowing arrangement and loans with an unpaid principal balance totaling $466.8 million were pledged as collateral under a secured borrowing arrangement with the Federal Reserve as of September 30, 2024. See Note 8 – Borrowing Arrangements for additional information regarding the FHLB and Federal Reserve secured lines of credit.

Loans Held for Sale

At September 30, 2024, the Company had loans held for sale totaling $33.7 million, consisting of $7.8 million SBA 7(a) loans and $25.9 million C&I loans transferred from loans held for investment, compared to $7.3 million, consisting of only SBA 7(a) loans at December 31, 2023. The Company accounts for loans held for sale at the lower of carrying value or fair value. At September 30, 2024 and December 31, 2023, the fair value of loans held for sale totaled $34.5 million and $7.8 million, respectively.

Credit Quality Indicators

The Company categorizes loans using risk ratings based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. Larger, non-homogeneous loans such as CRE and C&I loans are analyzed individually for risk rating assessment. For purposes of risk classification, 1-4 Family Residential loans for investment purposes are evaluated with CRE loans. This analysis is performed on an ongoing basis as new information is obtained. The Company uses the following definitions for risk ratings:

Pass - Loans classified as pass include loans not meeting the risk ratings defined below.

Special Mention - Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

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Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss - Loans classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

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The risk category of loans by class of loans and origination year as of September 30, 2024 follows:

						Term Loans Amortized Cost Basis by Origination Year																																				Revolving Loans Amortized Cost Basis						Revolving Loans Amortized Cost Basis Converted to Term During the Period
(dollars in thousands)						2024						2023						2022						2021						2020						Prior																		Total
September 30, 2024
Construction and land development
Pass						$	493					$	40,861					$	111,686					$	51,163					$	17,283					$	2,340					$	8,476					$	—					$	232,302
Special mention						—						—						—						—						—						—						—						—						—
Substandard						—						—						9,659						—						2,945						3,028						—						—						15,632
Doubtful						—						—						—						—						—						—						—						—						—
Loss						—						—						—						—						—						—						—						—						—
Total construction and land development						493						40,861						121,345						51,163						20,228						5,368						8,476						—						247,934
Real estate - other:
1-4 family residential
Pass						6,271						21,137						33,768						17,995						6,736						17,562						45,329						—						148,798
Special mention						—						—						—						—						—						847						—						—						847
Substandard						—						—						2,895						—						—						—						—						—						2,895
Doubtful						—						—						—						—						—						—						—						—						—
Loss						—						—						—						—						—						—						—						—						—
Total 1-4 family residential						6,271						21,137						36,663						17,995						6,736						18,409						45,329						—						152,540
Multifamily residential
Pass						1,625						18,808						91,437						89,992						5,287						43,506						1,479						—						252,134
Special mention						—						—						—						—						—						—						—						—						—
Substandard						—						—						—						—						—						—						—						—						—
Doubtful						—						—						—						—						—						—						—						—						—
Loss						—						—						—						—						—						—						—						—						—
Total multifamily residential						1,625						18,808						91,437						89,992						5,287						43,506						1,479						—						252,134

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						Term Loans Amortized Cost Basis by Origination Year																																				Revolving Loans Amortized Cost Basis						Revolving Loans Amortized Cost Basis Converted to Term During the Period
(dollars in thousands)						2024						2023						2022						2021						2020						Prior																		Total
September 30, 2024
Commercial real estate and other
Pass						74,938						83,188						457,671						398,356						101,050						472,661						106,386						151						1,694,401
Special mention						—						9,585						5,059						14,148						2,277						10,870						1,596						497						44,032
Substandard						—						—						—						11,573						—						5,902						—						—						17,475
Doubtful						—						—						—						—						—						—						—						—						—
Loss						—						—						—						—						—						—						—						—						—
Total commercial real estate and other						74,938						92,773						462,730						424,077						103,327						489,433						107,982						648						1,755,908
Commercial and industrial
Pass						48,106						75,264						122,585						45,355						15,765						70,103						271,764						—						648,942
Special mention						383						1,251						—						7,556						285						2,099						36,995						—						48,569
Substandard						—						50						21,535						268						—						3,644						42,464						—						67,961
Doubtful						—						—						—						—						—						—						—						—						—
Loss						—						—						—						—						—						—						—						—						—
Total commercial and industrial						48,489						76,565						144,120						53,179						16,050						75,846						351,223						—						765,472
Consumer
Pass						1,088						—						1,107						22,946						100						7						143						—						25,391
Special mention						—						—						—						—						—						—						—						—						—
Substandard						—						—						—						335						—						—						—						—						335
Doubtful						—						—						—						—						—						—						—						—						—
Loss						—						—						—						—						—						—						—						—						—
Total consumer						1,088						—						1,107						23,281						100						7						143						—						25,726
Total loans						$	132,904					$	250,144					$	857,402					$	659,687					$	151,728					$	632,569					$	514,632					$	648					$	3,199,714
Total by risk rating:
Pass						$	132,521					$	239,258					$	818,254					$	625,807					$	146,221					$	606,179					$	433,577					$	151					$	3,001,968
Special mention						383						10,836						5,059						21,704						2,562						13,816						38,591						497						93,448
Substandard						—						50						34,089						12,176						2,945						12,574						42,464						—						104,298
Doubtful						—						—						—						—						—						—						—						—						—
Loss						—						—						—						—						—						—						—						—						—
Total loans						$	132,904					$	250,144					$	857,402					$	659,687					$	151,728					$	632,569					$	514,632					$	648					$	3,199,714

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The risk category of loans by class of loans and origination year as of December 31, 2023 follows:

						Term Loans Amortized Cost Basis by Origination Year																																				Revolving Loans Amortized Cost Basis						Revolving Loans Amortized Cost Basis Converted to Term During the Period
(dollars in thousands)						2023						2022						2021						2020						2019						Prior																		Total
December 31, 2023
Construction and land development
Pass						$	25,113					$	127,496					$	71,199					$	17,022					$	2,071					$	528					$	—					$	—					$	243,429
Special mention						—						—						—						—						—						—						—						—						—
Substandard						—						—						—						—						—						92						—						—						92
Doubtful						—						—						—						—						—						—						—						—						—
Loss						—						—						—						—						—						—						—						—						—
Total construction and land development						25,113						127,496						71,199						17,022						2,071						620						—						—						243,521
Real estate - other:
1-4 family residential
Pass						24,928						35,670						20,207						6,887						4,884						15,582						35,645						100						143,903
Special mention						—						—						—						—						—						—						—						—						—
Substandard						—						—						—						—						—						—						—						—						—
Doubtful						—						—						—						—						—						—						—						—						—
Loss						—						—						—						—						—						—						—						—						—
Total 1-4 family residential						24,928						35,670						20,207						6,887						4,884						15,582						35,645						100						143,903
Multifamily residential
Pass						18,803						61,677						73,365						5,712						27,292						21,245						149						—						208,243
Special mention						—						—						—						—						—						—						—						—						—
Substandard						—						13,004						—						—						—						—						—						—						13,004
Doubtful						—						—						—						—						—						—						—						—						—
Loss						—						—						—						—						—						—						—						—						—
Total multifamily residential						18,803						74,681						73,365						5,712						27,292						21,245						149						—						221,247

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						Term Loans Amortized Cost Basis by Origination Year																																				Revolving Loans Amortized Cost Basis						Revolving Loans Amortized Cost Basis Converted to Term During the Period
(dollars in thousands)						2023						2022						2021						2020						2019						Prior																		Total
Commercial real estate and other
Pass						76,434						304,524						287,245						57,736						51,992						203,976						36,543						1,626						1,020,076
Special mention						—						2,701						—						—						—						—						295						—						2,996
Substandard						—						—						—						—						—						1,171						—						—						1,171
Doubtful						—						—						—						—						—						—						—						—						—
Loss						—						—						—						—						—						—						—						—						—
Total commercial real estate and other						76,434						307,225						287,245						57,736						51,992						205,147						36,838						1,626						1,024,243
Commercial and industrial
Pass						46,701						70,658						12,883						7,095						8,266						13,715						153,712						1,877						314,907
Special mention						—						—						—						—						—						—						—						—						—
Substandard						—						346						64						—						1,208						121						3,097						399						5,235
Doubtful						—						—						—						—						—						—						—						—						—
Loss						—						—						—						—						—						—						—						—						—
Total commercial and industrial						46,701						71,004						12,947						7,095						9,474						13,836						156,809						2,276						320,142
Consumer
Pass						163						—						39						91						6						11						4,076						—						4,386
Special mention						—						—						—						—						—						—						—						—						—
Substandard						—						—						—						—						—						—						—						—						—
Doubtful						—						—						—						—						—						—						—						—						—
Loss						—						—						—						—						—						—						—						—						—
Total consumer						163						—						39						91						6						11						4,076						—						4,386
Total loans						$	192,142					$	616,076					$	465,002					$	94,543					$	95,719					$	256,441					$	233,517					$	4,002					$	1,957,442
Total by risk rating:
Pass						$	192,142					$	600,025					$	464,938					$	94,543					$	94,511					$	255,057					$	230,125					$	3,603					$	1,934,944
Special mention						—						2,701						—						—						—						—						295						—						2,996
Substandard						—						13,350						64						—						1,208						1,384						3,097						399						19,502
Doubtful						—						—						—						—						—						—						—						—						—
Loss						—						—						—						—						—						—						—						—						—
Total loans						$	192,142					$	616,076					$	465,002					$	94,543					$	95,719					$	256,441					$	233,517					$	4,002					$	1,957,442

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A summary of gross charge-offs by class of loans and origination year for the nine months ended September 30, 2024 and 2023 follows:

						Term Loans Gross Charge-offs by Origination Year																																				Revolving Loans Amortized Cost Basis						Revolving Loans Amortized Cost Basis Converted to Term During the Period
(dollars in thousands)						2024						2023						2022						2021						2020						Prior																		Total
Nine Months Ended September 30, 2024
Construction and land development						$	—					$	—					$	967					$	—					$	—					$	—					$	—					$	—					$	967
Real estate - other:
1-4 family residential						—						—						—						—						—						—						1						—						1
Multifamily residential						—						—						1,456						—						—						—						—						—						1,456
Commercial real estate and other						—						—						—						—						—						—						—						—						—
Commercial and industrial						—						37						24						—						—						—						—						—						61
Consumer						—						—						—						135						—						—						—						—						135
Total						$	—					$	37					$	2,447					$	135					$	—					$	—					$	1					$	—					$	2,620

						Term Loans Gross Charge-offs by Origination Year																																				Revolving Loans Amortized Cost Basis						Revolving Loans Amortized Cost Basis Converted to Term During the Period
(dollars in thousands)						2023						2022						2021						2020						2019						Prior																		Total
Nine Months Ended September 30, 2023
Construction and land development						$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—
Real estate - other:
1-4 family residential						—						—						—						—						—						12						—						—						12
Multifamily residential						—						—						—						—						—						—						—						—						—
Commercial real estate and other						—						—						—						—						—						—						—						—						—
Commercial and industrial						—						—						—						15						—						9						—						—						24
Consumer						—						—						—						—						—						—						—						—						—
Total						$	—					$	—					$	—					$	15					$	—					$	21					$	—					$	—					$	36

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Past Due Loans

A summary of past due loans as of September 30, 2024 and December 31, 2023 follows:

						Current
(dollars in thousands)						30-59 Days Past Due						60-89 Days Past Due						Over 90 Days Past Due						Total Past Due						Current						Nonaccrual						Total
September 30, 2024
Construction and land development						$	—					$	—					$	—					$	—					$	238,275					$	9,659					$	247,934
Real estate - other:
1-4 family residential						—						—						—						—						149,645						2,895						152,540
Multifamily residential						—						—						—						—						252,134						—						252,134
Commercial real estate and other						18,175						—						—						18,175						1,728,628						9,105						1,755,908
Commercial and industrial						667						—						—						667						760,803						4,002						765,472
Consumer						96						172						37						305						25,421						—						25,726
						$	18,938					$	172					$	37					$	19,147					$	3,154,906					$	25,661					$	3,199,714

						Current
(dollars in thousands)						30-59 Days Past Due						60-89 Days Past Due						Over 90 Days Past Due						Total Past Due						Current						Nonaccrual						Total
December 31, 2023
Construction and land development						$	—					$	—					$	—					$	—					$	243,521					$	—					$	243,521
Real estate - other:
1-4 family residential						—						—						—						—						143,903						—						143,903
Multifamily residential						—						—						—						—						208,243						13,004						221,247
Commercial real estate and other						—						—						—						—						1,024,243						—						1,024,243
Commercial and industrial						19						—						—						19						320,123						—						320,142
Consumer						—						—						—						—						4,386						—						4,386
						$	19					$	—					$	—					$	19					$	1,944,419					$	13,004					$	1,957,442

The Company had $37 thousand in consumer solar loans that were over 90 days past due that were accruing interest at September 30, 2024. There were no loans over 90 days past due loans and still accruing interest as of December 31, 2023.

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Nonaccrual Loans

A summary of total nonaccrual loans and the amount of nonaccrual loans with no related ACL as of September 30, 2024 and December 31, 2023 follows:

						September 30, 2024												December 31, 2023
(dollars in thousands)						Total Nonaccrual Loans						Nonaccrual Loans with no ACL						Total Nonaccrual Loans						Nonaccrual Loans with no ACL
Construction and land development						$	9,659					$	9,659					$	—					$	—
Real estate - other:
1-4 family residential						2,895						2,895						—						—
Multifamily residential						—						—						13,004						13,004
Commercial real estate and other						9,105						117						—						—
Commercial and industrial						4,002						—						—						—
Consumer						—						—						—						—
						$	25,661					$	12,671					$	13,004					$	13,004

Collateral Dependent Loans

Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Estimates for costs to sell are included in the determination of the ACL when liquidation of the collateral is anticipated. In cases where the loan is well secured and the estimated value of the collateral exceeds the amortized cost of the loan, no ACL is recorded. At September 30, 2024, a substandard nonaccrual construction loan and a 1-4 family residential loan were classified as collateral dependent loans. The construction loan was collateralized by a stalled construction project for a single family residential estate located in Los Angeles, California. Based on the Company's internal analysis, the estimated collateral value was $9.7 million, and was $967 thousand lower than the subject loan’s net carrying value resulting in a partial charge-off in the third quarter of 2024. The net estimated collateral value after accounting for selling costs for the 1-4 family residential loan was sufficient to cover the subject loan’s net carrying value resulting in no partial charge-off in the third quarter of 2024. At December 31, 2023, a $13.0 million multifamily residential loan was classified as a collateral dependent loan, and was collateralized by three investment multifamily properties. The subject loan was partially charged off by $1.3 million in the fourth quarter of 2023, foreclosed on in the first quarter of 2024 and sold in the second quarter of 2024.

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A summary of collateral dependent loans by collateral type as of September 30, 2024 and December 31, 2023 follows:

						Type of Collateral
(dollars in thousands)						Commercial Real Estate						Residential Real Estate						Business Assets
September 30, 2024
Construction and land development						$	—					$	9,659					$	—
Real estate - other:
1-4 family residential						—						2,895						—
Commercial real estate and other						10,535						—						—
Commercial and industrial						—						271						2,301
						$	10,535					$	12,825					$	2,301
December 31, 2023
Multifamily residential						$	—					$	13,004					$	—
						$	—					$	13,004					$	—

Other Real Estate Owned (“OREO”), Net

Real estate acquired by foreclosure or deed in lieu of foreclosure is recorded at fair value less costs to sell at the date of foreclosure, establishing a new cost basis by a charge to the ACL, if necessary. The Company had $4.1 million and zero foreclosed assets at September 30, 2024 and December 31, 2023, respectively.

During the nine months ended September 30, 2024, the Company foreclosed on and sold $13.1 million of OREO related to a three-property multifamily OREO in Santa Monica, California, and recognized a $4.8 million pre-tax loss.

Additionally, during the nine months ended September 30, 2024, the Company foreclosed on a multifamily nonaccrual loan of $4.7 million, that was transferred to OREO. During the three and nine months ended September 30, 2024, the Company recorded a $614 thousand valuation allowance due to a decline in the fair value of the underlying property in the third quarter of 2024.

Modified Loans to Borrowers Experiencing Financial Difficulty

A summary of modified loans to borrowers experiencing financial difficulty as of September 30, 2024 follows:

(dollars in thousands)															Commercial & Industrial												Total
September 30, 2024:
Term extension:
Amortized cost basis															13,094												13,094
% of total class of loans															1.7		%										0.4		%

The modified loans to borrowers experiencing financial difficulty in the table above were all loans that were acquired in the Merger.

There were no modified loans to borrowers experiencing financial difficulty as of December 31, 2023.

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A summary of the payment status for modified loans to borrowers experiencing financial difficulty as of September 30, 2024 follows:

(dollars in thousands)			30-59 Days Past Due						60-89 Days Past Due						Over 90 Days Past Due						Total Past Due						Current						Total
September 30, 2024:
Commercial and industrial			—						—						397						397						12,697						13,094
			$	—					$	—					$	397					$	397					$	12,697					$	13,094

The modified loans were acquired from the merger. The were no new modifications or refinancings (including those with borrowers that are experiencing financial difficulty) of loans representing a new non-acquired loan or a continuation of an existing non-acquired loan during the three and nine months ended September 30, 2024, and 2023.

Allowance for Credit Losses - Loans

The ACL consists of: (i) a specific allowance established for CECL on loans individually evaluated, (ii) a quantitative allowance for current expected loan losses based on the portfolio and expected economic conditions over a reasonable and supportable forecast period that reverts back to long-term trends to cover the expected life of the loan, (iii) a qualitative allowance including management judgment to capture factors and trends that are not adequately reflected in the quantitative allowance, and (iv) the ACL for off-balance sheet credit exposure for unfunded loan commitments.

For prepayment and curtailment rates, the Company used its own historical quarterly prepayment and curtailment experience covering the period starting February 2021 to estimate the ACL. The Company used the probability-weighted two-scenario forecasts, representing a base-case scenario and one downside scenario, to estimate the ACL. The Company utilized economic forecasts released by Moody’s Analytics during the fourth week of September 2024. Other sources of economic forecasts and meeting minutes of the Federal Open Market Committee meeting were also considered by the Company when determining the scenario weighting. At September 30, 2024, the Moody’s economic forecast assumes two interest rate cuts in 2024. In its September 2024 meeting, the Federal Reserve chose to lower its key overnight borrowing rate by 50 basis points to 4.75% to 5.00%, amid signals that inflation was moderating and the labor market was weakening. The underlying assumptions in the Moody’s economic forecasts supporting the baseline forecast remained consistent in the expectation that the Federal Reserve will continue to reduce the Federal Reserve’s balance sheet through quantitative tightening at its current pace.

Moody’s baseline national gross domestic product forecast was 2.6% in 2024 on an annual average basis. The forecast assumes the growth is largely based on the Bureau of Economic Analysis’ upward revision of 2Q24 GDP. Growth in the following two years is forecasted at 2.1% in 2025 and 2.0% in 2026. The Conference Board increased their September forecast from 1% to 2.4%. The upward revision is now in line with Moody’s Baseline scenario of 2.6% while the Federal Reserve members median projection for GDP growth in 2024 and 2025 remained at 2.0%.

Moody’s economic forecasts for California suggested a modest change for its September 2024 baseline forecast state unemployment rate and Gross State Product (GSP) growth rate of 5.2% and 2.04%, respectively, declining to 4.9% and 1.3%, respectively, in 2025. Moody’s downside scenario forecasted the state unemployment rate would rise in the fourth quarter of 2024 and will reach 7.86% in the third quarter of 2025 from the weakening economy. The outlook for GSP growth rate was adjusted higher at the near term in baseline and downside scenario from 1.54% and 1.05%, respectively, in the fourth quarter of 2024 to 1.60% and -0.77%, respectively, in the fourth quarter of 2025. The mix changes in these key economic forecasts for California would have a mix impact to the Company ACL.

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During the third quarter of 2024, the Company updated its historical prepayment and curtailment rates analysis, which reflected a moderate decrease from the second quarter of 2024 primarily due to lower payoffs and paydowns.

Accrued interest receivable on loans receivable, net, totaled $14.2 million and $6.4 million at September 30, 2024 and December 31, 2023, respectively, and is included within accrued interest receivable and other assets in the accompanying consolidated balance sheets. Accrued interest receivable is excluded from the ACL.

Allowance for Credit Losses - Unfunded Loan Commitments

The allowance for unfunded credit commitments is maintained at a level that management believes to be sufficient to absorb estimated expected credit losses related to unfunded credit facilities. The Company evaluates the loss exposure for unfunded loan commitments to extend credit following the same principles used for the ACL, with consideration for experienced utilization rates on client credit lines and the inherently lower risk of unfunded loan commitments relative to disbursed commitments. The Company recognized a provision for unfunded loan commitments of $3.3 million and $3.1 million, respectively, for the three and nine months ended September 30, 2024, of which $2.7 million related to the initial allowance for unfunded credit commitments acquired in the Merger. There was a $298 thousand and $509 thousand negative provision for unfunded loan commitments for the three and nine months ended September 30, 2023, respectively. The provision for unfunded loan commitments is included in provision for (reversal of) credit losses in the consolidated statements of operations. The reserve for unfunded loan commitments was $4.1 million and $933 thousand at September 30, 2024 and December 31, 2023, respectively. The reserve for unfunded loan commitments is included in accrued interest payable and other liabilities in the consolidated balance sheets.

A summary of the changes in the ACL for loans and unfunded commitments for the periods indicated follows:

						Three Months Ended September 30,												Nine Months Ended September 30,
(dollars in thousands)						2024						2023						2024						2023
Allowance for loan losses (ALL)
Balance, beginning of period						$	23,788					$	22,502					$	22,569					$	17,099
Adoption of ASU No. 2016-13(1)						—						—						—						5,027
Initial allowance for acquired PCD loans						11,216						—						11,216						—
Provision for loan losses(2)						19,711						202						22,387						600
Charge-offs						(1,163)						—						(2,620)						(36)
Recoveries						—						1						—						15
Net (charge-offs) recoveries						(1,163)						1						(2,620)						(21)
Balance, end of period						$	53,552					$	22,705					$	53,552					$	22,705
Reserve for unfunded loan commitments
Balance, beginning of period						$	819					$	1,538					$	933					$	1,310
Adoption of ASU No. 2016-13(1)						—						—						—						439
Provision for (reversal of) credit losses for unfunded loan commitments(3)						3,252						(298)						3,138						(509)
Balance, end of period						4,071						1,240						4,071						1,240
Allowance for credit losses, end of period						$	57,623					$	23,945					$	57,623					$	23,945

(1)Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2023. As a result of adopting ASU 2016-13, the Company’s methodology to compute our ACL is based on a CECL methodology, rather than the previously applied incurred loss methodology.

(2)Includes an initial provision for credit losses for non-PCD loans acquired in the Merger of $18.5 million for the three and nine months ended September 30, 2024. There was no similar activity in the comparable 2023 period.

(3)Includes an initial provision for credit losses for unfunded commitments acquired in the Merger of $2.7 million for the three and nine months ended September 30, 2024. There was no similar activity in the comparable 2023 period.

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A summary of changes in the ALL by loan portfolio segment for the periods indicated follows:

(dollars in thousands)						Construction and Land Development						Real Estate - Other						Commercial & Industrial						Consumer						Total
Three Months Ended September 30, 2024
Beginning of period						$	2,942					$	17,048					$	3,795					$	3					$	23,788
Initial allowance for acquired PCD loans						328						2,392						8,355						141						11,216
(Reversal of) provision for loan losses(1)						(219)						10,020						8,769						1,141						19,711
Charge-offs						(967)						—						(61)						(135)						(1,163)
Recoveries						—						—						—						—						—
Net charge-offs						(967)						—						(61)						(135)						(1,163)
End of period						$	2,084					$	29,460					$	20,858					$	1,150					$	53,552
Three Months Ended September 30, 2023
Beginning of period						$	3,556					$	15,097					$	3,808					$	41					$	22,502
(Reversal of) provision for loan losses						(1,021)						1,318						(70)						(25)						202
Charge-offs						—						—						—						—						—
Recoveries						—						—						1						—						1
Net recoveries						—						—						1						—						1
End of period						$	2,535					$	16,415					$	3,739					$	16					$	22,705

(1)Includes an initial provision for credit losses for non-PCD loans acquired in the Merger of $18.5 million for the three months ended September 30, 2024. There was no similar activity in the comparable 2023 period.

(dollars in thousands)						Construction and Land Development						Real Estate - Other						Commercial & Industrial						Consumer						Total
Nine Months Ended September 30, 2024
Beginning of period						$	2,032					$	16,280					$	4,242					$	15					$	22,569
Initial allowance for acquired PCD loans						328						2,392						8,355						141						11,216
Provision for loan losses(1)						691						12,245						8,322						1,129						22,387
Charge-offs						(967)						(1,457)						(61)						(135)						(2,620)
Recoveries						—						—						—						—						—
Net charge-offs						$	(967)					$	(1,457)					$	(61)					$	(135)					$	(2,620)
End of period						$	2,084					$	29,460					$	20,858					$	1,150					$	53,552
Nine Months Ended September 30, 2023
Beginning of period						$	2,301					$	11,691					$	3,079					$	28					$	17,099
Adoption of ASU No. 2016-13(2)						881						2,983						1,132						31						5,027
(Reversal of) provision for loan losses						(647)						1,753						(463)						(43)						600
Charge-offs						—						(12)						(24)						—						(36)
Recoveries						—						—						15						—						15
Net charge-offs						$	—					$	(12)					$	(9)					$	—					$	(21)
End of period						$	2,535					$	16,415					$	3,739					$	16					$	22,705

(1)Includes an initial provision for credit losses for non-PCD loans acquired in the Merger of $18.5 million for the nine months ended September 30, 2024. There was no similar activity in the comparable 2023 period.

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(2)Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2023. As a result of adopting ASU 2016-13, the Company’s methodology to compute our ACL is based on a CECL methodology, rather than the previously applied incurred loss methodology.

NOTE 5 - TRANSFERS AND SERVICING OF FINANCIAL ASSETS

The Company has originated loans that are serviced for others, including loans partially guaranteed by the SBA, some of which have been sold in the secondary market, as well as CRE loans and C&I loans participated with various other financial institutions and special purpose vehicle (“SPV”) participations for the Main Street loans. Loans sold and serviced for others are accounted for as sales and are therefore not included in the accompanying consolidated balance sheets. Loans serviced for others totaled $150.2 million and $58.8 million at September 30, 2024 and December 31, 2023, respectively. This includes SBA loans serviced for others of $36.3 million and $35.4 million at September 30, 2024, and December 31, 2023, for which there was a related servicing asset of $415 thousand and $546 thousand, respectively.

Consideration for each SBA loan sale includes the cash received and a related servicing asset. The Company receives servicing fees ranging from 0.25% to 1.00% for the services provided over the life of the loan. The servicing asset is based on the estimated fair value of these future cash flows to be collected. The risks inherent in SBA servicing assets primarily relates to accelerated prepayment of loans in excess of what was originally modeled driven by changes in interest rates and a reduction in the estimated future cash flows.

The servicing asset activity includes additions from loan sales with servicing retained, and reductions from amortization as the serviced loans are repaid and servicing fees are earned. The SBA servicing asset is reported in accrued interest receivable and other assets in the consolidated balance sheets.

A summary of changes in the SBA servicing asset for the three and nine months ended September 30, 2024 and 2023 follows:

						Three Months Ended September 30,												Nine Months Ended September 30,
(dollars in thousands)						2024						2023						2024						2023
Balance, beginning of period						$	521					$	683					$	546					$	514
Additions						—						—						109						216
Amortization (1)						(106)						(54)						(240)						(101)
Balance, end of period						$	415					$	629					$	415					$	629

(1) Amortization included accelerated amortization of $84 thousand and $29 thousand for the three months ended September 30, 2024 and 2023, respectively, and $174 thousand and $32 thousand for the nine months ended September 30, 2024 and 2023, respectively.

There were no SBA 7(a) loan sales during the three months ended September 30, 2024 and 2023.

SBA 7(a) loans sold during the nine months ended September 30, 2024 totaled $6.3 million resulting in total gains on sale of SBA loans of $415 thousand. SBA 7(a) loans sold during the nine months ended September 30, 2023 totaled $10.9 million resulting in total gains on sale of SBA loans of $874 thousand.

The fair value of the servicing asset approximated the carrying value at September 30, 2024 and December 31, 2023. The significant assumptions used in the valuation of the SBA servicing asset at September 30, 2024 and December 31, 2023 included:

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(dollars in thousands)

September 30, 2024

December 31, 2023

Discount rate:

Range

6.5% – 25.4%

10.5% – 26.2%

Weighted average

14.3%

16.1%

Prepayment speed:

Range

12.4% – 38.7%

11.2% – 48.1%

Weighted average

20.1%

19.0%

The following table presents the components of net servicing fees, included in servicing and related income on loans, net in the consolidated statements of operations, for the three and nine months ended September 30, 2024 and 2023:

						Three Months Ended September 30,												Nine Months Ended September 30,
(dollars in thousands)						2024						2023						2024						2023
Contractually specified fees						$	114					$	113					297						309
Amortization						(106)						(54)						(240)						(101)
Net servicing fees						$	8					$	59					$	57					$	208

NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill, the excess purchase price over the fair value of all identifiable assets and liabilities acquired, totaled $112.5 million at September 30, 2024 and $37.8 million at December 31, 2023. Goodwill is reviewed for impairment at least annually during the fourth quarter of each fiscal year. On an ongoing basis, we qualitatively assess if current events or circumstances warrant the need for an interim quantitative assessment of goodwill impairment. We also monitor fluctuations in our stock prices. During the third quarter of 2024, our stock price and market capitalization decreased due primarily to market volatility related to economic uncertainty and rising political tensions prior to the Presidential election. We also noted the trends in our recent financial results were primarily driven by the impact of the Merger and the loss for the quarter was primarily due to merger related expenses. In early November, our stock price and market capitalization recovered and after assessing the totality of these events and circumstances, we determined it is not likely that the fair value of a reporting unit is less than its carrying amount at September 30, 2024. Management will continue to evaluate the economic conditions at future reporting periods for applicable changes.

The Company performed a qualitative assessment for the annual impairment review at December 31, 2023, and as a result of that assessment had determined that there has been no impairment to the goodwill.

The following table presents changes in the carrying amount of goodwill for the three and nine months ended September 30, 2024 and 2023:

						Three Months Ended September 30,												Nine Months Ended September 30,
(dollars in thousands)						2024						2023						2024						2023
Balance, beginning of period						$	37,803					$	37,803					$	37,803					$	37,803
Goodwill from CALB merger						74,712						—						74,712						—
Balance, end of period						$	112,515					$	37,803					$	112,515					$	37,803

Core deposit intangibles are amortized over remaining periods of 4.3 to 9.8 years. As of September 30, 2024, the weighted-average remaining amortization period for core deposit intangibles was approximately 9.6 years. The Company performs the annual impairment analysis for the core deposit intangibles at least annually during the fourth quarter of each fiscal year. The Company evaluated current conditions and concluded there had

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been no significant changes in the economic environment or future projections since the annual core deposit intangibles impairment test performed at September 30, 2023 and therefore, believes that there was no impairment as of September 30, 2024. Management will continue to evaluate the economic conditions at future reporting periods for applicable changes. The following table presents the changes in core deposit intangibles for the three and nine months ended September 30, 2024 and 2023.

						Three Months Ended September 30,												Nine Months Ended September 30,
(dollars in thousands)						2024						2023						2024						2023
Gross balance, beginning of period						$	4,185					$	4,185					$	4,185					$	4,185
Additions from CALB merger						22,653						—						22,653						—
Gross balance, end of period						$	26,838					$	4,185					$	26,838					$	4,185
Accumulated amortization:
Balance, beginning of period						$	(3,120)					$	(2,782)					$	(2,990)					$	(2,601)
Amortization						(687)						(128)						(817)						(309)
Balance, end of period						(3,807)						(2,910)						(3,807)						(2,910)
Net core deposit intangible, end of period						$	23,031					$	1,275					$	23,031					$	1,275

Future estimated amortization expense is as follows:

(dollars in thousands)						Amount
Remainder of 2024						$	998
2025						3,641
2026						3,051
2027						2,761
2028						2,465
Thereafter						10,115
						$	23,031

NOTE 7 - DEPOSITS

The Company is a participant in the Certificate of Deposit Account Registry Service (“CDARS”), IntraFi Network Insured Cash Sweep (“ICS”), and Reich & Tang Deposit Solutions (“R&T”) network. The Company receives an equal dollar amount of deposits (“reciprocal deposits”) from other participating banks in exchange for the deposits we place into the networks to fully qualify large customer deposits for FDIC insurance. These reciprocal deposits are not required to be treated as brokered deposits up to the lesser of 20% of the Bank’s total liabilities or $5 billion.

As of September 30, 2024, reciprocal deposits increased to $839.7 million, representing 22.4% of total deposits and 22.1% of Bank’s total liabilities, compared to $274.1 million, or 14.1% of total deposits at December 31, 2023. The excess over 20% increased the Bank’s wholesale funding to total assets ratio and net non core funding dependence ratio. These two ratios were still within the Bank's internal policy limit. In connection with the Merger, the Company acquired $442.7 million in fair value of reciprocal deposits, of which $98.4 million was in ICS, $306.6 million in R&T and $37.7 million in CDARS.

Time deposits that exceeded the FDIC insurance limit of $250,000 amounted to $162.0 million and $122.6 million as of September 30, 2024 and December 31, 2023, respectively. Brokered time deposits totaled $222.6 million and $107.8 million as of September 30, 2024 and December 31, 2023, respectively.

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The Company participates in a state public deposits program that allows it to receive deposits from the state or from political subdivisions within the state in amounts that would not be covered by the FDIC. This program provides a stable source of funding to the Company. As of September 30, 2024 and December 31, 2023, total collateralized deposits, including the deposits of State of California and their public agencies, were $104.9 million and $72.7 million, respectively, and were collateralized by letters of credit issued by the FHLB under the Company’s secured line of credit with the FHLB. See Note 8 – Borrowing Arrangements for additional information regarding the FHLB secured line of credit.

At September 30, 2024, the scheduled maturities of time deposits are as follows:

(dollars in thousands)						Amount
Remainder of 2024						$	265,493
2025						171,637
2026						4,765
2027						74
2028 and thereafter						250
						$	442,219

NOTE 8 - BORROWING ARRANGEMENTS

A summary of outstanding borrowings as of September 30, 2024 and December 31, 2023 follows:

(dollars in thousands)			September 30, 2024						December 31, 2023
FHLB advances			$	—					$	85,000
Subordinated notes			69,142						17,865
Total borrowings			$	69,142					$	102,865

Federal Home Loan Bank Secured Line of Credit

At September 30, 2024, the Company had a secured line of credit of $786.1 million from the FHLB, of which $663.6 million was available. This secured borrowing arrangement is collateralized under a blanket lien on qualifying real estate loans and is subject to the Company providing adequate collateral and continued compliance with the Advances and Security Agreement and other eligibility requirements established by the FHLB. At September 30, 2024, the Company had pledged $2.20 billion of qualifying loans with the FHLB under a blanket lien, of which an unpaid principal balance of $1.44 billion was considered as eligible collateral under this secured borrowing arrangement. In addition, at September 30, 2024, the Company used $122.5 million of its secured FHLB borrowing capacity by having the FHLB issue letters of credit to meet collateral requirements for deposits from the State of California and other public agencies.

There were no overnight borrowings at September 30, 2024. The Company had overnight borrowings of $85.0 million with an interest of 5.70% at December 31, 2023, respectively.

Federal Reserve Bank Secured Line of Credit

At September 30, 2024, the Company had credit availability of $446.4 million at the Federal Reserve discount window to the extent of collateral pledged. At September 30, 2024, the Company had pledged debt securities with an amortized cost of $56.3 million as collateral, and qualifying loans with an unpaid principal balance of $466.8 million as collateral through the Borrower-in-Custody (“BIC”) program. The Company had no discount window borrowings at September 30, 2024 and December 31, 2023.

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Federal Funds Unsecured Lines of Credit

At September 30, 2024, the Company had six overnight unsecured credit lines from correspondent banks totaling $110.5 million. The lines are subject to annual review. There were no outstanding borrowings under these lines at September 30, 2024 and December 31, 2023.

Revolving Line of Credit

The Company assumed a senior revolving line of credit from CALB in connection with the Merger with a commitment of $3.0 million. This facility is secured by 100% of the common stock of the Bank. This revolving line of credit bears interest, due quarterly, at a rate of Prime plus 0.40% and matures in November 2024. The revolving line of credit contains certain financial covenants, including but not limited to, minimum capital, classified asset, nonperforming asset, primary and secondary liquidity, and debt service coverage ratios. At September 30, 2024, the Company was in compliance with all covenants under the revolving line of credit. There were no borrowings under this revolving line of credit at September 30, 2024.

Fixed-to-Floating Rate Subordinated Notes

On May 28, 2020, the Company issued $18 million of 5.50% Fixed-to-Floating Rate Subordinated Notes Due 2030 (the “Notes”). The Notes mature March 25, 2030 and accrue interest at a fixed rate of 5.50% through the fixed-rate period to March 26, 2025, after which interest accrues at a floating rate of 90-day Secured Overnight Financing Rate (“SOFR”) plus 3.50%, until maturity, unless redeemed early, at the Company’s option, after the end of the fixed-rate period. Issuance costs of $475 thousand were incurred and are being amortized over the first 5-year fixed term of the Notes; unamortized issuance costs at September 30, 2024 and December 31, 2023, were $63 thousand and $135 thousand, respectively. The net unamortized issuance costs are netted against the balance and recorded in borrowings in the consolidated balance sheets. The amortization expense is recorded in interest expense in the consolidated statements of operations. At September 30, 2024, the Company was in compliance with all covenants and terms of the Notes.

In connection with the Merger, the Company assumed $20 million in subordinated debt, with a fixed interest rate of 5.00% and a stated maturity of September 30, 2030. Beginning September 30, 2025, the interest rate changes to a quarterly variable rate equal to the then current 90-day SOFR plus 4.88%, until maturity, unless redeemed early, at the Company’s option, after the end of the fixed-rate period. The subordinated debt was initially recognized with a fair value discount of $794 thousand. At September 30, 2024, the net unamortized fair value discount was $688 thousand, The net unamortized fair value discount is netted against the balance and recorded in borrowings in the consolidated balance sheets. The amortization of the fair value discount is recorded in interest expense in the consolidated statements of operations. At September 30, 2024, the Company was in compliance with all covenants and terms of these notes.

In addition and in connection with the Merger, the Company assumed an additional $35 million in subordinated debt, with a fixed interest rate of 3.50% and a stated maturity of September 1, 2031. Beginning August 17, 2026, the interest rate changes to a quarterly variable rate equal to the then current 90-day SOFR plus 2.86%, until maturity, unless redeemed early, at the Company’s option, after the end of the fixed-rate period. The subordinated debt was initially recognized with a fair value discount of $3.4 million. At September 30, 2024, the net unamortized fair value discount was $3.1 million. The net unamortized fair value discount is netted against the balance and recorded in borrowings in the consolidated balance sheets. The amortization of the fair value discount is recorded in interest expense in the consolidated statements of operations. At September 30, 2024, the Company was in compliance with all covenants and terms of these notes.

NOTE 9 - SHAREHOLDERS’ EQUITY

Common Stock Repurchase Plan

On June 14, 2023, the Company announced an authorized share repurchase plan, providing for the repurchase of up to 550,000 shares of the Company’s outstanding common stock, or approximately 3% of its then outstanding shares. Repurchases under the program may occur from time to time in open market transactions, in

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privately negotiated transactions, or by other means in accordance with federal securities laws and other restrictions. The Company intends to fund its repurchases from available working capital and cash provided by operating activities. The timing of repurchases, as well as the number of shares repurchased, will depend on a variety of factors, including price; trading volume; business, economic and general market conditions; and the terms of any Rule 10b5-1 plan adopted by the Company. The repurchase program has no expiration date and may be suspended, modified, or terminated at any time without prior notice.

There were no shares repurchased under this share repurchase plan during the three and nine months ended September 30, 2024.

During the third quarter of 2024, the Company issued 13,579,454 shares of common stock, including net shares for the settlement of accelerated restricted stock units, in connection with the Merger (refer to Note 2 - Business Combinations for additional information)

NOTE 10 - (LOSS) EARNINGS PER SHARE (“EPS”)

The following is a reconciliation of net (loss) income and shares outstanding to the (loss) income and number of shares used to compute EPS for the three and nine months ended September 30, 2024 and 2023:

						Three Months Ended September 30,												Nine Months Ended September 30,
(dollars in thousands, except share and per share data)						2024						2023						2024						2023
Net (loss) income						$	(16,464)					$	6,556					$	(11,339)					$	21,498
Weighted average common shares outstanding - basic						27,705,844						18,304,023						21,579,175						18,216,546
Dilutive effect of outstanding:
Stock options and unvested stock grants						—						368,109						—						416,344
Weighted average common shares outstanding - diluted1						27,705,844						18,672,132						21,579,175						18,632,890
(Loss) earnings per common share - basic						$	(0.59)					$	0.36					$	(0.53)					$	1.18
(Loss) earnings per common share - diluted1						$	(0.59)					$	0.35					$	(0.53)					$	1.15

(1)Weighted average diluted shares for GAAP diluted EPS are the same as shares for calculating basis EPS due to the antidilutive effect of the diluted shares when considering the GAAP loss for the three and nine months ended September 30, 2024.

The Company’s only performance based restricted stock grants were vested when the performance conditions had been met on March 1, 2023. A total of 275,171 performance based restricted stock grants were vested and included in the computation of basic EPS for the three and nine months ended September 30, 2023 because the performance conditions had been met. For the three months ended September 30, 2024 and 2023, there were 538,726 and 14,750 restricted stock units and 58,785 and 12,750 stock options, respectively, that were not included in the computation of diluted earnings per share, because they were anti-dilutive. For the nine months ended September 30, 2024 and 2023, there were 392,424 and 91,080 restricted stock units and 71,066 and 8,637 stock options, respectively, that were not included in the computation of diluted earnings per share, because they were anti-dilutive.

NOTE 11 - RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Company has granted loans to certain directors, their related interests with which they are associated, and beneficial owners with more than 5% of any class of the Company’s voting securities. The balance of these loans outstanding and activity in related party loans for the three and nine months ended September 30, 2024 and 2023 follows:

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						Three Months Ended September 30,												Nine Months Ended September 30,
(dollars in thousands)						2024						2023						2024						2023
Balance, beginning of period						$	5,295					$	7,732					$	5,928					$	8,073
Assumed in the Merger						22,523						—						22,523						—
New credit granted						—						—						—						—
Repayments						(18)						(1,136)						(651)						(1,477)
Balance, end of period						$	27,800					$	6,596					$	27,800					$	6,596

Directors and related interests deposits at September 30, 2024 and December 31, 2023, amounted to approximately $30.4 million and $16.4 million, respectively.

The Company leases its Ramona branch office from a beneficial owner who holds more than 5% of any class of the Company’s voting securities and is former member of the Company’s Board of Directors under an operating lease expiring in 2027 on terms considered to be prevailing in the market at the time of the lease. Total lease expense for the three and nine months ended September 30, 2024 and 2023 was $11 thousand and $33 thousand, respectively, and future minimum lease payments under the lease were $118 thousand and $151 thousand, respectively as of September 30, 2024 and December 31, 2023.

On April 2022, the holding company entered into an investment commitment of $2.0 million with the Castle Creek Launchpad Fund I (“Launchpad”). A director of the Company is a member of the Investment Committee for Launchpad. At September 30, 2024 and December 31, 2023, total capital contributions made to this investment were $1.1 million and $910 thousand, respectively.

NOTE 12 - COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Company enters into financial commitments to meet the financing needs of its customers. These financial commitments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk not recognized in the Company’s financial statements.

Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. The Company evaluates each client’s credit worthiness on a case-by-case basis. Collateral may or may not be required based on management’s credit evaluation of the customer. The majority of the Company’s commitments to extend credit and standby letters of credit are secured by real estate.

The Company’s exposure to loan loss in the event of nonperformance on commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for loans reflected in the consolidated financial statements.

The Company had the following outstanding financial commitments whose contractual amount represents potential credit risk at September 30, 2024 and December 31, 2023:

(dollars in thousands)						September 30, 2024						December 31, 2023
Commitments to extend credit						$	1,033,055					$	405,854
Letters of credit issued to customers						17,978						4,939
Commitments to contribute capital to other equity investments						7,278						3,170
						$	1,058,311					$	413,963

The Company entered into Supplemental Executive Retirement Plan (“SERP”) agreements to provide a 10-year benefit to certain key officers upon their retirement. Under these agreements, the annual benefits range

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from $20 thousand to $75 thousand. In connection with the Merger, the Company assumed all SERP agreements from CALB, under the same terms and conditions, with the exception of the Chief Executive Officer whose maximum “targeted benefit amount” increased to 30% of the average of his three highest calendar years of base salary as part of his employment agreement with the Company. The estimated present value of future benefits to be paid is being accrued over the period from the effective date of the agreements until the expected retirement dates of the participants. The expense incurred for these agreements for the three and nine months ended September 30, 2024 was $161 thousand and $323 thousand, respectively, and for the three and nine months ended September 30, 2023 was $83 thousand and $240 thousand, respectively. The Company is a beneficiary of life insurance policies that have been purchased as a method of financing the obligated benefits under these agreements.

In the normal course of business, the Company is named or threatened to be named as a defendant in various legal actions. The ultimate outcome with respect to these legal matters and claims cannot be determined. At this time, the Company believes that liability, if any, is not likely to be material to the consolidated balance sheets or consolidated statements of operations.

NOTE 13 - STOCK-BASED COMPENSATION PLAN

In contemplation of the holding company reorganization, in November 2019 the Company’s Board of Directors adopted the Southern California Bancorp 2019 Omnibus Equity Incentive Plan (the “2019 Plan”). The 2019 Plan was approved by shareholders in April 2020 with a maximum number of shares of common stock that may be issued or paid out under the plan of 2,200,000. In addition, upon the completion of the bank holding company reorganization in 2020, the Bank’s 2001 Stock Option Plan and 2011 Omnibus Equity Incentive Plan were terminated and all outstanding and unexpired stock options and all shares of restricted stock outstanding under the terminated plans became equivalent awards of the Company under the 2019 Plan.

In October 2020, the maximum number of shares under the 2019 Plan was increased by 300,000 to 2,500,000. In June 2021, the maximum number of shares under the 2019 Plan was increased by 900,000 to 3,400,000.

In addition, the 2019 Plan permits the Company to grant additional stock options and restricted share units. The Plan provides for the granting to eligible participants such incentive awards as the Board of Directors or a committee established by the Board, in its sole discretion, to administer the Plan. The Board has the power to determine the terms of the awards, including the exercise price, the number of shares subject to each award, the vesting and exercisability of the awards and the form of consideration payable upon exercise. Stock options expire no later than ten years from the date of the grant. The 2019 Plan provides for accelerated vesting if there is a change of control, as defined in the Plan. Restricted stock units generally vest over a period of one to five years.

In connection with the Merger, each of the 185,878 outstanding, unvested restricted stock units granted to the continuing directors, executives and employees under CALB’s Amended and Restated 2017 Equity Incentive Plan were converted into 295,512 unvested restricted stock units of the Company. Each such converted restricted stock unit award continues to be subject to the same terms and conditions as were applicable to the corresponding CALB restricted stock unit award immediately prior to the Merger. The weighted average remaining term on these assumed restricted stock units was 4.0 years, ranging from two months to 5.0 years. All outstanding unvested CALB restricted stock units of 77,436 shares in aggregate that were held by employees who are not continuing directors, executives and employees were accelerated and became fully vested and converted automatically into the right to receive approximately 82,364 shares of the Company’s common stock after 25,635 of CALB shares were surrendered by certain executives and employees to pay for taxes at the effective time of the Merger.

For the three and nine months ended September 30, 2024, total stock-based compensation cost related to stock options and restricted shares units was $2.8 million and $4.7 million, respectively. Included in these amounts was $1.1 million related to the acceleration of vesting for replacement awards issued in connection with the Merger to non-continuing directors, executives and employees. For the three and nine months ended September 30, 2023, total stock-based compensation cost related to stock options and restricted shares units was $1.0 million and $3.8 million, respectively. For the three and nine months ended September 30, 2024, the

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Company did not record any accelerated stock-based compensation expense for the performance-based restricted stock units. For three and nine months ended September 30, 2023, the Company recorded $632 thousand for an accelerated stock-based compensation expense for the performance-based restricted stock units.

Stock Options

As of September 30, 2024, there was $25 thousand of total unrecognized compensation cost related to the outstanding stock options. There were 1,500 stock options exercised with the intrinsic value of $12 thousand during the three months ended September 30, 2024, and no stock options exercised during the three months ended September 30, 2023.

There were 82,900 and 10,950 stock options exercised during the nine months ended September 30, 2024 and 2023, respectively. The intrinsic value of stock options exercised was approximately $570 thousand and $78 thousand for the nine months ended September 30, 2024 and 2023, respectively.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. There were no options granted during the three and nine months ended September 30, 2024 and 2023.

A summary of changes in outstanding stock options during the three and nine months ended September 30, 2024 and 2023 are presented below:

						Three Months Ended												Nine Months Ended
						September 30, 2024												September 30, 2024
(dollars in thousands, except share data)						Shares						Weighted Average Exercise Price						Shares						Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (Years)						Aggregate Intrinsic Value
Outstanding at beginning of period						175,363						$	9.47					272,813						$	9.30
Granted						—						$	—					—						$	—
Exercised						(1,500)						$	6.61					(82,900)						$	8.64
Expired						—						$	—					(750)						$	5.93
Forfeited						—						$	—					(15,300)						$	10.75
Outstanding at end of period						173,863						$	9.50					173,863						$	9.50		2.8						$	920
Options exercisable						167,663						$	9.46					167,663						$	9.46		2.7						$	894

						Three Months Ended												Nine Months Ended
						September 30, 2023												September 30, 2023
(dollars in thousands, except share data)						Shares						Weighted Average Exercise Price						Shares						Weighted Average Exercise Price						Weighted Average Remaining Contractual Term (Years)						Aggregate Intrinsic Value
Outstanding at beginning of period						288,338						$	9.26					326,868						$	9.53
Granted						—						$	—					—						$	—
Exercised						—						$	—					(10,950)						$	8.53
Forfeited						(200)						$	10.99					(27,780)						$	12.78
Outstanding at end of period						288,138						$	9.26					288,138						$	9.26					3.4						$	1,369
Options exercisable						260,638						$	8.97					260,638						$	8.97					3.1						$	1,312

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Restricted Stock Units

A summary of the changes in outstanding unvested restricted stock units during the three and nine months ended September 30, 2024 and 2023 is presented below:

						Three Months Ended												Nine Months Ended
						September 30, 2024												September 30, 2024
						Restricted Shares						Weighted Average Grant Date Fair Value						Restricted Shares						Weighted Average Grant Date Fair Value
Unvested at beginning of period						661,116						$	13.06					637,899						$	13.11
Granted(1)						769,002						$	15.50					937,037						$	15.45
Vested(2)						(141,262)						$	15.75					(280,050)						$	15.79
Forfeited						(77,808)						$	15.67					(83,838)						$	15.67
Unvested at end of period						1,211,048						$	13.06					1,211,048						$	13.06

(1)Includes 418,634 shares granted as replacement awards to continuing and non-continuing directors, executives and employees in connection with the Merger for the three and nine months ended September 30, 2024. The fair value of these replacement awards attributable to post-combination vesting a) will be recognized over the remaining vesting period for continuing directors, executives and employees and b) was immediately recognized for non-continuing directors, executives and employees as components of compensation expense.

(2)Includes the discretionary vesting of 123,123 replacement awards issued in connection with the Merger for non-continuing directors, executives and employees for the three and nine months ended September 30, 2024.

						Three Months Ended												Nine Months Ended
						September 30, 2023												September 30, 2023
						Restricted Shares						Weighted Average Grant Date Fair Value						Restricted Shares						Weighted Average Grant Date Fair Value
Unvested at beginning of period						774,067						$	13.17					959,337						$	11.55
Granted						16,329						$	14.76					204,231						$	16.58
Vested (1)						(17,148)						$	15.11					(390,320)						$	10.99
Forfeited						—						$	—					—						$	—
Unvested at end of period						773,248						$	13.16					773,248						$	13.16

(1)Included the vesting of performance-based awards totaling 275,171 shares, with a weighted average grant date fair value of $9.29 for the nine months ended September 30, 2023.

On March 1, 2023, the Board confirmed that all performance conditions for the performance-based restricted stock units totaling 275,171 shares had been satisfied and accelerated vesting in full. As of September 30, 2024, the Company did not have any outstanding unvested restricted stock units subject to various financial performance conditions. For the nine months ended September 30, 2023, the Company recorded accelerated stock-based compensation totaling $632 thousand.

As of September 30, 2024, there was $12.4 million of total unrecognized compensation expense related to the outstanding restricted stock units that will be recognized over the weighted-average period of 3.2 years. The total unrecognized compensation expense included $2.5 million related to the fair value of outstanding restricted stock units that was assumed from the Merger which will be recognized over the weighted-average vesting period of 3.8 years. The total grant date fair value of restricted stock units vested was $2.2 million and $4.4 million for the three and nine months ended September 30, 2024, and $259 thousand and $4.3 million for the three and nine months ended September 30, 2023. Related tax expenses were approximately $4 thousand and $89 thousand for the three months ended September 30, 2024, respectively. Related tax expenses were approximately $2 thousand

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for the three months ended September 30, 2023 and related tax benefits were $642 thousand for the nine months ended September 30, 2023.

Future levels of compensation cost recognized related to stock-based compensation awards may be impacted by new awards and/or modifications, repurchases and cancellations of existing awards. Under the terms of the 2019 Plan, vested options generally expire ninety days after the director or employee terminates their service affiliation with the Company.

NOTE 14 - REGULATORY MATTERS

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Prior to the merger with CALB during the third quarter of 2024, the Company qualified for treatment under the Small Bank Holding Company Policy Statement (Regulation Y, Appendix C) and, therefore, was not subject to consolidated capital rules at the bank holding company level. Beginning in the third quarter of 2024, the Company became subject to the consolidated capital rules at the bank holding company level.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of their respective assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. These capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. The Company and Bank also elected to exclude the effects of credit loss accounting under CECL from common equity Tier 1 capital ratio for a three-year transitional period.

A bank holding company and bank considered to be “adequately capitalized” is required to maintain a minimum total capital ratio of 8.0%, a minimum Tier 1 capital ratio of 6.0%, a minimum common equity Tier 1 capital ratio of 4.5%, and a minimum leverage ratio of 4.0%. A holding company and bank considered to be “well capitalized” must maintain a minimum total capital ratio of 10.0%, a minimum Tier 1 capital ratio of 8.0%, a minimum common equity Tier 1 capital ratio of 6.5%, and a minimum leverage ratio of 5.0%. As of September 30, 2024, the Company and the Bank exceeded the minimums necessary to qualify as “well capitalized” under the regulatory framework for prompt corrective action (“PCA”). As of December 31, 2023, the Bank exceeded the minimums necessary to qualify as “well capitalized” under the regulatory framework for PCA. Management believes, as of September 30, 2024 and December 31, 2023, that the Company and the Bank met all capital adequacy requirements to which we are subject.

Basel III, the comprehensive regulatory capital rules for U.S. banking organizations, requires all banking organizations to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively comprised of common equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not to the leverage ratio. Effective January 1, 2019, the capital conservation buffer increased by 0.625% to its fully phased-in 2.5%, such that the common equity Tier 1, Tier 1 and total capital ratio minimums inclusive of the capital conservation buffers were 7.0%, 8.5%, and 10.5% at September 30, 2024. At September 30, 2024, the Company and the Bank were in compliance with the capital conservation buffer requirements. To be categorized as well capitalized, the Company and the Bank must maintain minimum ratios as set forth in the table below.

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The following table also sets forth the Company’s actual capital amounts and ratios:

															Amount of Capital Required
															To be												To be Well-
															Adequately												Capitalized under
			Actual												Capitalized												PCA Provisions
(dollars in thousands)			Amount						Ratio						Amount						Ratio						Amount						Ratio
As of September 30, 2024:
California BanCorp:
Total Capital (to Risk-Weighted Assets)			$	478,321					12.65		%				$	302,513					8.0		%				N/A						N/A
Tier 1 Capital (to Risk-Weighted Assets)			365,382						9.66		%				226,885						6.0		%				N/A						N/A
CET1 Capital (to Risk-Weighted Assets)			365,382						9.66		%				170,163						4.5		%				N/A						N/A
Tier 1 Capital (to Average Assets)			365,382						10.55		%				138,588						4.0		%				N/A						N/A
California Bank of Commerce, N.A.:
Total Capital (to Risk-Weighted Assets)			$	473,738					12.53		%				$	302,427					8.0		%				$	378,033					10.0		%
Tier 1 Capital (to Risk-Weighted Assets)			429,941						11.37		%				226,820						6.0		%				302,427						8.0		%
CET1 Capital (to Risk-Weighted Assets)			429,941						11.37		%				170,115						4.5		%				245,722						6.5		%
Tier 1 Capital (to Average Assets)			429,941						12.41		%				138,572						4.0		%				173,215						5.0		%
As of December 31, 2023:
California Bank of Commerce, N.A.:
Total Capital (to Risk-Weighted Assets)			$	289,743					13.51		%				$	171,575					8.0		%				$	214,469					10.0		%
Tier 1 Capital (to Risk-Weighted Assets)			270,341						12.61		%				128,681						6.0		%				171,575						8.0		%
CET1 Capital (to Risk-Weighted Assets)			270,341						12.61		%				96,511						4.5		%				139,405						6.5		%
Tier 1 Capital (to Average Assets)			270,341						11.65		%				92,818						4.0		%				116,022						5.0		%

The primary source of funds for the Company is dividends from the Bank. Under federal law, the Bank may not declare a dividend in excess of its undivided profits and, absent the approval of the OCC, the Bank’s primary banking regulator, if the total amount of dividends declared by the Bank in any calendar year exceeds the total of the Bank’s retained net income of that current period, year to date, combined with its retained net income for the preceding two years. The Bank is also prohibited from declaring or paying any dividend if, after making the dividend, the Bank would be considered “undercapitalized” (as defined by reference to other OCC regulations). Federal bank regulatory agencies have authority to prohibit banking institutions from paying dividends if those agencies determine that, based on the financial condition of the bank, such payment will constitute an unsafe or unsound practice.

The Federal Reserve limits the amount of dividends that bank holding companies may pay on common stock to income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. It is also the Federal Reserve’s policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of strength to its banking subsidiaries. Additionally, in consideration of the current financial and economic environment, the Federal Reserve has indicated that bank holding companies should carefully review their dividend policies.

NOTE 15 - FAIR VALUE

The fair value of a financial instrument is the amount at which the asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no market value exists for a significant

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portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature, involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

ASC Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Fair value of financial instruments

Fair value estimates are based on financial instruments both on and off the balance sheet without attempting to estimate the value of anticipated future business, and the value of assets and liabilities that are not considered financial instruments. Additionally, tax consequences related to the realization of the unrealized gains and losses can have a potential effect on fair value estimates and have not been considered in many of the estimates. The following methods and assumptions were used to estimate the fair value of significant financial instruments:

Cash and Due from Banks: The carrying amounts of cash and short-term instruments approximate fair values because of the liquidity of these instruments.

Federal Funds Sold and Interest-Bearing Balances: The carrying amount is assumed to be the fair value given the short-term nature of these deposits.

Debt Securities Held to Maturity and Available for Sale: The fair values of securities held to maturity and available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.

Loans Held for Sale: The fair value of loans held-for-sale is based on commitments outstanding from investors as well as what secondary market investors are currently offering for portfolios with similar characteristics.

Loans Held for Investment, net: The fair value of loans, which is based on an exit price notion, is generally determined using an income based approach based on discounted cash flow analysis. This approach utilizes the contractual maturity of the loans and market indications of interest rates, prepayment speeds, defaults and credit risk in determining fair value. The fair value for PCD loans incorporated market-based loss rates used to estimated expected life of loan credit losses. The noncredit discount resulting from the acquired PCD loans was allocated to each individual asset. If an individually evaluated loan has had a charge-off or if the fair value of the collateral is less than the recorded investment in the loan, we establish a specific reserve and report the loan as nonrecurring Level 3. Loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. For the fair value of collateral-dependent individually evaluated loans, an asset-based approach is applied to determine the estimated fair values of the underlying collateral based on recent real estate appraisals, less costs to sell. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. New appraisals in certain circumstances, including when there has been significant deterioration in the condition of the collateral, if the foreclosure process has begun, or if the existing valuation is deemed to be outdated. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable

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sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Restricted Stock Investments: Investments in FHLB and Federal Reserve stocks are recorded at cost and measured for impairment. Ownership of FHLB and Federal Reserve stocks are restricted to member banks and the securities do not have a readily determinable market value. Purchases and sales of these securities are at par value with the issuer. The fair value of investments in FHLB and Federal Reserve stock is equal to the carrying amount.

Other Equity Securities: The fair value of equity securities is based on quoted prices in active markets for identical assets to determine the fair value. If quoted prices are not available to determine fair value, the Company estimates the fair values by using independent pricing models, quoted prices of securities with similar characteristics, or discounted cash flows.

Other Real Estate Owned (“OREO”): Nonrecurring adjustments to certain commercial and residential real estate properties classified as OREO are measured at the lower of the carrying amount or fair value, less costs to sell. The fair value of OREO is generally based on recent real estate appraisals or broker opinions, obtained from independent third parties, which are frequently adjusted by management to reflect current conditions and estimated selling costs.

Accrued Interest Receivable: The fair value of accrued interest receivable approximates their carrying amounts.

Deposits: The fair values disclosed for demand deposits, including interest and non-interest demand accounts, savings, and certain types of money market accounts are by definition based on carrying value. Fair value for fixed-rate certificates of deposit is estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregate expected monthly maturities on time deposits. Early withdrawal of fixed-rate certificates of deposit is not expected to be significant.

Borrowings: The fair values of the Company’s overnight borrowings from the Federal Home Loan Bank approximates their carrying value as the advances were recently borrowed at market rate. The fair value of fixed-rated term borrowings is estimated using a discounted cash flow through the remaining maturity dates based on the current borrowing rates for similar types of borrowing arrangements. The fair values of subordinated debt are based on rates currently available to the Company for debt with similar terms and remaining maturities.

Accrued Interest Payable: The fair value of accrued interest payable approximates their carrying amounts.

Off-Balance Sheet Financial Instruments: The fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements. The fair value of these financial instruments is not material.

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The estimated fair value hierarchy level and estimated fair value of financial instruments at September 30, 2024 and December 31, 2023, is summarized as follows:

												September 30, 2024												December 31, 2023
																		Estimated												Estimated
						Fair Value						Carrying						Fair						Carrying						Fair
(dollars in thousands)						Hierarchy						Value						Value						Value						Value
Financial assets:
Cash and due from banks						Level 1						$	115,165					$	115,165					$	33,008					$	33,008
Fed funds and interest-bearing balances						Level 1						499,258						499,258						53,785						53,785
Debt securities available for sale						Level 1/2						159,330						159,330						130,035						130,035
Debt securities held to maturity						Level 2						53,364						49,487						53,616						50,432
Loans held for sale						Level 2						33,704						34,508						7,349						7,834
Loans held for investment, net						Level 3						3,146,162						3,144,451						1,934,873						1,883,154
Restricted stock, at cost						Level 2						27,394						27,394						16,055						16,055
Other equity securities						Level 2						14,712						14,712						9,187						9,187
Accrued interest receivable						Level 2						15,632						15,632						7,301						7,301
Financial liabilities:
Deposits						Level 2						3,740,915						3,740,963						1,943,556						1,943,007
Borrowings						Level 2						69,142						69,053						102,865						102,447
Accrued interest payable						Level 2						4,976						4,976						477						477

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Recurring fair value measurements

The following table provides the hierarchy and fair value for each major category of assets and liabilities measured at fair value on a recurring basis at the periods indicated:

						Recurring Fair Value Measurements
(dollars in thousands)						Level 1						Level 2						Level 3						Total
September 30, 2024
Securities available for sale:
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities						$	—					$	92,259					$	—					$	92,259
SBA securities						—						5,684						—						5,684
U.S. Treasury						17,321						—						—						17,321
U.S. Agency						—						1,743						—						1,743
Collateralized mortgage obligations						—						40,573						—						40,573
Taxable municipals						—						923						—						923
Tax exempt bank-qualified municipals						—						827						—						827
						$	17,321					$	142,009					$	—					$	159,330
December 31, 2023
Securities available for sale:
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities						$	—					$	74,434					$	—					$	74,434
SBA securities						—						5,782						—						5,782
U.S. Treasury						2,417						—						—						2,417
U.S. Agency						—						1,670						—						1,670
Collateralized mortgage obligations						—						43,501						—						43,501
Taxable municipals						—						1,421						—						1,421
Tax exempt bank-qualified municipals						—						810						—						810
						$	2,417					$	127,618					$	—					$	130,035

Nonrecurring fair value measurements

The Company may also be required, from time to time, to measure certain other assets and liabilities on a nonrecurring basis in accordance with generally accepted accounting principles.

Collateral-dependent loans. For the valuation of the collateral-dependent loans, the Company relies primarily on third-party valuation information from certified appraisers and values are generally based upon recent appraisals of the underlying collateral, brokers’ opinions based upon recent sales of comparable properties, estimated equipment auction or liquidation values, income capitalization, or a combination of income capitalization and comparable sales. Depending on the type of underlying collateral, valuations may be adjusted by management for qualitative factors such as economic factors and estimated liquidation expenses. The range of these possible adjustments may vary. At September 30, 2024, the Company’s individual evaluated collateral dependent loans were evaluated based on the estimated fair value of the underlying collateral from the Company’s internal reviews, including reviews of the most recent appraisals and the current sale market condition. These reviews resulted in a partial charge off of $967 thousand on the individually evaluated loans in the third quarter of 2024.

At December 31, 2023, the Company took a partial charge-off of $1.3 million on an individually evaluated collateral-dependent loan based on its recent property appraisals during the year ended December 31, 2023.

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Other real estate owned, net (“OREO”). Subsequent to foreclosure, it may be necessary to record nonrecurring fair value adjustments for declines in fair value of OREO. Fair value, when recorded, is determined based on appraisals by qualified licensed appraisers and adjusted for management’s estimates of costs to sell. Accordingly, values for OREO are classified as Level 3.

During the three and nine months ended September 30, 2024, the Company recorded a $614 thousand valuation allowance due to a decline in the fair value of the underlying property in the third quarter of 2024. This amount is included within other charges and fees in the accompanying consolidated statements of operations.

The following tables summarize the fair value of assets and liabilities measured at fair value on a nonrecurring basis as of September 30, 2024 and December 31, 2023.

												Fair Value Measurement Level
												Quoted Prices in
												Active Markets for						Significant Other						Significant
						Fair						Identical Assets						Observable Inputs						Unobservable Inputs
(dollars in thousands)						Value						(Level 1)						(Level 2)						(Level 3)
September 30, 2024
Collateral dependent loans (1):
Construction and Land						$	10,000					$	—					$	—					$	10,000
1-4 Family Residential						4,600						—						—						4,600
Foreclosed assets:
Other real estate owned, net						$	4,083					$	—					$	—					$	4,083
December 31, 2023
Collateral dependent loans (1):
Multifamily Residential						$	13,000					$	—					$	—					$	13,000

(1) Collateral-dependent loans whose fair value is based upon appraisals.

Quantitative information about Level 3 fair value measurements measured on a non-recurring basis are summarized below as of September 30, 2024 and December 31, 2023.

Asset Fair

Valuation

Unobservable

% or Range %

(dollars in thousands)

Value

Technique

Input

(Weighted Average)

September 30, 2024

Construction and Land

$

10,000

Market approach

Land value

N/A

1-4 Family Residential

4,600

Market approach

Cost to sell

7.50%-7.50% (7.50%)

Other real estate owned, net

$

4,083

Market approach

Cost to sell

5.75%-5.75% (5.75%)

December 31, 2023

Multifamily Residential

$

13,000

Income approach

Capitalization rate

3.84%-4.94% (4.50%)

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our consolidated financial condition and consolidated results of operations should be read in conjunction with our consolidated financial statements and related notes. Historical consolidated results of operations and the percentage relationships among any amounts included, and any trends that may appear, may not indicate trends in operations or consolidated results of operations for any future periods. We are a bank holding company and we conduct all of our material business operations through the Bank. As a result, the discussion and analysis below primarily relate to activities conducted at the Bank level.

Overview

California BanCorp, formerly known as Southern California Bancorp, is a California corporation incorporated on October 2, 2019, and headquartered in Del Mar, California. On May 15, 2020, we completed a reorganization whereby California Bank of Commerce, N.A., formerly known as Bank of Southern California, N.A., became the wholly owned subsidiary of the Company. California Bank of Commerce, N.A. has a wholly-owned subsidiary, BCAL OREO1, LLC, which was incorporated on February 14, 2024. BCAL OREO1, LLC is used for holding other real estate owned and other assets acquired by foreclosure. We are regulated as a bank holding company by the Board of Governors of the Federal Reserve System (“Federal Reserve”). The Bank operates under a national charter and is regulated by the Office of Comptroller of the Currency (“OCC”).

We are a relationship-focused community bank and we offer a range of financial products and services to individuals, professionals, and small- to medium-sized businesses through our 14 branch offices serving Southern and Northern California. We keep a steady focus on our solution-driven, relationship-based approach to banking, providing clients accessibility to decision makers and enhancing the value of our services through strong client partnerships. Our lending products consist primarily of construction and land development loans, real estate loans, C&I loans and consumer loans, and we are a Preferred SBA Lender. Our deposit products consist primarily of demand deposit, money market, and certificates of deposit. We also provide treasury management services including online banking, cash vault, sweep accounts and lock box services.

Recent Developments

Merger with California BanCorp (“CALB”)

On July 31, 2024, the Company completed its all-stock merger with CALB on the terms set forth in the Agreement and Plan of Merger and Reorganization, dated January 30, 2024, by and between the Company and CALB. At July 31, 2024, CALB had total loans of $1.43 billion , total assets of $1.91 billion, and total deposits of $1.64 billion. Immediately following the merger of CALB with and into the Company, California Bank of Commerce, a California state-chartered bank and wholly-owned subsidiary of CALB, merged with and into the Bank. Effective with these mergers, the corporate names of Southern California Bancorp and Bank of Southern California, N.A. were changed to California BanCorp and California Bank of Commerce, N.A., respectively. The merger expands the Company’s footprint into Northern California and provides an opportunity for building scale and increasing market share through complementary business models with a strong deposit base. The combined company retained all banking offices of both banks, adding California Bank of Commerce’s one full-service bank branch and its four loan production offices in the Bay Area to the Bank’s 13 full-service bank branches located throughout the Southern California region.

Under the terms of the Agreement and Plan of Merger and Reorganization, each outstanding share of CALB common stock was exchanged for the right to receive 1.590 shares of the Company’s common stock, resulting in the net issuance of approximately 13,579,454 shares, with cash (without interest) paid in lieu of fractional shares and repurchase of shares for settlement of accelerated restricted stock units. Refer to Note 2 - Business Combinations of the Notes to Consolidated Financial Statements included in Part I - Financial

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Information - Item 1. Financial Statements of this filing for more information regarding business combinations and related activity.

Impact of Federal Reserve Rapid Rate Hiking Cycle on the Economy and Banking Industry

Between March 2022 and September 2023, the Federal Reserve raised interest rates eleven times by an aggregate of 525 basis points, to a range between 5.25% and 5.50%, the highest level in 22 years. The rapid rate hiking cycle was in response to an increase in inflation, as measured by the Consumer Price Index, from 1.2% in November 2020 to 9.1% in July 2022, which has since moderated to 2.4% in September 2024. In its September 2024 meeting, the Federal Reserve reduced federal funds interest rates by 50 basis points to a target rate between 4.75% and 5.0%. In the statement issued after the meeting, the Federal Reserve noted it “has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”

Concerns regarding a potential recession have moderated with full year U.S. 2023 GDP reported at 2.5%, slowing to 1.3% in the first quarter of 2024 and rebounding to 3.0% and 2.8% in the second and third quarters of 2024, respectively, with Moody’s full-year 2024 GDP growth forecast at 2.7%. California’s 2023 GDP increased by 2.1% from 2022 and it is forecast by Moody’s to decrease by 2.0% in 2024 and 1.3% in 2025. Despite the anticipated slowdown in California, it is still considered to have the fifth largest economy in the world. Higher interest rates and broader economic headwinds have put a damper on investment, particularly in the near term for the tech industry, which employs 8% of the state’s workforce, as tech payrolls have trended lower over the past year. The U.S. Bureau of Labor Statistics reports California’s September 2024 unemployment rate at 5.3%; it has been a range between 5.0% and 5.3% since September 2023.

The rapid rise in interest rates between 2022 and 2023 resulted in an industry-wide reduction in the fair value of many banks’ securities portfolios, pressuring their liquidity. The subsequent bank runs led to the failure of several financial institutions beginning in March of 2023 and the distress at New York Community Bank in early 2024, fostering a state of volatility and uncertainty with respect to the health of the U.S. banking system, particularly around liquidity, uninsured deposits and customer concentrations. The situation has stabilized due to strong actions taken by federal regulators in attempts to calm the markets, coupled with the Federal Reserve’s initiation of reductions to the federal funds interest rate.

We have a strong consolidated balance sheet with diversified deposit and loan portfolios, with very little sector or individual customer concentration, other than our CRE concentration. Our relationship-based banking model is founded on strong, ongoing relationships with our commercial clients, which represent a broad variety of industries. The recent uncertainty in the banking industry has provided us with an opportunity to attract new clients that have concerns about the banks they have been doing business with, based on the above events. We have no meaningful exposure to cryptocurrency or venture capital business models, our accumulated other comprehensive loss on our available-for-sale debt securities is manageable, and our capital position is strong. We also have elected to vigorously defend our deposit base in the face of increasing competition and deposit costs by adjusting the rates we pay on interest-bearing deposits.

We have a highly skilled and experienced lending production team and credit administration team. Given our concentration in commercial real estate secured loans, we mitigate that risk through comprehensive underwriting policies, semi-annual loan level reviews, close monitoring of self-established industry and geographical and collateral type limits, periodic stress testing and continuous portfolio risk management reporting. Per the regulatory definition of commercial real estate, at September 30, 2024, our concentration of such loans represented 479% of our total risk-based capital. In addition, at September 30, 2024, total loans secured by commercial real estate under construction and land development represented 51% of our total risk-based capital. The non-performing loans for these segments per the regulatory definition of commercial real estate loans at September 30, 2024 were $18.8 million and there were $2.4 million charge-offs during the nine months ended September 30, 2024. At September 30, 2024, our only OREO, carried at $4.1 million, was from a multifamily nonaccrual loan we foreclosed on in the third quarter of 2024.

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Given the nature of our commercial banking business, approximately 44% of our total deposits exceeded the FDIC deposit insurance limits at September 30, 2024. However, we offer our deposit customers access to the Certificate of Deposit Account Registry Service (“CDARS”), IntraFi Network Insured Cash Sweep (“ICS”), and Reich & Tang Deposit Solutions (“R&T”) networks. We receive an equal dollar amount of deposits (“reciprocal deposits”) from other participating banks in exchange for the deposits we place into the networks to fully qualify large customer deposits for FDIC insurance. These reciprocal deposits allow us to divide customers’ deposits that exceed the FDIC insurance limits into smaller amounts, below the FDIC insurance limits, and place those deposits in other participating FDIC insured institutions with the convenience of managing all deposit accounts through our Bank. These reciprocal deposits are not required to be treated as brokered deposits up to the lesser of 20% of the Bank’s total liabilities or $5 billion. Our total reciprocal deposits increased to $839.7 million, representing 22% of total deposits and 22% of Bank’s total liabilities at September 30, 2024, compared to $274.1 million, or 14% of total deposits at December 31, 2023. The excess over 20% increased our wholesale funding to total assets ratio and net non core funding dependence ratio. These two ratios were still within the Bank's internal policy limit. In connection with the Merger, the Company acquired $442.7 million in fair value of reciprocal deposits, of which included $98.4 million in ICS, $306.6 million in R&T and $37.7 in CDARS.

We have a small investment portfolio of high-quality securities. In 2022, we deployed our excess cash by purchasing held-to-maturity debt securities that are not marked to market, which means there is no unrealized loss recorded through the accumulated other comprehensive loss if their market value is impacted by changes in interest rates. We continue to reposition our debt securities mix to protect us from an unpredictable interest rate environment. In connection with the Merger, our investment portfolio increased by $42.6 million, consisting primarily of treasury and mortgage-backed securities. At September 30, 2024, the amortized cost of our held-to-maturity debt securities was $53.4 million, or approximately 1.2% of total assets. The fair value of our available-for-sale debt securities was $159.3 million, or approximately 3.7% of total assets. The decreases in the 10-Year Treasury Bond to below 4% in the third quarter, resulted in a lower net unrealized losses on our debt securities at September 30, 2024. The 10-Year Treasury Bond was approximately 3.8% at the end of September 2024. At September 30, 2024, our accumulated other comprehensive loss, net of taxes, decreased to $2.9 million, compared to $4.5 million at December 31, 2023. If we realized all of our unrealized losses on both held-to-maturity and available-for-sale debt securities, our losses, net of taxes would be $5.6 million at September 30, 2024. The results of our stress testing on our debt security portfolio at September 30, 2024, illustrated that our losses, net of taxes on both held-to-maturity and available-for-sale debt securities would increase to $24.8 million in a 300 basis point rate increase shock scenario. If we realized all of these unrealized losses, the Bank would continue to exceed all regulatory capital requirements necessary to be considered well capitalized.

At September 30, 2024, our liquidity position remained strong, with the following financial balances (unaudited), compared to December 31, 2023:

•Total cash and cash equivalents of approximately $614.4 million, compared to $86.8 million.

•Total liquidity ratio of approximately 21.0%, compared to 11.1%.

•Unpledged, liquid securities at fair value were approximately $146.7 million, compared to $130.0 million.

•Available borrowing capacity from the Federal Home Loan Bank (“FHLB”) secured lines of credit of approximately $663.6 million, compared to $339.2 million. At September 30, 2024, there were no overnight FHLB borrowings.

•Available borrowing capacity from the Federal Reserve Discount Window program was approximately $446.4 million, compared to $141.6 million. There were no outstanding borrowings under this program at September 30, 2024.

•Available borrowing capacity from seven unsecured credit lines from correspondent banks totaling $113.5 million at both period ends. There were no outstanding borrowings on these lines at September 30, 2024.

•Total available borrowing capacity was approximately $1.22 billion at September 30, 2024, compared to $555.8 million.

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•Total available liquidity was approximately $1.98 billion at September 30, 2024.

We continue to monitor macroeconomic variables related to increasing interest rates, inflation, and concerns regarding an economic downturn, and its potential effects on our business, customers, employees, communities and markets. The following challenges could have an impact on our business, consolidated financial condition or near- or longer-term consolidated results of operations:

•Slower loan growth and declining deposits;

•Difficulty retaining and attracting deposit relationships;

•Credit quality deterioration of our loan portfolio resulting in additional provision for credit losses and impairment charges;

•Margin pressure as we increase deposit rates in response to potential further rate increases by our competitors;

•Merger and related costs being higher than anticipated;

•Merger cost savings being less than anticipated;

•Increases in other comprehensive loss from the unrealized losses on available-for-sale debt securities; and

•Liquidity stresses to maintain sufficient levels of high-quality liquid assets and access to borrowing lines.

Critical Accounting Policies and Estimates

We have chosen accounting policies that it believes are appropriate to accurately and fairly report its operating results and financial position, and we apply those accounting policies in a consistent manner. The Significant Accounting Policies are summarized in Note 1 - Basis of Presentation and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Part I - Financial Information - Item 1. Financial Statements included in the 2023 Annual Report on Form 10-K.

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Financial Highlights

The following table sets forth certain of our financial highlights as of and for each of the periods presented. This data should be read in conjunction with our consolidated financial statements and related notes included herein at Part I - Financial Information, Item 1 - Financial Statements of this filing.

			Three Months Ended																		Nine Months Ended September 30,
($ in thousands except share and per share data)			September 30, 2024						June 30, 2024						September 30, 2023						2024						2023
EARNINGS
Net interest income			$	36,942					$	21,007					$	23,261					$	78,443					$	71,579
Provision for (reversal of) credit losses			$	22,963					$	2,893					$	(96)					$	25,525					$	91
Noninterest income			$	1,174					$	1,169					$	815					$	3,756					$	3,481
Noninterest expense			$	37,680					$	19,005					$	14,781					$	71,666					$	44,407
Income tax (benefit) expense			$	(6,063)					$	88					$	2,835					$	(3,653)					$	9,064
Net (loss) income			$	(16,464)					$	190					$	6,556					$	(11,339)					$	21,498
Pre-tax pre-provision income(1)			$	436					$	3,171					$	9,295					$	10,533					$	30,653
Adjusted pre-tax pre-provision income(1)			$	15,041					$	3,662					$	9,295					$	26,178					$	30,653
Diluted (loss) earnings per share			$	(0.59)					$	0.01					$	0.35					$	(0.53)					$	1.15
Ending shares outstanding			32,142,427						18,547,352						18,309,282						32,142,427						18,309,282
PERFORMANCE RATIOS
Return on average assets			(1.82)		%				0.03		%				1.12		%				(0.55)		%				1.25		%
Adjusted return on average assets(1)			1.01		%				0.11		%				1.12		%				0.74		%				1.25		%
Return on average common equity			(15.28)		%				0.26		%				9.38		%				(4.48)		%				10.63		%
Adjusted return on average common equity(1)			8.44		%				0.82		%				9.38		%				6.00		%				10.63		%
Yield on loans			6.79		%				6.21		%				5.97		%				6.40		%				5.89		%
Yield on earning assets			6.49		%				5.97		%				5.72		%				6.15		%				5.63		%
Cost of deposits			2.09		%				2.12		%				1.56		%				2.09		%				1.22		%
Cost of funds			2.19		%				2.21		%				1.62		%				2.19		%				1.30		%
Net interest margin			4.43		%				3.94		%				4.23		%				4.12		%				4.43		%
Efficiency ratio(1)			98.9		%				85.7		%				61.4		%				87.2		%				59.2		%
Adjusted efficiency ratio(1)			60.5		%				83.5		%				61.4		%				68.2		%				59.2		%
Net charge-offs to average loans held-for-investment			(0.17)		%				(0.31)		%				0.00		%				(0.16)		%				0.00		%

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																					September 30, 2024						December 31, 2023
CAPITAL
Tangible equity to tangible assets(1)																					8.58		%				10.73		%
Book value (BV) per common share																					$	15.50					$	15.69
Tangible BV per common share(1)																					$	11.28					$	13.56
ASSET QUALITY
Allowance for loan losses (ALL)																					$	53,552					$	22,569
Reserve for unfunded loan commitments																					4,071						933
Allowance for credit losses (ACL)																					$	57,623					$	23,502
Allowance for loan losses to nonperforming loans																					209		%				174		%
ALL to total loans																					1.67		%				1.15		%
ACL to total loans																					1.80		%				1.20		%
Net charge-offs to average loans held-for-investment																					(0.16)		%				(0.07)		%
30-89 days past due, excluding nonaccrual loans																					$	19,110					$	19
Over 90 days past due, excluding nonaccrual loans																					$	37					$	—
Special mention loans																					$	93,448					$	2,996
Special mention loans to total loans held for investment																					2.92		%				0.15		%
Substandard loans																					$	104,298					$	19,502
Substandard loans to total loans held for investment																					3.26		%				1.00		%
Nonperforming loans																					$	25,698					$	13,004
Nonperforming loans to total loans held for investment																					0.80		%				0.66		%
Other real estate owned																					$	4,083					$	—
Nonperforming assets																					$	29,781					$	13,004
Nonperforming assets to total assets																					0.68		%				0.55		%
END OF PERIOD BALANCES
Total loans, including loans held for sale																					$	3,233,418					$	1,964,791
Total assets																					$	4,362,767					$	2,360,252
Deposits																					$	3,740,915					$	1,943,556
Loans to deposits																					86.4		%				101.1		%
Shareholders' equity																					$	498,064					$	288,152

(1) Refer to Non-GAAP Financial Measures in the Management's Discussion and Analysis of Financial Condition and Results of Operations of this filing.

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Non-GAAP Financial Measures

This filing contains certain non-GAAP financial measures in addition to results presented in accordance with GAAP. We believe the presentation of certain non-GAAP financial measures provides information useful to assess our consolidated financial condition and consolidated results of operations and to assist investors in evaluating our consolidated financial results relative to our peers. These non-GAAP financial measures complement our GAAP reporting and are presented below to provide investors and others with information that we use to manage the business each period. Because not all companies use identical calculations, the presentation of these non-GAAP financial measures may not be comparable to other similarly titled measures used by other companies. These non-GAAP measures should be taken together with the corresponding GAAP measures and should not be considered a substitute of the GAAP measures.

(1) Efficiency ratio is computed by dividing noninterest expense by total net interest income and noninterest income. We measure our success and the productivity of our operations through monitoring of the efficiency ratio. Adjusted noninterest expense is computed by adjusting noninterest expense for merger related expense for the period indicated. Adjusted efficiency ratio is computed by dividing adjusted noninterest expense by total net interest income and noninterest income.

(2) Pre-tax pre-provision income is computed by adding net interest income and noninterest income and subtracting noninterest expense. This non–GAAP financial measure provides a greater understanding of pre–tax profitability before giving effect to credit loss expense. Adjusted pre-tax pre-provision income is computed by adding net interest income and noninterest income and subtracting adjusted noninterest expense.

(3) Adjusted net (loss) income is computed by adjusting net (loss) income for the tax-effected one-time initial provision for credit losses related to non-purchased credit deteriorated (“non-PCD”) loans and unfunded loan commitments and tax-effected merger related expense adjustments for the periods indicated.

(4) Average tangible common equity is computed by subtracting average goodwill and average core intangible deposits, (“net average intangible assets”), from average shareholders’ equity.

(5) Adjusted return on average assets is computed by dividing annualized adjusted net income by average assets. Adjusted return on average equity is computed by dividing annualized adjusted net income by average shareholders’ equity.

(6) Return on average tangible common equity is computed by dividing net (loss) income by average tangible common equity. Adjusted return on average tangible common equity is computed by dividing adjusted net income by average tangible common equity.

(7) Tangible common equity and tangible assets are computed by subtracting goodwill and core deposit intangibles, net, from total shareholders’ equity and total assets, respectively.

(8) Tangible common equity to tangible assets ratio is computed by dividing tangible common equity by tangible assets.

(9) Tangible book value per share is computed by dividing tangible common equity by total common shares outstanding. We consider tangible book value per share a meaningful measure because it suggests what our common shareholders can expect to receive if we are in financial distress and are forced to liquidate our assets at the book value price. Intangible assets like goodwill are not a part of the process since they cannot be sold for cash during liquidation.

We consider average tangible common equity, tangible common equity, and the tangible common equity to tangible asset ratio as useful additional methods to evaluate our capital utilization and adequacy to withstand unexpected market conditions. These ratios differ from the regulatory capital ratios principally in that the numerator excludes goodwill and other intangible assets.

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The following tables present a reconciliation of non-GAAP financial measures to GAAP measures for the periods indicated:

						Three Months Ended																		Nine Months Ended September 30,
(dollars in thousands)						September 30, 2024						June 30, 2024						September 30, 2023						2024						2023
Efficiency Ratio
Noninterest expense						$	37,680					$	19,005					$	14,781					$	71,666					$	44,407
Less: Merger and related expenses						14,605						491						—						15,645						—
Adjusted noninterest expense						$	23,075					$	18,514					$	14,781					$	56,021					$	44,407
Net interest income						36,942						21,007						23,261						78,443						71,579
Noninterest income						1,174						1,169						815						3,756						3,481
Total net interest income and noninterest income						$	38,116					$	22,176					$	24,076					$	82,199					$	75,060
(1) Efficiency ratio (non-GAAP)						98.9		%				85.7		%				61.4		%				87.2		%				59.2		%
(1) Adjusted efficiency ratio (non-GAAP)						60.5		%				83.5		%				61.4		%				68.2		%				59.2		%
Pre-tax Pre-provision Income
Net interest income						$	36,942					$	21,007					$	23,261					$	78,443					$	71,579
Noninterest income						1,174						1,169						815						3,756						3,481
Total net interest income and noninterest income						38,116						22,176						24,076						82,199						75,060
Less: Noninterest expense						37,680						19,005						14,781						71,666						44,407
(2) Pre-tax pre-provision income (non-GAAP)						$	436					$	3,171					$	9,295					$	10,533					$	30,653
Add: Merger and related expenses						14,605						491						—						15,645						—
(2) Adjusted pre-tax pre-provision income (non-GAAP)						$	15,041					$	3,662					$	9,295					$	26,178					$	30,653
Return on Average Assets, Equity, and Tangible Equity
Net (loss) income						$	(16,464)					$	190					$	6,556					$	(11,339)					$	21,498
Add: After-tax Day1 provision for non PCD loans and unfunded loan commitments (1)						14,978						—						—						14,978						—
Add: After-tax merger and related expenses (1)						10,576						412						—						11,535						—
(3) Adjusted net income (non-GAAP)						$	9,090					$	602					$	6,556					$	15,174					$	21,498
Average assets						$	3,593,157					$	2,294,678					$	2,313,941					$	2,735,695					$	2,293,060
Average shareholders’ equity						428,558						294,121						277,442						337,813						270,405
Less: Average intangible assets						104,409						38,900						39,158						60,917						39,249
(4) Average tangible common equity (non-GAAP)						$	324,149					$	255,221					$	238,284					$	276,896					$	231,156
Return on average assets						(1.82		%)				0.03		%				1.12		%				(0.55		%)				1.25		%
(5) Adjusted return on average assets (non-GAAP)						1.01		%				0.11		%				1.12		%				0.74		%				1.25		%
Return on average equity						(15.28		%)				0.26		%				9.38		%				(4.48		%)				10.63		%
(5) Adjusted return on average equity (non-GAAP)						8.44		%				0.82		%				9.38		%				6.00		%				10.63		%

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						Three Months Ended																		Nine Months Ended September 30,
(dollars in thousands)						September 30, 2024						June 30, 2024						September 30, 2023						2024						2023
(6) Return on average tangible common equity (non-GAAP)						(20.21		%)				0.30		%				10.92		%				(5.47		%)				12.43		%
(6) Adjusted return on average tangible common equity (non-GAAP)						11.16		%				0.95		%				10.92		%				7.32		%				12.43		%

(1) After-tax merger and related expenses are presented using a 29.56% tax rate.

(dollars in thousands, except per share amounts)						September 30, 2024												December 31, 2023
Tangible Common Equity Ratio/Tangible Book Value Per Share
Shareholders’ equity						$	498,064											$	288,152
Less: Intangible assets						135,546												38,998
(7) Tangible common equity (non-GAAP)						$	362,518											$	249,154
Total assets						$	4,362,767											$	2,360,252
Less: Intangible assets						135,546												38,998
(7) Tangible assets (non-GAAP)						$	4,227,221											$	2,321,254
Equity to asset ratio						11.42		%										12.21		%
(8) Tangible common equity to tangible asset ratio (non-GAAP)						8.58		%										10.73		%
Book value per share						$	15.50											$	15.69
(9) Tangible book value per share (non-GAAP)						$	11.28											$	13.56
Shares outstanding						32,142,427												18,369,115

Impact of Merger on Earnings

The comparability of our financial information is affected by the merger with CALB. We completed this Merger on July31, 2024. This merger has been accounted for using the acquisition method of accounting and, accordingly, CALB’s operating results have been included in the consolidated financial statements for periods beginning after July 31, 2024. Refer to Note 2 - Business Combinations of the Notes to Consolidated Financial Statements included in Part I - Financial Information - Item 1. Financial Statements of this filing for more information regarding business combinations and related activity.

Results of Operations

Net (Loss) Income

Three Months Ended September 30, 2024 Compared to Three Months Ended June 30, 2024

Net loss for the three months ended September 30, 2024 was $16.5 million, or $0.59 per diluted share, compared to net income of $190 thousand or $0.01 per diluted share in the prior quarter. The $16.7 million decrease in net income from the prior quarter was primarily due to a $18.7 million increase in noninterest expense and a $20.1 million increase in the provision for credit losses, partially offset by a $15.9 million increase in net interest income and a $6.2 million decrease in income taxes. Results during the three months ended September 30, 2024 were negatively impacted by $15.0 million of after-tax CECL-related provisions for credit losses on loans and unfunded commitments related to the Merger and $10.6 million of after-tax merger expenses. Excluding one-time CECL-related provision for credit losses on acquired loans and unfunded loan commitments, and merger related expenses, the Company would have reported net income (non-GAAP) of $9.1 million, or $0.33 per diluted

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share, for the third quarter of 2024. Pre-tax, pre-provision income for the three months ended September 30, 2024 was $436 thousand, a decrease of $2.7 million, or 86.3% compared to pre-tax, pre-provision income of $3.2 million for the three months ended June 30, 2024.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Net loss for the three months ended September 30, 2024 was $16.5 million, or $0.59 per diluted share, compared to net income of $6.6 million, or $0.35 per diluted share for the same 2023 period. The $23.0 million decrease in net income from the three months ended September 30, 2023 was primarily due to a $22.9 million increase in noninterest expense, a $23.1 million increase in provision for credit losses, partially offset by a $13.7 million increase in net interest income and an $8.9 million decrease in income taxes. The increase in losses primarily related to the Merger as previously described above. Pre-tax, pre-provision income for the three months ended September 30, 2024 was $436 thousand, a decrease of $8.9 million, or 95.3% compared to pre-tax, pre-provision income of $9.3 million for the same 2023 period.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Net loss for the nine months ended September 30, 2024 was $11.3 million, or $0.53 per diluted share, compared to net income of $21.5 million, or $1.15 per diluted share in the prior year. The $32.8 million decrease in net income from the prior year was primarily due to a $25.4 million increase in the provision for credit losses, and a $27.3 million increase in noninterest expense, partially offset by a $6.9 million increase in net interest income and a $12.7 million decrease in income taxes. Excluding one-time CECL-related provision for credit losses on acquired loans and unfunded loan commitments, and merger related expenses, the Company would have reported net income (non-GAAP) of $15.2 million, or $0.70 per diluted share, for the nine months ended September 30, 2024. Pre-tax, pre-provision income for the nine months ended September 30, 2024 was $10.5 million, a decrease of $20.1 million, or 65.6% compared to pre-tax, pre-provision income of $30.7 million for the nine months ended September 30, 2023.

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Net Interest Income and Margin

Net interest income is our primary source of revenue, which is the difference between interest income on loans, debt securities and other investments (collectively, “interest-earning assets”) and interest expense on deposits and borrowings (collectively, “interest-bearing liabilities”). Net interest margin represents net interest income expressed as a percentage of interest-earning assets. Net interest income is affected by changes in volume, mix, and rates of interest-earning assets and interest-bearing liabilities, as well as days in a period. We closely monitor both total net interest income and the net interest margin and seek to maximize net interest income without exposing us to an excessive level of interest rate risk through our asset and liability management policies. The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs for the periods indicated:

			Three Months Ended
			September 30, 2024																		June 30, 2024																		September 30, 2023
			Average Balance						Income/Expense						Yield/Cost						Average Balance						Income/Expense						Yield/Cost						Average Balance						Income/Expense						Yield/Cost
Assets			($ in thousands)
Interest-earning assets:
Total loans(1)			$2,783,581						$47,528						6.79		%				$1,882,845						$29,057						6.21		%				$1,924,384						$28,977						5.97		%
Taxable debt securities			149,080						1,687						4.50		%				123,906						1,229						3.99		%				111,254						942						3.36		%
Tax-exempt debt securities (2)			53,682						306						2.87		%				53,754						306						2.90		%				59,630						359						3.02		%
Deposits in other financial institutions			161,616						2,215						5.45		%				47,417						638						5.41		%				50,367						681						5.36		%
Fed funds sold/resale agreements			143,140						1,886						5.24		%				19,062						261						5.51		%				20,653						283						5.44		%
Restricted stock investments and other bank stock			24,587						505						8.17		%				17,091						358						8.42		%				16,365						242						5.87		%
Total interest-earning assets			3,315,686						54,127						6.49		%				2,144,075						31,849						5.97		%				2,182,653						31,484						5.72		%
Total noninterest-earning assets			277,471																		150,603																		131,288
Total assets			$	3,593,157																	$	2,294,678																	$	2,313,941
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing NOW accounts			$	617,373					$	2,681					1.73		%				$	361,244					$	2,134					2.38		%				$	353,714					$	1,706					1.91		%
Money market and savings accounts			999,322						8,392						3.34		%				653,244						4,905						3.02		%				675,609						4,216						2.48		%
Time deposits			421,241						5,087						4.80		%				259,722						3,145						4.87		%				183,745						1,867						4.03		%
Total interest-bearing deposits			2,037,936						16,160						3.15		%				1,274,210						10,184						3.21		%				1,213,068						7,789						2.55		%
Borrowings:
FHLB advances			611						9						5.86		%				27,391						387						5.68		%				11,731						163						5.51		%
Subordinated debt			52,246						1,016						7.74		%				17,901						271						6.09		%				17,830						271						6.03		%
Total borrowings			52,857						1,025						7.71		%				45,292						658						5.84		%				29,561						434						5.82		%
Total interest-bearing liabilities			2,090,793						17,185						3.27		%				1,319,502						10,842						3.30		%				1,242,629						8,223						2.63		%
Noninterest-bearing liabilities:
Noninterest-bearing deposits (3)			1,031,844																		658,001																		768,148
Other liabilities			41,962																		23,054																		25,722
Shareholders’ equity			428,558																		294,121																		277,442
Total Liabilities and Shareholders’ Equity			$	3,593,157																	$	2,294,678																	$	2,313,941
Net interest spread															3.22		%																2.67		%																3.09		%
Net interest income and margin(4)									$	36,942					4.43		%										$	21,007					3.94		%										$	23,261					4.23		%
Cost of deposits(5)			$3,069,780						$16,160						2.09		%				$1,932,211						$10,184						2.12		%				$1,981,216						$7,789						1.56		%
Cost of funds(6)			$3,122,637						$17,185						2.19		%				$1,977,503						$10,842						2.21		%				$2,010,777						$8,223						1.62		%

(1)Total loans are net of deferred loan origination fees/costs and discounts/premiums, and include average balances of loans held for sale and nonperforming loans. Interest income includes accretion of net deferred loan fees and net discounts on acquired loans of $4.7 million, $386 thousand and $550 thousand for the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, respectively.

(2)Tax-exempt debt securities yields are presented on a tax equivalent basis using a 21% tax rate.

(3)Average noninterest-bearing deposits represent 33.61%, 34.05% and 38.77% of average total deposits for the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, respectively.

(4)Annualized net interest income divided by average interest-earning assets.

(5)Total deposits is the sum of interest-bearing deposits and noninterest-bearing deposits. The cost of deposits is calculated as annualized total interest expense on deposits divided by average total deposits.

(6)Total funding is the sum of total interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.

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			Nine Months Ended
			September 30, 2024																		September 30, 2023
			Average Balance						Income/Expense						Yield/Cost						Average Balance						Income/Expense						Yield/Cost
Assets			($ in thousands)
Interest-earning assets:
Total loans(1)			$	2,194,059					$	105,169					6.40		%				$	1,906,327					$	83,983					5.89		%
Taxable debt securities			133,321						4,129						4.14		%				104,881						2,506						3.19		%
Tax-exempt debt securities (2)			53,759						918						2.89		%				68,043						1,302						3.24		%
Deposits in other financial institutions			87,966						3,569						5.42		%				43,629						1,675						5.13		%
Fed funds sold/resale agreements			57,634						2,281						5.29		%				21,182						798						5.04		%
Restricted stock investments and other bank stock			19,383						1,174						8.09		%				15,774						689						5.84		%
Total interest-earning assets			2,546,122						117,240						6.15		%				2,159,836						90,953						5.63		%
Total noninterest-earning assets			189,573																		133,224
Total assets			$	2,735,695																	$	2,293,060
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing NOW accounts			$	446,759					$	6,860					2.05		%				$	290,326					$	3,301					1.52		%
Money market and savings accounts			767,916						18,022						3.13		%				674,452						10,254						2.03		%
Time deposits			312,544						11,253						4.81		%				170,620						4,373						3.43		%
Total interest-bearing deposits			1,527,219						36,135						3.16		%				1,135,398						17,928						2.11		%
Borrowings:
FHLB advances			26,105						1,103						5.64		%				16,282						632						5.19		%
Subordinated debt			29,425						1,559						7.08		%				17,807						814						6.11		%
Total borrowings			55,530						2,662						6.40		%				34,089						1,446						5.67		%
Total interest-bearing liabilities			1,582,749						38,797						3.27		%				1,169,487						19,374						2.21		%
Noninterest-bearing liabilities:
Noninterest-bearing deposits (3)			784,609																		829,082
Other liabilities			30,524																		24,086
Shareholders’ equity			337,813																		270,405
Total Liabilities and Shareholders’ Equity			$	2,735,695																	$	2,293,060
Net interest spread															2.88		%																3.42		%
Net interest income and margin (4)									$	78,443					4.12		%										$	71,579					4.43		%
Cost of deposits (5)			$2,311,828						$36,135						2.09		%				$1,964,480						$17,928						1.22		%
Cost of funds (6)			$2,367,358						$38,797						2.19		%				$1,998,569						$19,374						1.30		%

(1)Total loans are net of deferred loan origination fees/costs and discounts/premiums, and include average balances of loans held for sale and nonperforming loans. Interest income includes accretion of net deferred loan fees and net discounts on acquired loans of $5.6 million and $1.5 million for the nine months ended September 30, 2024 and 2023, respectively.

(2)Tax-exempt debt securities yields are presented on a tax equivalent basis using a 21% tax rate.

(3)Average noninterest-bearing deposits represent 33.94%, and 42.20% of average total deposits for the nine months ended September 30, 2024 and 2023, respectively.

(4)Annualized net interest income divided by average interest-earning assets.

(5)Total deposits is the sum of interest-bearing deposits and noninterest-bearing deposits. The cost of deposits is calculated as annualized total interest expense on deposits divided by average total deposits.

(6)Total funding is the sum of total interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.

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Rate/Volume Analysis

The following table presents the changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. Information is provided on changes attributable to (i) changes in volume multiplied by the prior rate and (ii) changes in rate multiplied by the prior volume. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

			Three Months Ended September 30, 2024 vs. June 30, 2024																		Three Months Ended September 30, 2024 vs. September 30, 2023																		Nine Months Ended September 30, 2024 vs. 2023
			Increase (Decrease) Due to																		Increase (Decrease) Due to																		Increase (Decrease) Due to
			Volume						Rate						Net						Volume						Rate						Net						Volume						Rate						Net
Interest-earning assets:			($ in thousands)
Total loans			$	15,487					$	2,984					$	18,471					$	14,183					$	4,368					$	18,551					$	13,526					$	7,660					$	21,186
Taxable debt securities			286						172						458						371						374						745						779						844						1,623
Tax-exempt debt securities			4						(4)						—						(31)						(22)						(53)						(218)						(166)						(384)
Deposits in other financial institutions			1,572						5						1,577						1,523						11						1,534						1,795						99						1,894
Fed fund sold/resale agreements			1,639						(14)						1,625						1,614						(11)						1,603						1,441						42						1,483
Restricted stock investments and other bank stock			158						(11)						147						147						116						263						181						304						485
Total interest-earning assets			19,146						3,132						22,278						17,807						4,836						22,643						17,504						8,783						26,287
Interest-bearing liabilities:
Interest-bearing NOW accounts			1,252						(705)						547						1,155						(180)						975						2,161						1,398						3,559
Money market and savings accounts			2,913						574						3,487						2,410						1,766						4,176						1,589						6,179						7,768
Time deposits			2,012						(70)						1,942						2,814						406						3,220						4,660						2,220						6,880
Total interest-bearing deposits			6,177						(201)						5,976						6,379						1,992						8,371						8,410						9,797						18,207
Borrowings:
FHLB advances			(378)						—						(378)						(159)						5						(154)						411						60						471
Subordinated debt			653						92						745						650						95						745						600						145						745
Total borrowings			275						92						367						491						100						591						1,011						205						1,216
Total interest-bearing liabilities			6,452						(109)						6,343						6,870						2,092						8,962						9,421						10,002						19,423
Net interest income			$	12,694					$	3,241					$	15,935					$	10,937					$	2,744					$	13,681					$	8,083					$	(1,219)					$	6,864

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Three Months Ended September 30, 2024 Compared to Three Months Ended June 30, 2024

Net interest income for the third quarter of 2024 was $36.9 million, compared with $21.0 million in the prior quarter. The increase in net interest income was primarily due to a $22.3 million increase in total interest and dividend income, partially offset by a $6.3 million increase in total interest expense in the third quarter of 2024 as compared to the prior quarter. The increase in interest income and interest expense primarily relates to increases in total average interest-earning assets and total interest-bearing liabilities from the Merger during the quarter. During the third quarter of 2024, loan interest income increased $18.5 million, of which $4.1 million was related to accretion income from the net purchase accounting discounts on acquired loans, total debt securities income increased $458 thousand, and interest and dividend income from other financial institutions decreased $3.3 million. The increase in interest income was primarily driven by the mix of interest-earning assets added by the Merger and the impact of the accretion and amortization of fair value marks. Average total interest-earning assets increased $1.17 billion, the result of a $900.7 million increase in average total loans, a $114.2 million increase in average deposits in other financial institutions, a $25.1 million increase in average total debt securities, a $124.1 million increase in average Fed funds sold/resale agreements and a $7.5 million increase in average restricted stock investments and other bank stock. The increase in interest expense for the third quarter of 2024 was primarily due to a $6.0 million increase in interest expense on interest-bearing deposits, the result of a $763.7 million increase in average interest-bearing deposits, coupled with a $34.3 million increase in average subordinated debt, partially offset by a 6 basis point decrease in average interest-bearing deposit costs and a $378 thousand decrease in interest expense on Federal Home Loan Bank (“FHLB”) borrowings, the result of a $26.8 million decrease in average FHLB borrowings in the third quarter of 2024.

Net interest margin for the third quarter of 2024 was 4.43%, compared with 3.94% in the prior quarter. The increase was primarily related to a 52 basis point increase in the total interest-earning assets yield, coupled with a 2 basis point decrease in the cost of funds. The yield on total average earning assets in the third quarter of 2024 was 6.49%, compared with 5.97% in the prior quarter. The yield on average total loans in the third quarter of 2024 was 6.79%, an increase of 58 basis points from 6.21% in the prior quarter. Accretion income from the net purchase accounting discounts on acquired CALB loans was $4.1 million and the related amortization expense impact on interest expense was $278 thousand, which increased the net interest margin by 46 basis points in the third quarter of 2024. Accretion income from the net purchase accounting discounts on acquired CALB loans increased the yield on average total loans by 59 basis points in the third quarter of 2024.

Cost of funds for the third quarter of 2024 was 2.19%, a decrease of 2 basis points from 2.21% in the prior quarter. The decrease was primarily driven by a 6 basis point decrease in the cost of average interest-bearing deposits, and an increase in average noninterest-bearing deposits, partially offset by an increase of 187 basis points in the cost of total borrowings, which was driven primarily by the amortization expense of $373 thousand, or 281 basis points from the purchase accounting discounts on acquired subordinated debt. Average noninterest-bearing demand deposits increased $373.8 million to $1.03 billion and represented 33.6% of total average deposits for the third quarter of 2024, compared with $658.0 million and 34.1%, respectively, in the prior quarter; average interest-bearing deposits increased $763.7 million to $2.04 billion during the third quarter of 2024. The total cost of deposits in the third quarter of 2024 was 2.09%, a decrease of 3 basis points from 2.12% in the prior quarter. The cost of total interest-bearing deposits decreased primarily due to the Company’s deposit repricing strategy and paying off high cost brokered deposits in the third quarter of 2024.

Average total borrowings increased $7.6 million to $52.9 million for the third quarter of 2024, primarily due to an increase of $34.3 million in average subordinated debt from the $50.8 million in fair value of subordinated debt acquired in the Merger, partially offset by a decrease of $26.8 million in average FHLB borrowings during the third quarter of 2024. The average cost of total borrowings was 7.71% for the third quarter of 2024, up from 5.84% in the prior quarter.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Net interest income for the three months ended September 30, 2024 was $36.9 million, compared to $23.3 million for the three months ended September 30, 2023. The increase in interest income primarily relates to

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increases in total average interest-earning assets due to the Merger during the quarter. The $13.7 million increase in net interest income was due to higher average balances and yields on interest-earning assets, partially offset by higher average balances and costs of interest-bearing liabilities.

Net interest margin for the three months ended September 30, 2024 was 4.43%, compared with 4.23% for the same 2023 period. The 20 basis point increase was primarily related to a 77 basis point increase in the total average interest-earning assets yield resulting from higher market interest rates, accretion income from the net purchase accounting discounts on acquired loans and a change in our average interest-earning asset mix, partially offset by a 57 basis point increase in the cost of funds. The yield on total average earning assets during the three months ended September 30, 2024 was 6.49%, compared with 5.72% for the same 2023 period. The yield on average loans during the three months ended September 30, 2024 was 6.79%, an increase of 82 basis points from 5.97% for the same 2023 period. Accretion income from the net purchase accounting discounts on acquired loans was $4.1 million and the amortization expense impact on interest expense was $278 thousand, which increased the net interest margin by 46 basis points in the third quarter of 2024.

During the three months ended September 30, 2024, total interest income increased $22.6 million, comprised of a $18.6 million increase in total loan interest income, of which $4.1 million was related to accretion income from the net purchase accounting discounts on acquired loans, a $692 thousand increase in total debt securities income, and a $3.4 million increase interest and dividend income from other financial institutions and other interest-earning assets. The increase in interest income was primarily driven by the mix of interest-earning assets added by the Merger and the impact of the accretion and amortization of fair value loan marks. Average interest-earning assets increased $1.13 billion, resulting primarily from a $859.2 million increase in average total loans, a $111.2 million increase in average deposits in other financial institutions, a $31.9 million increase in total average debt securities, a $8.2 million increase in average restricted stock investments and other bank stock, and a $122.5 million increase in average Fed fund sold/resale agreements.

During the three months ended September 30, 2024, total interest expense increased by $9.0 million to $17.2 million, comprised primarily of a $8.4 million increase in interest on interest-bearing deposits due primarily to an increase in average interest-bearing liabilities resulting from the Merger, coupled with repricing deposits due to peer bank deposit competition.

Total cost of funds for the three months ended September 30, 2024 was 2.19%, an increase of 57 basis points from 1.62% for the same 2023 period. The increase was primarily driven by a 60 basis point increase in the cost of interest-bearing deposits, coupled with an increase in average interest-bearing and noninterest-bearing deposits, and an increase of 1.89% basis points in the cost of total borrowings, which was driven primarily by the amortization expense of $373 thousand, or 281 basis points from the purchase accounting discounts on acquired subordinated debts from the Merger. Average noninterest-bearing demand deposits increased $263.7 million to $1.03 billion and represented 33.6% of total average deposits for the three months ended September 30, 2024, compared with $768.1 million and 38.8%, respectively, for the same 2023 period; average interest-bearing deposits increased $824.9 million to $2.04 billion during the three months ended September 30, 2024. The total cost of deposits for the three months ended September 30, 2024 was 2.09%, up 53 basis points from 1.56% for the same 2023 period.

Average total borrowings increased $23.3 million to $52.9 million for the three months ended September 30, 2024 resulting from an increase of $34.4 million in average subordinated debt from the $50.8 million in fair value of subordinated debt acquired in the Merger, partially offset by a $11.1 million decrease in average FHLB advances. The average cost of total borrowings was 7.71% for the three months ended September 30, 2024, a 189 basis point increase from 5.82% for the same 2023 period.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Net interest income for the nine months ended September 30, 2024 was $78.4 million, compared to $71.6 million for the nine months ended September 30, 2023. The increase was primarily due to a $26.3 million increase in total interest income, offset by a $19.4 million increase in total interest expense. The increase in interest income and interest expense primarily relates to increases in total average interest-earning assets and total average interest-bearing liabilities from the Merger during the third quarter of 2024. During the nine months ended September 30, 2024, total loan interest income increased $21.2 million, of which $4.1 million was related

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to accretion income from the net purchase accounting discounts on acquired loans, total debt securities income increased $1.2 million, and interest and dividend income from other financial institutions and other interest-earning assets increased $3.9 million. The increase in interest income was primarily driven by the mix of interest-earning assets added by the Merger and the impact of the accretion and amortization of fair value marks. The increase in interest income was primarily due to higher average balances, due in part to the Merger, and a 52 basis point increase in yield on the interest-earning assets for the nine months ended September 30, 2024 compared to the same 2023 period. Average interest-earning assets increased $386.3 million, resulting from a $287.7 million increase in average total loans, a $14.2 million increase in total average debt securities, a $44.3 million increase in average deposits in other financial institutions, and a $36.5 million increase in average Fed funds sold/resale agreements.

During the nine months ended September 30, 2024, total interest expense increased by $19.4 million to $38.8 million, comprised primarily of a $18.2 million increase in interest on average interest-bearing deposits due to increases related to interest-bearing deposits from the Merger, increases in target Fed fund rates, coupled with the increase in other average interest-bearing liabilities balances between periods.

Net interest margin for the nine months ended September 30, 2024 was 4.12%, compared with 4.43% for the nine months ended September 30, 2023. The decrease was primarily related to an 89 basis point increase in the cost of funds, partially offset by a 52 basis point increase in the total interest-earning assets yield resulting from higher market interest rates and a change in our interest-earning asset mix. The yield on total earning assets during the nine months ended September 30, 2024 was 6.15%, compared with 5.63% for the nine months ended September 30, 2023. The yield on average total loans during the nine months ended September 30, 2024 was 6.40%, a 51 basis point increase from 5.89% for the nine months ended September 30, 2023. The cost on total interest-bearing liabilities during the nine months ended September 30, 2024 was 3.27%, a 106 basis point increase from 2.21% for the same 2023 period. Accretion income from the net purchase accounting discounts on acquired loans was $4.1 million and the amortization expense impact on interest expense was $278 thousand, which increased the net interest margin by 20 basis points for the nine months ended September 30, 2024. Accretion income from the net purchase accounting discounts on acquired loans increased the yield on average total loans by 25 basis points for the nine months ended September 30, 2024.

Total cost of funds for the nine months ended September 30, 2024 was 2.19%, an increase of 89 basis points from 1.30% for the nine months ended September 30, 2023. The increase was primarily driven by a 105 basis point increase in the cost of interest-bearing deposits, coupled with an increase in average interest-bearing deposits, and a decrease in average noninterest-bearing deposits. Average noninterest-bearing demand deposits decreased $44.5 million to $784.6 million and represented 33.9% of total average deposits for the nine months ended September 30, 2024, compared with $829.1 million and 42.2%, respectively, for the same 2023 period; average interest-bearing deposits increased $391.8 million to $1.53 billion during the nine months ended September 30, 2024. The total cost of deposits for the nine months ended September 30, 2024 was 2.09%, up 87 basis points from 1.22% for the same 2023 period.

Average total borrowings increased $21.4 million to $55.5 million for the nine months ended September 30, 2024, resulting primarily from a $9.8 million increase in average FHLB advances and an $11.6 million increase in subordinated debt from the $50.8 million in fair value of subordinated debt acquired in the Merger. The average cost of total borrowings was 6.40% for the nine months ended September 30, 2024, a 73 basis point increase from 5.67% for the same 2023 period.

Provision for Credit Losses

Three Months Ended September 30, 2024 Compared to Three Months Ended June 30, 2024

We recorded a provision for credit losses of $23.0 million for the three months ended September 30, 2024, compared to $2.9 million in the prior quarter. The increase was largely related to the Merger, and the resulting one-time initial provision for credit losses on acquired non-PCD loans of $18.5 million and unfunded

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loan commitments of $2.7 million. Total net charge-offs were $1.2 million, which included $967 thousand from a construction loan and $135 thousand from the consumer solar loan portfolio. The provision for credit losses for the three months ended September 30, 2024 included a $3.3 million provision for unfunded loan commitments, of which $2.7 million was related to the one-time initial provision for credit losses on acquired unfunded loan commitments, and $511 thousand related to the increase in unfunded loan commitments during the third quarter of 2024, coupled with higher loss rates and average funding rates used to estimate the ACL. Total unfunded loan commitments increased $662.4 million to $1.03 billion at September 30, 2024, including $574.3 million in unfunded loan commitments related to the Merger, compared to $371.5 million in unfunded loan commitments at June 30, 2024. The provision for credit losses for loans held for investment in the three months ended September 30, 2024 was $19.7 million, an increase of $16.7 million from $3.0 million in the prior quarter. The increase was driven primarily by the one-time initial provision for credit losses on acquired non-PCD loans and increases in special mention loans and loans held for investment. Additionally, qualitative factors, coupled with changes in the portfolio mix and in net charge-offs, and in the reasonable and supportable forecast, primarily related to the economic outlook for California which were partially offset by decreases in legacy substandard accruing loans, were factors related to the increase in the provision for credit losses. We continue to monitor macroeconomic variables related to increasing interest rates, inflation and the concerns of an economic downturn, and believe it is appropriately provisioned for the current environment.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

We recorded a provision for credit losses of $23.0 million for the three months ended September 30, 2024, compared to a reversal of credit losses of $96 thousand for the same 2023 period. The increase was largely related to the Merger, and the resulting one-time initial provision for credit losses on acquired non-PCD loans of $18.5 million and unfunded commitments of $2.7 million.

The provision for credit losses for loans held for investment in the three months ended September 30, 2024 was $19.7 million an increase of $19.5 million from $202 thousand in the same 2023 period. The increase was driven primarily by the one-time initial provision for credit losses on acquired non-PCD loans and increases in special mention loans and loans held for investment. Additionally, qualitative factors, coupled with changes in the portfolio mix and in net charge-offs, and in the reasonable and supportable forecast, primarily related to the economic outlook for California which were partially offset by decreases in legacy substandard accruing loans, were factors related to the increase in the provision for credit losses. We continue to monitor macroeconomic variables related to increasing interest rates, inflation and the concerns of an economic downturn, and believe it is appropriately provisioned for the current environment.

The provision for credit losses for the three months ended September 30, 2023 included a $202 thousand provision for credit losses on loans held for investment, partially offset by a $298 thousand reversal of credit provision for unfunded loan commitments primarily due to the impact of lower unfunded loan commitments.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

We recorded a provision for credit losses of $25.5 million for the nine months ended September 30, 2024, compared to a provision for credit losses of $91 thousand for the same 2023 period. The increase was largely related to the Merger, and the resulting one-time initial provision for credit losses on acquired non-PCD loans of $18.5 million and unfunded commitments of $2.7 million. The provision for credit losses for the nine months ended September 30, 2024 included a $22.4 million provision for credit losses on loans held for investment largely due to the one-time initial provision for credit losses on acquired non-PCD loans, and a $3.1 million provision for credit losses on unfunded loan commitments primarily due to the initial provision for credit losses on unfunded commitments acquired in the Merger and the impact of higher unfunded loan commitments. The provision for credit losses for the nine months ended September 30, 2023 included a $600 thousand provision for credit losses on loans held for investment, partially offset by a $509 thousand reversal of credit provision for unfunded loan commitments.

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Noninterest Income

The following table sets forth the various components of our noninterest income for the periods indicated:

						Three months ended																		Nine Months Ended
(dollars in thousands)						September 30, 2024						June 30, 2024						September 30, 2023						September 30, 2024						September 30, 2023
Service charges and fees on deposit accounts						$	842					$	378					$	286					$	1,582					$	881
Interchange and ATM income						294						190						184						647						558
Gain (loss) on sale of loans						8						—						(54)						423						831
Income from bank-owned life insurance						398						266						238						925						693
Servicing and related income (expense) on loans, net						82						(5)						61						150						223
Gain on sale of debt securities						—						—						—						—						34
Loss on sale and disposal of fixed assets						—						(19)						—						(19)						—
Other charges and fees						(450)						359						100						48						261
Total noninterest income						$	1,174					$	1,169					$	815					$	3,756					$	3,481

Three Months Ended September 30, 2024 Compared to Three Months Ended June 30, 2024

Total noninterest income during the three months ended September 30, 2024 was $1.2 million, an increase of $5 thousand compared to total noninterest income of $1.2 million in the prior quarter. Noninterest income was impacted by the Merger through increases in service charges and fees on deposit accounts, bank owned life insurance income, and servicing and related income on loans; offset by a $613 thousand valuation allowance on other real estate owned (“OREO”) due to a decline in the fair value of the underlying property in the third quarter of 2024, which is included in other charges and fees in the accompanying consolidated statements of operations.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Total noninterest income during the three months ended September 30, 2024 was $1.2 million, an increase of $359 thousand compared to total noninterest income of $815 thousand for the same 2023 period. The increase was due primarily to the impact of the Merger, which resulted in increases in service charges and fees on deposit accounts, bank owned life insurance income, and servicing and related income on loans; offset by the $613 thousand valuation allowance on OREO.

Gain on sale of loans during the three months ended September 30, 2024 was $8 thousand, compared to a loss of $54 thousand for the same 2023 period. There were no SBA 7(a) loan sales during the three months ended September 30, 2024 and 2023. The amounts in both periods related to a guaranty activity from the U.S. Small Business Administration for previous SBA 7A loan sales.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Total noninterest income during the nine months ended September 30, 2024 was $3.8 million, an increase of $275 thousand compared to total noninterest income of $3.5 million for the same period in the prior year. The increase was due primarily to increases in service charges and fees on deposit accounts, and bank owned life insurance income from the Merger, offset by lower servicing and related income on loans, and the $613 thousand valuation allowance on OREO and lower gains on sale of loans for the nine months ended September 30, 2024.

Gain on sale of loans was $423 thousand during the nine months ended September 30, 2024, compared to $831 thousand for the same 2023 period. The $408 thousand decrease was primarily due to fewer SBA 7(a) loan sales during the nine months ended September 30, 2024. During the nine months ended September 30, 2024, loan

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sales related to six SBA loans with a net carrying value of $6.3 million, resulting in a gain of $415 thousand, at an average premium of 6.56% and two non-SBA loans with a net carrying value of $455 thousand, resulting in no gain or loss. In the same 2023 period, we sold nine SBA 7(a) loans with a net carrying value of $10.9 million, resulting in a gain on sale of $874 thousand at an average premium of 8.01%, and one non-SBA loan with a net carrying value of $39 thousand, resulting in a gain of $11 thousand.

Noninterest Expense

The following table sets forth the various components of our noninterest expense for the periods indicated:

						Three months ended																		Nine Months Ended
(dollars in thousands)						September 30, 2024						June 30, 2024						September 30, 2023						September 30, 2024						September 30, 2023
Salaries and employee benefits						$	15,385					$	8,776					$	9,736					$	33,771					$	29,651
Occupancy and equipment						2,031						1,445						1,579						4,928						4,553
Data processing and communications						1,536						1,186						1,144						3,872						3,376
Legal, audit and professional						669						557						598						1,742						2,050
Regulatory assessments						544						347						369						1,278						1,188
Director and shareholder expenses						520						229						215						952						642
Merger and related expenses						14,605						491						—						15,645						—
Core deposit intangible amortization						687						65						128						817						309
Other real estate owned expenses						3						4,935						—						5,026						—
Other expenses						1,700						974						1,012						3,635						2,638
Total noninterest expense						$	37,680					$	19,005					$	14,781					$	71,666					$	44,407

Three Months Ended September 30, 2024 Compared to Three Months Ended June 30, 2024

Total noninterest expense during the three months ended September 30, 2024 was $37.7 million, an increase of $18.7 million compared with total noninterest expense of $19.0 million in the prior quarter. The increase was largely due to increases related to the Merger, including an increase of $14.1 million in merger and related expenses, partially offset by a $4.9 million decrease in OREO expenses.

Salaries and employee benefits increased $6.6 million during the quarter to $15.4 million. The increase in salaries and employee benefits was primarily due to the growth in headcount from CALB employees retained subsequent to the Merger. The average full-time equivalent (“FTE”) employees for three months ended September 30, 2024 was 256 compared to 191 FTE employees for the prior quarter. The three months ended September 30, 2024 salaries and employee benefits also included a $1.3 million one-time stock-based compensation costs associated with non-continuing CALB executives and employees.

Occupancy and equipment expenses increased $586 thousand during the quarter to $2.0 million. The increase in occupancy and equipment expenses was primarily driven by the additional leased offices related expenses acquired from the Merger.

Merger and related expenses were $14.6 million during the three months ended September 30, 2024 and related to the recently completed merger with CALB, and primarily included severance and change in control costs of $6.2 million, financial advisory fees of $2.3 million, information technology expenses of $4.5 million, insurance costs of $919 thousand and legal and other professional costs of $305 thousand. There were $491 thousand in merger and related expenses in the prior quarter.

Core deposit intangible amortization increased $622 thousand during the three months ended September 30, 2024. The increase in core deposit intangible amortization was primarily driven by the additional amortization from the $22.7 million core deposit intangible acquired in the Merger.

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OREO expenses decreased $4.9 million during the three months ended September 30, 2024. The Company sold OREO and recognized a $4.8 million loss in the second quarter of 2024. There was no comparable transaction in the third quarter of 2024.

Our efficiency ratio (non-GAAP) for the three months ended September 30, 2024 was 98.9%, compared to 85.7% for the three months ended June 30, 2024. Excluding the merger and related expenses of $14.6 million, the efficiency ratio (non-GAAP) for the three months ended September 30, 2024 would have been 60.5%.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Total noninterest expense during the three months ended September 30, 2024 was $37.7 million, an increase of $22.9 million compared with total noninterest expense of $14.8 million for the same 2023 period. The increase was primarily due to higher costs as a result of the Merger, including increases in merger and related expenses and core deposit amortization.

Salaries and employee benefits were $15.4 million during the three months ended September 30, 2024, compared to $9.7 million for the same 2023 period. The $5.6 million increase in salaries and benefits was driven primarily by higher headcount as a result of the Merger. The average FTE employees for the three months ended September 30, 2024 was 256 compared to 207 FTE employees for the same 2023 period. The three months ended September 30, 2024 salaries and employee benefits also included a $1.3 million one-time stock-based compensation costs associated with non-continuing CALB executives and employees.

Data processing and communications were $1.5 million during the three months ended September 30, 2024, compared to $1.2 million for the same 2023 period. The $392 thousand increase in data processing and communications was primarily related to increases in transaction volume from both organic growth and the Merger.

Merger and related expenses were $14.6 million during the three months ended September 30, 2024 and related to the recently completed merger with CALB, and primarily included severance and change in control costs of $6.2 million, financial advisory fees of $2.6 million, information technology expenses of $4.7 million, insurance costs of $919 thousand, and legal and other professional costs of $768 thousand. There were no comparable expenses for the same 2023 period.

Core deposit intangible amortization increased $559 thousand during the three months ended September 30, 2024. The increase in core deposit intangible amortization was primarily driven by the additional amortization from the $22.7 million core deposit intangible acquired in the Merger.

Other expenses were $1.7 million during the three months ended September 30, 2024, compared to $1.0 million for the same 2023 period. The $688 thousand increase was due primarily to the increases in loan related expenses, customer service related expenses, travel expenses and insurance expenses as a result of completing the Merger.

Our efficiency ratio for the three months ended September 30, 2024 was 98.9%, compared to 61.4% for the three months ended September 30, 2023. Excluding the merger and related expenses of $14.6 million, the efficiency ratio (non-GAAP) for the three months ended September 30, 2024 would have been 60.5%.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Total noninterest expense during the nine months ended September 30, 2024 was $71.7 million, an increase of $27.3 million compared with total noninterest expense of $44.4 million for the same 2023 period. The increase was largely due to increases for the Merger, including increases in merger and related expenses, salaries and employee benefits, other real estate owned expenses, core deposit intangible amortization, and other expenses.

Salaries and employee benefits were $33.8 million during the nine months ended September 30, 2024, compared to $29.7 million during the prior year. The $4.1 million increase in salaries and benefits was driven primarily by higher headcount as a result of the Merger. The average FTE employees for the nine months ended September 30, 2024 was 236 compared to 207 FTE employees for the same 2023 period. The three months ended

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September 30, 2024 salaries and employee benefits also included the aforementioned one-time stock-based compensation costs associated with non-continuing CALB executives and employees.

During the nine months ended September 30, 2024, the Company sold OREO and recognized a $4.8 million loss. There was no comparable transaction in the same 2023 period.

Merger and related expenses were $15.6 million during the nine months ended September 30, 2024 and primarily included severance and change in control costs of $6.2 million, financial advisory fees of $5.1 million, information technology expenses of $4.5 million, and legal and other professional costs of $4.5 million. There were no comparable expenses for the same 2023 period.

Core deposit intangible amortization increased $508 thousand during the nine months ended September 30, 2024. The increase in core deposit intangible amortization was primarily driven by the additional amortization from the $22.7 million core deposit intangible acquired in the Merger.

Other expenses were $3.6 million during the nine months ended September 30, 2024, compared to $2.6 million for the same 2023 period. The $997 thousand increase was due primarily to the increases in loan related expenses, customer service related expenses, travel expenses and insurance expenses primarily as a result of the Merger.

Our efficiency ratio (non-GAAP) for the nine months ended September 30, 2024 and 2023 was 87.2% and 59.2%, respectively. Excluding the loss on sale of OREO, the efficiency ratio (non-GAAP) for the nine months ended September 30, 2024 would have been 81.4%. Excluding the merger and related expenses of $15.6 million, the efficiency ratio (non-GAAP) for the nine months ended September 30, 2024 would have been 68.2%.

Income Taxes

Three Months Ended September 30, 2024 Compared to Three Months Ended June 30, 2024

Income tax benefit during the three months ended September 30, 2024 was $6.1 million, compared to income tax expense of $88 thousand in the prior quarter. The effective rate was 26.9% during the three months ended September 30, 2024, compared to 31.7% for the prior quarter. The decrease in the effective tax rate between periods was primarily due to the impact of the non-tax deductible portion of the merger expenses and the vesting and exercise of equity awards combined with changes in the Company's stock price over time.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Income tax benefit for the three months ended September 30, 2024 was $6.1 million, compared to income tax expense of $2.8 million for the same 2023 period. The effective rate was 26.9% during the three months ended September 30, 2024, compared to 30.2% for the same 2023 period. The decrease in the effective tax rate between periods was primarily due to the impact of the non-tax deductible portion of the merger expenses and the vesting and exercise of equity awards combined with changes in the Company's stock price over time, partially offset by the impact of excess executive compensation.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Income tax benefit for the nine months ended September 30, 2024 was $3.7 million, compared to income tax expense of $9.1 million for the same 2023 period. The effective rate was 24.4% during the nine months ended September 30, 2024, compared to 29.7% for the same 2023 period. The decrease in effective tax rate between periods was primarily due to the impact of the non-tax deductible portion of the merger expenses and the vesting and exercise of equity awards combined with changes in the Company's stock price over time, partially offset by the impact of excess executive compensation.

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Financial Condition

Summary

Total assets at September 30, 2024 were $4.36 billion, an increase of $2.00 billion from $2.36 billion at December 31, 2023. The increase in total assets was primarily related to the $1.86 billion in fair value of total assets acquired in the Merger, which included increases of $1.36 billion in loans held for investment, $42.6 million in debt securities, and $336.3 million in cash and cash equivalents. In addition, the Company recorded preliminary goodwill of $74.7 million related to the Merger in the third quarter of 2024.

Total liabilities were $3.86 billion at September 30, 2024, an increase of $1.79 billion from $2.07 billion at December 31, 2023. The increase in total liabilities was driven by the $1.72 billion in fair value of total liabilities acquired in the Merger, which included $1.64 billion of deposits and $50.8 million of borrowings.

Shareholders’ equity was $498.1 million at September 30, 2024, an increase of $209.9 million from $288.2 million at December 31, 2023. The increase in shareholders’ equity was primarily driven by $214.4 million shares issued in connection with closing the Merger, $4.7 million related to share-based compensation activity, a $1.6 million decrease in net of tax unrealized losses on available-for-sale debt securities during the period, partially offset by $11.3 million of net loss during the nine months ended September 30, 2024.

Debt Securities

Our debt securities portfolio consists of both held-to-maturity and available-for-sale securities aggregating $212.7 million and $183.7 million at September 30, 2024 and December 31, 2023, respectively. The $29.0 million increase in debt securities was primarily related to the $42.6 million in debt securities acquired in the Merger, partially offset by paydowns, sales, maturities and calls. Our held-to-maturity debt securities and available-for-sale debt securities represented 1.22% and 3.65%, respectively, of total assets at September 30, 2024, compared to 2.27% and 5.51%, respectively, at December 31, 2023.

During the three and nine months ended September 30, 2024, there were no transfers between held-to-maturity and available-for-sale debt securities.

At September 30, 2024 and December 31, 2023, debt securities with an amortized cost of $56.3 million and $53.6 million, respectively, were pledged to the Federal Reserve as collateral for a secured line of credit of $49.7 million and $47.3 million, respectively.

Held-to-Maturity Debt Securities

The amortized cost of held-to-maturity debt securities and their approximate fair values at September 30, 2024 and December 31, 2023 were as follows:

(dollars in thousands)						Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value
September 30, 2024
Taxable municipals						$	553					$	—					$	(70)					$	483
Tax exempt bank-qualified municipals						52,811						—						(3,807)						49,004
						$	53,364					$	—					$	(3,877)					$	49,487
December 31, 2023
Taxable municipals						$	551					$	—					$	(73)					$	478
Tax exempt bank-qualified municipals						53,065						25						(3,136)						49,954
						$	53,616					$	25					$	(3,209)					$	50,432

At September 30, 2024, we had 61 held-to-maturity debt securities in a gross unrealized loss position with an amortized cost basis of $53.4 million with pre-tax unrealized losses of $3.9 million, compared to 58 held-to-

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maturity debt securities with an amortized cost basis of $51.5 million with pre-tax unrealized losses of $3.2 million at December 31, 2023. The effective duration of the held-to-maturity debt securities was 6.22 years and 5.58 years at September 30, 2024 and December 31, 2023, respectively. We have the intent and ability to hold the securities classified as held to maturity until they mature, at which time we will receive full value for the securities.

All held-to-maturity debt securities were municipal securities, and historically have had limited credit loss experience. At September 30, 2024 and December 31, 2023, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities were $483 thousand and $478 thousand, respectively, and $49.0 million and $50.0 million, respectively. At September 30, 2024 and December 31, 2023, the total held-to-maturity debt securities rated AA and above was $46.2 million and $47.0 million, respectively, and rated AA- was $3.3 million and $3.4 million, respectively. Accordingly, we applied a zero credit loss assumption for these securities and no allowance for credit loss was recorded as of September 30, 2024 and December 31, 2023.

Available-for-Sale Debt Securities

The amortized cost of available-for-sale debt securities and their approximate fair values at September 30, 2024 and December 31, 2023 were as follows:

(dollars in thousands)						Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value
September 30, 2024
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities						$	93,445					$	1,284					$	(2,470)					$	92,259
SBA securities						5,754						12						(82)						5,684
U.S. Treasury						17,552						34						(265)						17,321
U.S. Agency						2,000						—						(257)						1,743
Collateralized mortgage obligations						42,796						180						(2,403)						40,573
Taxable municipal						1,007						1						(85)						923
Tax exempt bank-qualified municipals						830						—						(3)						827
						$	163,384					$	1,511					$	(5,565)					$	159,330
December 31, 2023
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities						$	77,031					$	631					$	(3,228)					$	74,434
SBA securities						5,886						5						(109)						5,782
U.S. Treasury						2,760						—						(343)						2,417
U.S. Agency						2,000						—						(330)						1,670
Collateralized mortgage obligations						46,330						173						(3,002)						43,501
Taxable municipals						1,528						—						(107)						1,421
Tax exempt bank-qualified municipals						831						—						(21)						810
						$	136,366					$	809					$	(7,140)					$	130,035

The estimated fair value of available-for-sale debt securities was $159.3 million at September 30, 2024, an increase of $29.3 million, from $130.0 million at December 31, 2023. The increase was primarily due to $42.6 million in debt securities acquired in the Merger, purchases of $2.0 million, and fair value market adjustments of

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$2.3 million, partially offset by sales of $3.4 million, maturities of $5.5 million, and principal reductions and amortization of discounts and premiums aggregating to $8.7 million.

At September 30, 2024, we had 70 available-for-sale debt securities in a gross unrealized loss position with an amortized cost basis and fair value of $77.8 million and $72.2 million, respectively, with pre-tax unrealized losses of $5.6 million, compared to 76 available-for-sale debt securities with an amortized cost basis and fair value of $100.7 million and $93.5 million, respectively with pre-tax unrealized holding losses of $7.1 million at December 31, 2023. The net of tax unrealized loss on available-for-sale debt securities is reflected in accumulated other comprehensive loss. The effective duration of this portfolio was 4.14 years and 5.13 years at September 30, 2024 and December 31, 2023, respectively. We do not have the current intent to sell these available-for-sale debt securities with a fair value below amortized cost, and it is more likely than not that we will not be required to sell such securities prior to the recovery of their amortized cost basis. The issuers of these securities have not, to our knowledge, established any cause for default on these securities. As a result, we expect to recover the entire amortized cost basis of these securities.

When market interest rates increase, bond prices tend to fall and, consequently, the fair value of our securities may also decrease. Increases in longer-term market interest rates during 2023 and into 2024 have resulted in higher net unrealized losses in our debt securities. There may be further net unrealized losses on our debt securities classified as available–for-sale, which would negatively affect our total and tangible shareholders’ equity.

We determined that the increase in unrealized losses related to each available-for-sale debt security at September 30, 2024 was primarily attributable to factors other than credit related, including general volatility in market conditions. Our available-for-sale debt securities consisted of U.S. Treasury, U.S. government and agency and government sponsored enterprise securities, and municipals which are issued, guaranteed, or supported by the U.S. government, and historically have had limited credit loss experience. In addition, we reviewed the credit rating of the municipal securities. At September 30, 2024, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities was $923 thousand and $827 thousand, respectively. All of these available-for-sale municipal debt securities rated AA and above totaled $1.8 million. At December 31, 2023, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities was $1.4 million and $810 thousand, respectively. These available-for-sale debt securities rated AA and above totaled $1.4 million and rated AA+ totaled $810 thousand at December 31, 2023. Accordingly, we applied a zero credit loss assumption for these securities and no ACL was recorded as of September 30, 2024 and December 31, 2023.

The amortized cost, estimated fair value and weighted average yield of held-to-maturity and available-for-sale debt securities as of September 30, 2024 are presented below by contractual maturities. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

						Held-to-Maturity																		Available-for-Sale
(dollars in thousands)						Amortized Cost						Estimated Fair Value						Weighted Average Yield (1)						Amortized Cost						Estimated Fair Value						Weighted Average  Yield (1)
Due in one year or less						$	—					$	—					—		%				$	27,641					$	27,668					7.69		%
Due after one year through five years						—						—						—		%				10,246						9,367						2.17		%
Due after five years through ten years						22,282						20,911						2.22		%				17,670						16,579						3.42		%
Due after ten years						31,082						28,576						2.32		%				107,827						105,716						4.12		%
						$	53,364					$	49,487					2.28		%				$	163,384					$	159,330					4.53		%

(1)Weighted average yields are computed based on the amortized cost of the individual underlying securities.

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The following table presents the amortized cost and weighted average yields using amortized cost of held-to-maturity debt securities as of September 30, 2024, based on the contractual maturity dates:

			One Year of Less												More than One Year through Five Years												More than Five Years through Ten Years												More than Ten Years												Total
			Amortized Cost						Weighted Average Yield						Amortized Cost						Weighted Average Yield						Amortized Cost						Weighted Average Yield						Amortized Cost						Weighted Average Yield						Amortized Cost						Weighted Average Yield
Held-to-maturity:
Taxable municipals			$	—					—		%				$	—					—		%				$	553					2.30		%				$	—					—		%				$	553					2.30		%
Tax exempt bank-qualified municipals			—						—		%				—						—		%				21,729						2.22		%				31,082						2.32		%				52,811						2.28		%
Total			$	—					—		%				$	—					—		%				$	22,282					2.22		%				$	31,082					2.32		%				$	53,364					2.28		%

The following table presents the fair value and weighted average yields using amortized cost of available-for-sale debt securities as of September 30, 2024, based on the contractual maturity dates:

			One Year of Less												More than One Year through Five Years												More than Five Years through Ten Years												More than Ten Years												Total
			Fair Value						Weighted Average Yield						Fair Value						Weighted Average Yield						Fair Value						Weighted Average Yield						Fair Value						Weighted Average Yield						Fair Value						Weighted Average Yield
Available-for-sale:
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities			$	11,976					11.36		%				$	5,957					2.15		%				$	8,130					2.90		%				$	66,196					4.21		%				$	92,259					4.89		%
SBA securities			—						—		%				453						6.23		%				4,272						5.53		%				959						5.27		%				5,684						5.55		%
U.S. Treasury			14,865						5.02		%				2,456						0.94		%				—						—		%				—						—		%				17,321						4.39		%
U.S. Agency			—						—		%				—						—		%				1,743						2.05		%				—						—		%				1,743						2.05		%
Collateralized mortgage obligations			—						—		%				—						—		%				2,012						2.98		%				38,561						3.93		%				40,573						3.89		%
Taxable municipals			—						—		%				501						5.24		%				422						—		%				—						1.72		%				923						3.47		%
Tax exempt bank-qualified municipals			827						2.50		%				—						—		%				—						—		%				—						—		%				827						2.50		%
Total			$	27,668					7.69		%				$	9,367					2.17		%				$	16,579					3.42		%				$	105,716					4.12		%				$	159,330					4.53		%

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Loans Held for Sale

At September 30, 2024, loans held for sale totaled $33.7 million, consisting of $7.8 million SBA 7(a) loans and $25.9 million C&I loans transferred from loans held for investment, compared to $7.3 million loans held for sale, consisting of only SBA 7(a) loans, at December 31, 2023.

Loans Held for Investment

The composition of our loans held for investment at September 30, 2024 and December 31, 2023 was as follows:

(dollars in thousands)						September 30, 2024						% of Total Loans						December 31, 2023						% of Total Loans
Construction and land development						$	247,934					7.7		%				$	243,521					12.4		%
Real estate - other:
1-4 family residential						152,540						4.8		%				143,903						7.4		%
Multifamily residential						252,134						7.9		%				221,247						11.3		%
Commercial real estate and other						1,755,908						54.9		%				1,024,243						52.3		%
Commercial and industrial						765,472						23.9		%				320,142						16.4		%
Consumer						25,726						0.8		%				4,386						0.2		%
Loans(1)						3,199,714						100.0		%				1,957,442						100.0		%
Allowance for loan losses						(53,552)												(22,569)
Net loans						$	3,146,162											$	1,934,873

(1) Loans held for investment includes net unearned fees of $1.6 million and $2.3 million and net unearned discounts of $66.0 million and $1.4 million at September 30, 2024 and December 31, 2023, respectively. We recognized $4.2 million and $4.3 million, respectively, in interest accretion for acquired loans for the three and nine months ended September 30, 2024.

Total loans held for investment were $3.20 billion, or 73.3% of total assets, at September 30, 2024, an increase of $1.24 billion from $1.96 billion, or 82.9% of total assets, at December 31, 2023. The change during the nine months ended September 30, 2024, was due primarily to the Merger, which increased loans by $1.36 billion. Additionally, there were originations of $142.2 million and net advances of $46.4 million, offset by transfer to OREO of $17.7 million, partial loan charge-offs of $2.6 million and payoffs of $239.8 million during the nine months ended September 30, 2024.

Loans secured by real estate, defined as construction and land development loans and real estate - other loans, increased by $775.6 million to $2.41 billion at September 30, 2024 primarily due to the Merger. The increase in loans secured by real estate was primarily driven by a $4.4 million increase in construction and land development loans, and a $30.9 million increase in multifamily residential loans, a $8.6 million increase in 1-4 family residential loans, and $731.7 million increase in commercial real estate and other loans.

Commercial and industrial loans were $765.5 million at September 30, 2024, an increase of $445.3 million from $320.1 million at December 31, 2023. The increase in commercial and industrial loans during the nine months ended September 30, 2024 was primarily attributable to acquired loans of $495.4 million and originations of $52.2 million, partially offset by net paydowns of $15.7 million and payoffs of $86.6 million.

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Loan Maturities

The following table sets forth the amounts of gross loans, by maturity, at September 30, 2024:

(dollars in thousands)						Due in One Year or Less						Due after One Year through Five Years						Due after Five Years through Fifteen Years						Due after Fifteen Years						Total
Construction and land development						$	222,146					$	23,259					$	2,529					$	—					$	247,934
Real estate - other:
1-4 family residential						23,178						39,388						60,325						29,649						152,540
Multifamily residential						34,392						102,054						96,129						19,559						252,134
Commercial real estate and other						131,303						753,388						790,216						81,001						1,755,908
Commercial and industrial						279,180						362,597						123,692						3						765,472
Consumer						1,007						1,462						—						23,257						25,726
						$	691,206					$	1,282,148					$	1,072,891					$	153,469					$	3,199,714

The following table sets forth the amounts of gross loans, due after one year, presented by fixed or floating interest rates at September 30, 2024:

(dollars in thousands)						Fixed Rate						Floating Rate						Total
Construction and land development						$	2,766					$	23,022					$	25,788
Real estate - other:
1-4 family residential						31,421						97,941						129,362
Multifamily residential						125,790						91,952						217,742
Commercial real estate and other						766,695						857,910						1,624,605
Commercial and industrial						187,500						298,792						486,292
Consumer						24,497						222						24,719
						$	1,138,669					$	1,369,839					$	2,508,508

Loan Concentrations

Commercial real estate loans are generally viewed as having more risk of default than residential real estate loans. They are also typically larger than most residential real estate loans and consumer loans and depend on cash flows from the owner’s business or the property to service the debt. Because our loan portfolio, including loans held for sale, contains a number of CRE loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in our levels of nonperforming assets. Approximately 54.3% of our total loan portfolio, including loans held for sale, is comprised of commercial real estate loans as of September 30, 2024 as presented below:

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(dollars in thousands)						September 30, 2024						Percentage of CRE Portfolio						Average Loan Size						Weighted Average LTV 2
Commercial real estate loans (1):
Industrial						$	515,700					29.4		%				$	1,855					49		%
Office						255,700						14.6		%				1,788						50		%
Retail						296,600						16.9		%				1,707						46		%
Hotel						134,700						7.7		%				9,624						46		%
Special purpose						116,000						6.6		%				2,071						38		%
Self storage						90,800						5.2		%				6,489						45		%
Other						190,800						10.9		%				2,097						47		%
Medical/dental office						115,100						6.6		%				1,046						52		%
Restaurant						39,800						2.3		%				1,245						45		%
Total						$	1,755,200					100.0		%				$	1,959					49		%

(1)CRE loans include owner-occupied CRE and non-owner occupied CRE loans, but exclude farmland loans. Balance includes loans held for sale and loans held for investment.

(2)Weighted average loan-to-value (“LTV”) is based on current loan balance as of September 30, 2024, and collateral value at origination or renewal.

The following table presents the percentages of our commercial real estate loans broken out by occupancy as of September 30, 2024:

						September 30, 2024
						Owner Occupied												Non-owner Occupied
(dollars in thousands)						Balance						% of Total						Balance						% of Total
Commercial real estate loans (1):
Industrial						$	292,300					47.3		%				$	223,400					19.6		%
Special purpose						68,500						11.1		%				47,500						4.2		%
Office						63,800						10.3		%				191,900						16.9		%
Retail						33,900						5.5		%				262,700						23.1		%
Medical/dental office						67,000						10.8		%				48,100						4.2		%
Other						82,600						13.4		%				108,200						9.6		%
Restaurant						9,700						1.6		%				30,100						2.6		%
Self storage						—						—		%				90,800						8.0		%
Hotel						—						—		%				134,700						11.8		%
Total						$	617,800					100.0		%				$	1,137,400					100.0		%

(1)CRE loans include owner-occupied CRE and non-owner occupied CRE loans, but exclude farmland loans. Balance includes loans held for sale and loans held for investment.

With the increases in remote work over the last few years, rising interest rates and increasing vacancy rates nationwide, commercial real estate loans collateralized by office properties have unique credit risks. We attempt to reduce our credit risk within this portfolio by emphasizing loan-to-value ratios and debt service ratios. The following table presents a summary of the balances and weighted average loan-to-values of office loans and medical/dental office loans within our commercial real estate loan portfolio as of September 30, 2024:

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(dollars in thousands)						September 30, 2024						Weighted Average LTV 1
Office loans:
Up to $500						$	26,700					45		%
More than $500 through $2,000						102,300						49		%
More than $2,000 through $5,000						82,200						55		%
More than $5,000 through $10,000						61,500						55		%
More than $10,000 through $20,000						73,200						44		%
Greater than $20,000						24,900						55		%
Total						$	370,800					50		%

(1)Weighted average LTV is based on current loan balance as of September 30, 2024, and collateral value at origination or renewal.

Delinquent Loans

A summary of past due loans, loans still accruing and nonaccrual loans as of September 30, 2024 and December 31, 2023 follows:

(dollars in thousands)						30-59 Days Past Due						60-89 Days Past Due						Over 90 Days Past Due						Total Past Due						Nonaccrual
September 30, 2024
Construction and land development						$	—					$	—					$	—					$	—					$	9,659
Real estate - other:
1-4 family residential						—						—						—						—						2,895
Multifamily residential						—						—						—						—						—
Commercial real estate and other						18,175						—						—						18,175						9,105
Commercial and industrial						667						—						—						667						4,002
Consumer						96						172						37						305						—
						$	18,938					$	172					$	37					$	19,147					$	25,661

(dollars in thousands)						30-59 Days Past Due						60-89 Days Past Due						Over 90 Days Past Due						Total Past Due						Nonaccrual
December 31, 2023
Construction and land development						$	—					$	—					$	—					$	—					$	—
Real estate - other:
1-4 family residential						—						—						—						—						—
Multifamily residential						—						—						—						—						13,004
Commercial real estate and other						—						—						—						—						—
Commercial and industrial						19						—						—						19						—
Consumer						—						—						—						—						—
						$	19					$	—					$	—					$	19					$	13,004

There were $19.1 million of past due loans still accruing at September 30, 2024, representing 0.60% of total loans held for investment, compared to 0.00% at December 31, 2023. The increase in delinquent loans during the nine months ended September 30, 2024 was primarily due to increases in CRE non owner-occupied, C&I and consumer solar loans.

Total nonaccrual loans increased during the nine months ended September 30, 2024 to $25.7 million, which included $13.0 million of nonaccrual PCD loans. The decreases in the non-acquired loan portfolio were

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primarily due to the downgrades of a construction loan and a 1-4 family residential loan from one relationship and a C&I loan that totaled $12.7 million, partially offset by the transfer of a nonaccrual multifamily loan collateralized by three multifamily properties in Santa Monica, California with a net carrying value of $13.0 million to OREO that was subsequently sold with a $4.8 million loss in the second quarter of 2024. The loans downgraded to nonaccrual during the nine months ended September 30, 2024 were net of total charge-offs of $2.6 million, which included partial charge-offs of $1.5 million for a substandard nonaccrual multifamily loan, $967 thousand for a substandard nonaccrual construction loan, and $134 thousand for consumer solar loans that were delinquent 120 or more days. The multifamily loan was charged-off during the second quarter of 2024 and was transferred to OREO with a net carrying value after charge-off of $4.7 million in July of 2024. The construction loan was collateralized by a stalled construction project in Los Angeles, California. Based on the Company's internal analysis, which included the review of an updated appraisal, the estimated net collateral value was $9.7 million, which was $967 thousand lower than the subject loan's net carrying value resulting in a partial charge-off in the third quarter of 2024.

The following table presents the risk categories for total loans by class of loans as of September 30, 2024 and December 31, 2023:

(dollars in thousands)						Pass						Special Mention						Substandard												Total
September 30, 2024
Construction and land development						$	232,302					$	—					$	15,632											$	247,934
Real estate - other:
1-4 family residential						148,798						847						2,895												152,540
Multifamily residential						252,134						—						—												252,134
Commercial real estate and other						1,694,401						44,032						17,475												1,755,908
Commercial and industrial						648,942						48,569						67,961												765,472
Consumer						25,391						—						335												25,726
						$	3,001,968					$	93,448					$	104,298											$	3,199,714

(dollars in thousands)						Pass						Special Mention						Substandard												Total
December 31, 2023
Construction and land development						$	243,429					$	—					$	92											$	243,521
Real estate - other:
1-4 family residential						143,903						—						—												143,903
Multifamily residential						208,243						—						13,004												221,247
Commercial real estate and other						1,020,076						2,996						1,171												1,024,243
Commercial and industrial						314,907						—						5,235												320,142
Consumer						4,386						—						—												4,386
						$	1,934,944					$	2,996					$	19,502											$	1,957,442

Special mention loans increased by $90.5 million during the nine months ended September 30, 2024 to $93.4 million at September 30, 2024. The increases included $41.0 million of non-PCD loans and $10.1 million of PCD loans acquired in the Merger. The increases in the non-acquired portfolio were due mostly to an $11.8 million increase in special mention commercial real estate loans, a $26.7 million increase in special mention commercial and industrial loans and an $847 thousand increase in special mention 1-4 family residential loans.

Substandard loans increased by $84.8 million during the nine months ended September 30, 2024 to $104.3 million. The increases included $73.3 million of accruing PCD loans and $13.0 million of nonaccrual PCD loans acquired in the Merger. The decreases in the non-acquired portfolio was due mostly to the aforementioned nonaccrual multifamily loan of $13.0 million transferred to OREO during the first quarter of 2024 that was sold in the second quarter of 2024. Two CRE loans with a combined net carrying value of $1.2 million were updated to

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pass risk rating, and the decrease of $706 thousand in commercial and industrial loans was due primarily to paydowns and payoffs, partially offset by increases in construction and land loans of $9.7 million and 1-4 family residential loans of $2.9 million due to downgrades during the nine months ended September 30, 2024.

There were no loans classified as doubtful or loss loans at September 30, 2024 and December 31, 2023.

Loan Modifications

The were no modifications or refinancings (including those with borrowers that are experiencing financial difficulty) of loans representing a new non-acquired loan or a continuation of an existing non-acquired loan during the three and nine months ended September 30, 2024, and 2023.

At September 30, 2024, all loan modifications with borrowers that are experiencing financial difficulty were loans that were acquired in the Merger and totaled $13.1 million, of which $397 thousand were past due. Refer to Note 4 - Loans and Allowances for Credit Losses - Modified Loans to Borrowers Experiencing Financial Difficulty included in Part I - Financial Information - Item 1. Financial Statements of this filing for more information regarding loan modifications.

Non-performing Assets

Nonperforming assets consist of loans on which we have ceased accruing interest (nonaccrual loans), OREO, and other repossessed assets owned. Nonaccrual loans consist of all loans 90 days or more past due and on loans where, in the opinion of management, there is reasonable doubt as to the collection of principal and interest.

The following table presents a summary of nonperforming assets, along with corresponding nonperforming asset ratios, as of September 30, 2024 and December 31, 2023:

(dollars in thousands)						September 30, 2024						December 31, 2023
Nonaccrual loans:
Construction and land development						$	9,659					$	—
Real estate - other:
1-4 family residential						2,895						—
Multifamily residential						—						13,004
Commercial real estate and other						9,105						—
Commercial and industrial						4,002						—
Consumer						—						—
Total nonaccrual loans						25,661						13,004
Loans past due over 90 days or more and still on accrual						37						—
Total nonperforming loans						25,698						13,004
Other real estate owned						4,083						—
Total nonperforming assets						$	29,781					$	13,004
Allowance for loan losses to total loans						1.67		%				1.15		%
Nonaccrual loans to total loans						0.80		%				0.66		%
Allowance for loan losses to nonaccrual loans						209		%				174		%
Nonperforming assets to total assets						0.68		%				0.55		%

At September 30, 2024, nonaccrual and nonperforming loans were $25.7 million, compared to $13.0 million at December 31, 2023. The increase from December 31, 2023 was due primarily to the downgrades of a construction loan and a 1-4 family residential loan from one relationship and a C&I loan that totaled $12.7 million and $13.0 million of nonaccrual PCD loans acquired in the Merger, offset by the aforementioned

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nonaccrual multifamily loan of $13.0 million that was transferred to OREO during the first quarter of 2024, and sold with a $4.8 million pre-tax loss in the second quarter of 2024. and the addition of the aforementioned multifamily loan with a carrying value of $4.7 million, net of a $1.5 million partial charge-off during the nine months ended September 30, 2024. We foreclosed on the nonaccrual multifamily loan with a carrying value of $4.7 million in the second quarter of 2024. The loan was transferred to OREO in July of 2024 and we recorded a $614 thousand valuation allowance on this OREO due to a decline in the fair value of the underlying property in the third quarter of 2024.

Allowance for Credit Losses

We adopted CECL effective January 1, 2023 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. The transition adjustment of the CECL adoption included an increase in the allowance for credit losses of $5.5 million, which included $439 thousand to establish a reserve for unfunded commitments and a $3.9 million decrease to retained earnings to reflect the cumulative effect of adoption of CECL, with the $1.6 million tax impact portion being recorded as part of the deferred tax asset on our Consolidated Balance Sheet.

Our ACL is an estimate of expected lifetime credit losses for loans held for investment at the time of origination or acquisition and is maintained at a level deemed appropriate by management to provide for expected lifetime credit losses in the portfolio. The ACL consists of: (i) a specific allowance established for CECL on loans individually evaluated, (ii) a quantitative allowance for current expected loan losses based on the portfolio and expected economic conditions over a reasonable and supportable forecast period that reverts back to long-term trends to cover the expected life of the loan, (iii) a qualitative allowance including management judgment to capture factors and trends that are not adequately reflected in the quantitative allowance, and (iv) the ACL for off-balance sheet credit exposure for unfunded loan commitments. Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts. We measure the ACL using a discounted cash flow methodology, which utilizes pool-level assumptions and cash flow projections on individual loan basis, which then aggregated at the portfolio segment level and supplemented by a qualitative reserve that is applied to each portfolio segment level. Our ACL model incorporates assumptions for our own historical quarterly prepayment and curtailment experience covering the period starting from February 2021 to estimate the ACL, probability of default (“PD”), and loss given default (“LGD”) to project each loan’s cash flow throughout its entire life cycle.

Accrued interest receivable on loans receivable, net, totaled $14.2 million and $6.4 million at September 30, 2024 and December 31, 2023, respectively, and is included within accrued interest receivable and other assets in the accompanying consolidated balance sheets. Accrued interest receivable is excluded from the ACL.

The following tables present a summary of the changes in the ACL for the periods indicated:

						Three Months Ended September 30, 2024																		Three Months Ended September 30, 2023
(dollars in thousands)						Allowance for Loan Losses (“ALL”)						Reserve for Unfunded Loan Commitments						Total Allowance for Credit Losses						Allowance for Loan Losses (“ALL”)						Reserve for Unfunded Loan Commitments						Total Allowance for Credit Losses
Balance, beginning of period						$	23,788					$	819					$	24,607					$	22,502					$	1,538					$	24,040
Initial allowance for acquired PCD loans						11,216						—						11,216						—						—						—
Provision for (reversal of) credit losses (1)(2)						19,711						3,252						22,963						202						(298)						(96)
Charge-offs						(1,163)						—						(1,163)						—						—						—
Recoveries						—						—						—						1						—						1
Net (charge-offs) recoveries						(1,163)						—						(1,163)						1						—						1
Balance, end of period						$	53,552					$	4,071					$	57,623					$	22,705					$	1,240					$	23,945

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(1)Includes an initial provision for credit losses for non-PCD loans acquired in the Merger of $18.5 million for the three and nine months ended September 30, 2024. There was no similar activity in the comparable 2023 period.

(2)Includes an initial provision for credit losses for unfunded commitments acquired in the Merger of $2.7 million for the three and nine months ended September 30, 2024. There was no similar activity in the comparable 2023 period.

						Nine Months Ended September 30, 2024																		Nine Months Ended September 30, 2023
(dollars in thousands)						Allowance for Loan Losses (“ALL”)						Reserve for Unfunded Loan Commitments						Total Allowance for Credit Losses						Allowance for Loan Losses (“ALL”)						Reserve for Unfunded Loan Commitments						Total Allowance for Credit Losses
Balance, beginning of period						$	22,569					$	933					$	23,502					$	17,099					$	1,310					$	18,409
Adoption of ASU No. 2016-13 (1)						—						—						—						5,027						439						5,466
Initial allowance for acquired PCD loans						11,216						—						11,216						—						—						—
Provision for (reversal of) credit losses (2)(3)						22,387						3,138						25,525						600						(509)						91
Charge-offs						(2,620)						—						(2,620)						(36)						—						(36)
Recoveries						—						—						—						15						—						15
Net (charge-offs) recoveries						(2,620)						—						(2,620)						(21)						—						(21)
Balance, end of period						$	53,552					$	4,071					$	57,623					$	22,705					$	1,240					$	23,945

(1)Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2023. As a result of adopting ASU 2016-13, our methodology to compute our ACL is based on a CECL methodology, rather than the previously applied incurred loss methodology.

(2)Includes an initial provision for credit losses for non-PCD loans acquired in the Merger of $18.5 million for the nine months ended September 30, 2024. There was no similar activity in the comparable 2023 period.

(3)Includes an initial provision for credit losses for unfunded commitments acquired in the Merger of $2.7 million for the nine months ended September 30, 2024. There was no similar activity in the comparable 2023 period.

The following table presents a summary of the ALL by portfolio segment, along with the corresponding percentage of each segment to total loans as of periods indicated:

						September 30, 2024												June 30, 2024												December 31, 2023
(dollars in thousands)						Amount						Percent of loans in each category to total loans						Amount						Percent of loans in each category to total loans						Amount						Percent of loans in each category to total loans
Construction and land development						$	2,084					7.7		%				$	2,942					10.9		%				$	2,032					12.4		%
Real estate - other:
1-4 family residential						1,045						4.8		%				1,472						8.4		%				1,195						7.4		%
Multifamily residential						1,636						7.9		%				1,239						10.0		%				1,449						11.3		%
Commercial real estate and other						26,779						54.9		%				14,337						55.6		%				13,636						52.3		%
Commercial and industrial						20,858						23.9		%				3,795						15.1		%				4,242						16.4		%
Consumer						1,150						0.8		%				3						—		%				15						0.2		%
						$	53,552					100.0		%				$	23,788					100.0		%				$	22,569					100.0		%

Since we first adopted CECL in January 2023, and through June 2024, the economic environment has experienced volatility, which has made forecasting future economic outcomes challenging. Among these challenges were the highest levels of inflation seen since the 1970s, a very aggressive rate hiking policy by the Fed and other central banks to combat inflation, turmoil in the banking sector that resulted in several large bank failures early in 2023 and distress at New York Community Bank in early 2024, and significant global geopolitical risks, as well as domestic political risks. On a quarterly basis, we evaluated numerous key macroeconomic variables within the economic forecast scenarios from Moody’s Analytics and determined that it was best to use a combination of these scenarios that would reflect the range of possible outcomes given the volatile economic environment. We also reviewed the underlying assumptions supporting each scenario along with other sources of economic forecasts and meeting minutes of the Federal Open Market Committee (“FOMC”)

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when determining the scenario weighting. We reduced the probability-weighted forecast from a three-scenario forecast to a two-scenario forecast in September 2023. At September 30, 2024, we used the probability-weighted two-scenario forecasts, representing a base-case scenario and one downside scenario, to estimate the ACL. We also updated the scenario weightings and assigned 80% to the base-case scenario and 20% to the downside scenario based on the FOMC lowering the Fed funds rate by 50 basis points at its September meeting, inflation trending lower, strong recent jobs reports and increasing GDP forecasts suggesting more positive growth in the coming quarters. The use of two weighted scenarios is consistent with the methodology used in our ACL model at June 30, 2024 and December 31, 2023.

We used economic forecasts released by Moody’s Analytics in the fourth week of September to update its ACL calculations for September 30, 2024. We updated our historical prepayment and curtailment rates analysis, and qualitative risk factors based on our judgment of the market area, industry or business specific data, changes in underlying loan composition of specific portfolios, trends relating to credit quality, delinquency, non-performing and adversely rated loans, model imprecision and reasonable and supportable forecasts of economic conditions that were not captured in the quantitative analysis. We continue to monitor macroeconomic variables related to changes in interest rates, inflation and the concerns of an economic downturn, and believe it is appropriately provisioned for the current environment.

The ALL was $53.6 million at September 30, 2024, compared to $23.8 million at June 30, 2024. The $29.8 million increase in the ALL during the three months ended September 30, 2024 was driven by a number of factors, including an increase of $11.2 million related to the initial allowance for credit losses on acquired PCD loans, and $18.5 million related to the initial provision for credit losses on acquired non-PCD loans, which were partially offset by net charge-offs of $1.2 million from the individually evaluated loans downgraded during the third quarter. Other factors that increased the ALL included changes in qualitative risk factors primarily related to the Merger that increased the ALL by $1.2 million, partially offset by a decrease in non-acquired substandard accruing loans of $1.3 million. Changes in the loans held for investment volume and mix decreased the ALL by $204 thousand. Changes in the reasonable and supportable forecast, primarily related to the economic outlook, the scenario weightings, and the historical prepayment and curtailment rates analysis decreased the ALL by $151 thousand.

At September 30, 2024, our ratio of ALL to total loans held for investment was 1.67%, an increase from 1.27% at June 30, 2024.

The ALL was $53.6 million at September 30, 2024, compared to $22.6 million at December 31, 2023. The $31.0 million change in the ALL during the nine months ended September 30, 2024 was driven by a number of factors, including an increase of $11.2 million related to the initial allowance for credit losses on acquired PCD loans, $18.5 million related to the initial provision for credit losses on acquired non-PCD loans, partially offset by net charge-offs of $2.6 million. Changes in Moody’s economic forecasts for California at September 30, 2024 as compared to December 31, 2023 were mixed. California unemployment rate and California GSP forecasts were revised downward. California GSP for the construction section and Home Price Index forecasts were both revised upward to reflect the recent price trends. Our updated historical prepayment and curtailment rates analysis reflected a decrease from December 31, 2023 due primarily to lower payoffs and paydowns. Changes in the reasonable and supportable forecast, primarily related to the economic outlook for California, coupled with changes in scenario weightings and historical prepayment and curtailment rates analysis increased the ALL by $259 thousand. Changes in the loans held for investment volume and mix decreased the ALL by $825 thousand. Changes in qualitative risk factors primarily related to the merger increased the ALL by $992 thousand.

At September 30, 2024, our ratio of ALL to total loans held for investment was 1.67%, an increase from 1.15% at December 31, 2023.

The ACL process involves subjective and complex judgments and is reflective of significant uncertainties that could potentially result in materially different results under different assumptions and conditions. We review the level of the allowance at least quarterly and perform a sensitivity analysis on the significant assumptions utilized in estimating the ACL for collectively evaluated loans. Applying a 100% probability weighting to the downside scenario rather than using the probability-weighted two scenario approach would result in an increase in ACL by approximately $7.6 million, or an additional 24 basis points to the ALL to total loans held for investment

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ratio. This sensitivity analysis and related impact on the ACL is a hypothetical analysis and is not intended to represent management’s judgments or assumptions of qualitative loss factors that were utilized at September 30, 2024.

The following table presents net charge-offs, average loans and net charge-offs as a percentage of average loans for the periods indicated:

						Three Months Ended September 30, 2024																		Three Months Ended September 30, 2023
(dollars in thousands)						Net (Charge-off) Recovery						Average Loans						Net (Charge-off) Recovery Ratio						Net (Charge-off) Recovery						Average Loans						Net (Charge-off) Recovery Ratio
Construction and land development						$	(967)					$	226,986					(0.57)		%				$	—					$	217,794					—		%
Real estate - other:
1-4 family residential						—						151,257						—		%				—						140,632						—		%
Multifamily residential						—						191,503						—		%				—						229,685						—		%
Commercial real estate and other						—						1,549,472						—		%				—						1,019,729						—		%
Commercial and industrial						(61)						647,139						(0.01)		%				1						313,803						—		%
Consumer						(135)						17,224						(1.05)		%				—						2,741						—		%
						$	(1,163)					$	2,783,581					(0.06)		%				$	1					$	1,924,384					—		%

						Nine Months Ended September 30, 2024																		Nine Months Ended September 30, 2023
(dollars in thousands)						Net (Charge-off) Recovery						Average Loans						Net (Charge-off) Recovery Ratio						Net (Charge-off) Recovery						Average Loans						Net (Charge-off) Recovery Ratio
Construction and land development						$	(967)					$	235,364					(0.55)		%				$	—					$	229,261					—		%
Real estate - other:
1-4 family residential						—						146,178						—		%				(12)						143,512						(0.01)		%
Multifamily residential						(1,457)						213,025						(0.91)		%				—						226,665						—		%
Commercial real estate and other						—						1,180,581						—		%				—						988,974						—		%
Commercial and industrial						(61)						412,096						(0.02)		%				(9)						315,088						—		%
Consumer						(135)						6,815						(2.64)		%				—						2,827						—		%
						$	(2,620)					$	2,194,059					(0.16)		%				$	(21)					$	1,906,327					—		%

Allowance for Credit Losses on Off-Balance Sheet Commitments

We also maintain a separate allowance for off-balance sheet commitments, which is included in accrued interest payable and other liabilities in our consolidated balance sheets. Management evaluates the loss exposure for off-balance sheet commitments to extend credit following the same principles used for the ACL, with consideration for experienced utilization rates on client credit lines and the inherently lower risk of unfunded loan commitments relative to disbursed commitments. The allowance for off-balance sheet commitments totaled $4.1 million and $933 thousand at September 30, 2024 and December 31, 2023, respectively. The change in the allowance for off-balance sheet commitments between periods was the result of a $3.1 million provision for credit losses on unfunded loan commitments, which included $2.7 million related to unfunded loan commitments acquired in the Merger, and from higher unfunded loan commitment balances at September 30, 2024. Total unfunded loan commitments increased $623.2 million to $1.03 billion at September 30, 2024, from $410.8 million at December 31, 2023.

Servicing Asset and Loan Servicing Portfolio

We sell loans in the secondary market and, for certain loans, retain the servicing responsibility. The loans serviced for others were accounted for as sales and are therefore not included in the accompanying consolidated

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balance sheets. We receive servicing fees ranging from 0.25% to 1.00% for the services provided over the life of the loan; the servicing asset is initially recognized at fair value based on the present value of the estimated future net servicing income, incorporating assumptions that market participants would use in their estimates of fair value. The risks inherent in the SBA servicing asset relates primarily to changes in prepayments that result from shifts in interest rates and a reduction in the estimated future cash flows. The servicing asset activity includes additions from loan sales with servicing retained and acquired servicing rights and reductions from amortization as the serviced loans are repaid and servicing fees are earned. Loans serviced for others totaled $150.2 million and $58.8 million at September 30, 2024 and December 31, 2023, respectively. This includes SBA loans serviced for others of $36.3 million at September 30, 2024 and $35.4 million at December 31, 2023 for which there was a related servicing asset of $415 thousand and $546 thousand, respectively. The fair value of the servicing asset approximated its carrying value at September 30, 2024 and December 31, 2023. Consideration for each SBA loan sale includes the cash received and the fair value of the related servicing asset. The significant assumptions used in the valuation of the SBA servicing asset at September 30, 2024 included a weighted average discount rate of 14.3% and a weighted average prepayment speed assumption of 20.1%. The significant assumptions used in the valuation of the SBA servicing asset at December 31, 2023 included a weighted average discount rate of 16.1% and a weighted average prepayment speed assumption of 19.0%.

Goodwill and Core Deposit Intangibles

Goodwill totaled $112.5 million and $37.8 million at September 30, 2024 and December 31, 2023, respectively. The $74.7 million increase was due to the goodwill recognized upon completion of the Merger during the third quarter of 2024. On an ongoing basis, we qualitatively assess if current events or circumstances warrant the need for an interim quantitative assessment of goodwill impairment. We also monitor fluctuations in our stock prices. During the third quarter of 2024, our stock price and market capitalization decreased due primarily to market volatility related to economic uncertainty and rising political tensions prior to the presidential election. We also noted that the trends in our recent financial results were primarily driven by the impact of the Merger and the loss for the quarter was primarily due to merger related expenses. In early November, our stock price and market capitalization recovered and after assessing these events and circumstances, we determined that it is not likely that the fair value of the reporting unit is less than its carrying amount at September 30, 2024. Management will continue to evaluate the economic conditions at future reporting periods for applicable changes.

Core deposit intangibles totaled $23.0 million and $1.2 million at September 30, 2024 and December 31, 2023, respectively. The $21.8 million increase in the core deposit intangibles between periods was the result of the $22.7 million core deposit intangible acquired in the Merger, partially offset by amortization during the period. At September 30, 2024, the core deposit intangibles had a weighted average remaining amortization period of 9.6 years.

Refer to Note 2 - Business Combinations and Note 6 - Goodwill and Other Intangible Assets of the Notes to Consolidated Financial Statements included in Part I - Financial Information - Item 1. Financial Statements of this filing for more information regarding business combinations and related activity.

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Deposits

The following table presents the composition of deposits, related percentage of total deposits, and spot rates, as of September 30, 2024 and December 31, 2023:

						September 30, 2024																		December 31, 2023
(dollars in thousands)						Amount						Percentage of Total Deposits						Spot Rate (1)						Amount						Percentage of Total Deposits						Spot Rate (1)
Noninterest-bearing demand (2)						$	1,368,303					36.6		%				0.0		%				$	675,098					34.7		%				0.0		%
Interest-bearing NOW accounts (3)						781,125						20.9		%				2.0		%				381,943						19.7		%				2.1		%
Money market and savings accounts (4)						1,149,268						30.7		%				2.9		%				636,685						32.8		%				2.9		%
Time deposits (5)						219,597						5.9		%				4.7		%				142,005						7.3		%				4.5		%
Broker time deposits						$	222,622					5.9		%				5.0		%				$	107,825					5.5		%				4.6		%
Total deposits						$	3,740,915					100.0		%				1.9		%				$	1,943,556					100.0		%				1.9		%

(1) Weighted average interest rates at September 30, 2024 and December 31, 2023.

(2) Included reciprocal deposit products of $102.5 million at September 30, 2024. There were no reciprocal deposits at December 31, 2023.

(3) Included reciprocal deposit products of $630.6 million and $265.8 million at September 30, 2024 and December 31, 2023, respectively.

(4) Included reciprocal deposit products of $69.0 million and $8.3 million at September 30, 2024 and December 31, 2023, respectively.

(5) Included CDARS deposits of $37.6 million at September 30, 2024. There were no CDARS deposits at December 31, 2023.

We offer our depositors access to the Certificate of Deposit Account Registry Service (“CDARS”), IntraFi Network Insured Cash Sweep (“ICS”), and Reich & Tang Deposit Solutions (“R&T”) networks. We receive an equal dollar amount of deposits (“reciprocal deposits”) from other participating banks in exchange for the deposits we place into the networks to fully qualify large customer deposits for FDIC insurance. These reciprocal deposits are not required to be treated as brokered deposits up to the lesser of 20% of the Bank’s total liabilities or $5 billion.

As a result of the Merger, the Company acquired the fair value of $37.7 million in CDARS deposits and $306.6 million in R&T deposits. Our total reciprocal deposits increased to $839.7 million, or 22.4% of total deposits and 22.1% of Bank’s total liabilities at September 30, 2024, compared to $274.1 million, or 14.1% of total deposits at December 31, 2023. The excess over 20% increased our wholesale funding to total assets ratio and net non-core funding dependence ratio. These two ratios were still within the Bank's internal policy limit.

Total deposits were $3.74 billion at September 30, 2024, an increase of $1.80 billion from $1.94 billion at December 31, 2023. The increase in total deposits was primarily driven by the $1.64 billion in fair value of deposits acquired in the Merger. During the nine months ended September 30, 2024, there was a $565.6 million increase in reciprocal deposits, a $590.7 million increase in noninterest-bearing demand deposits, excluding reciprocal deposits, a $114.8 million increase in brokered time deposits, a $452.0 million increase in money market and savings accounts, excluding reciprocal deposits, a $34.3 million increase in interest-bearing NOW accounts, excluding reciprocal deposits, and a $77.6 million increase in time deposits. The Company used excess cash acquired from the Merger to pay off high cost callable and noncallable brokered time deposits totaling $131.9 million during the third quarter 2024.

At September 30, 2024, noninterest-bearing demand deposits totaled $1.37 billion and represented 36.6% of total deposits, compared to $675.1 million or 34.7% at December 31, 2023. At September 30, 2024 and December 31, 2023, total deposits exceeding FDIC deposit insured limits were $1.65 billion, or 44% of total deposits and $816.6 million, or 42% of total deposits, respectively.

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The following table sets forth the average balance of deposit accounts and the weighted average rates paid for the periods indicated:

						For the Three Months Ended September 30,
						2024												2023
(dollars in thousands)						Average Balance						Average Rate Paid						Average Balance						Average Rate Paid
Noninterest-bearing demand						$	1,031,844					—		%				$	768,148					—		%
Interest-bearing NOW accounts						617,373						1.73		%				353,714						1.91		%
Money market and savings accounts						999,322						3.34		%				675,609						2.48		%
Time deposits						421,241						4.80		%				183,745						4.03		%
Total deposits						$	3,069,780					2.09		%				$	1,981,216					1.56		%

						For the Nine Months Ended September 30,
						2024												2023
(dollars in thousands)						Average Balance						Average Rate Paid						Average Balance						Average Rate Paid
Noninterest-bearing demand						$	784,609					—		%				$	829,082					—		%
Interest-bearing NOW accounts						446,759						2.05		%				290,326						1.52		%
Money market and savings accounts						767,916						3.13		%				674,452						2.03		%
Time deposits						312,544						4.81		%				170,620						3.43		%
Total deposits						$	2,311,828					2.09		%				$	1,964,480					1.22		%

The increase in the weighted average rate on deposits was primarily due to repricing deposits in the higher interest rate environment and peer bank deposit competition during the nine months ended September 30, 2024. Beginning in March 2022 through September 2023, the Federal Reserve’s FOMC raised the target Fed funds rate by 525 basis points. In its September 2024 meeting, the FOMC reduced the target Fed funds rate by 50 basis points.

The following table sets forth the maturities of time deposits at September 30, 2024:

(dollars in thousands)						Three Months of Less						Over Three Months through Six Months						Over Six Months through Twelve Months						Over Twelve Months						Total
Time deposits in amounts of $250,000 or less(1)						$	146,446					$	111,620					$	17,052					$	5,139					$	280,257
Time deposits in amounts over $250,000(1)						119,047						21,567						20,457						891						161,962
Total time deposits						$	265,493					$	133,187					$	37,509					$	6,030					$	442,219

(1)Amounts exclude fair value adjustments for acquired time deposits.

Borrowings

Total borrowings decreased $33.7 million to $69.1 million at September 30, 2024 from $102.9 million at December 31, 2023. The decrease was attributable to an $85.0 million decrease in FHLB overnight borrowings, offset by $50.8 million in fair value of borrowing acquired in the Merger. (Refer to Note 8 - Borrowing Arrangements of the Notes to Consolidated Financial Statements included in Part I - Financial Information, Part 1. Financial Statements of this filing).

A summary of outstanding borrowings, and related information, as of September 30, 2024 and December 31, 2023 follows:

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(dollars in thousands)			September 30, 2024						December 31, 2023
FHLB Advances
Outstanding balance			$	—					$	85,000
Weighted average interest rate, end of period			—		%				5.70		%
Average balance outstanding during the period			$	26,105					$	26,390
Weighted average interest rate during the period			5.64		%				5.43		%
Maximum amount outstanding at any month-end during the period			$	70,000					$	85,000
Subordinated Notes
Outstanding balance			$	73,000					$	18,000
Carrying value(1)			$	69,142					$	17,865
Weighted average interest rate, end of period			4.40		%				5.50		%
Average balance outstanding during the period(2)			$	29,425					$	17,818
Weighted average interest rate during the period(3)			7.08		%				6.09		%
Maximum amount outstanding at any month-end during the period			$	73,000					$	18,000

(1)Amount includes net unamortized issuance costs and fair value adjustments.

(2)Average balance outstanding includes average net unamortized issuance costs and average fair value adjustments for the periods presented.

(3)Weighted average interest rate includes issuance costs and fair value adjustments for the periods presented.

Shareholders’ Equity

Total shareholders’ equity was $498.1 million at September 30, 2024, compared to $288.2 million at December 31, 2023. The $209.9 million increase between periods was primarily due to the fair value of common stock issued in the Merger of $214.4 million and $825 thousand related to the acceleration of replacement awards issued for non-continuing CALB directors, executives and employees, a decrease in net of tax of unrealized losses on debt securities available-for-sale of $1.6 million, stock-based compensation expense of $4.7 million, and stock options exercised of $716 thousand, partially offset by net loss of $11.3 million and the repurchase of shares in settlement of restricted stock units of $968 thousand.

On June 14, 2023, we announced an authorized share repurchase plan, providing for the repurchase of up to 550,000 shares of our outstanding common stock, or approximately 3% of our then outstanding shares. Repurchases under the program may occur from time to time in open market transactions, in privately negotiated transactions, or by other means in accordance with federal securities laws and other restrictions. We intend to fund its repurchases from available working capital and cash provided by operating activities. The timing of repurchases, as well as the number of shares repurchased, will depend on a variety of factors, including price; trading volume; business, economic and general market conditions; and the terms of any Rule 10b5-1 plan adopted by us. The repurchase program has no expiration date and may be suspended, modified, or terminated at any time without prior notice.

There were no shares repurchased under this share repurchase plan during the three and nine months ended September 30, 2024.

Tangible book value per common share at September 30, 2024 was $11.28, compared with $13.56 at December 31, 2023. The $2.28 decrease in tangible book value per common share during the nine months ended September 30, 2024 was primarily the result of the increase in shares outstanding as a result of the Merger, the net loss during the year, other comprehensive income related to changes in unrealized losses, net of taxes on available-for-sale, and the impact of share-based compensation expense. Tangible book value per common share is also impacted by certain other items, including amortization of intangibles, and share changes resulting from share-based compensation results.

Prior to the Merger, the holding company qualified for treatment under the Small Bank Holding Company Policy Statement (Regulation Y, Appendix C) and, therefore, was not subject to consolidated capital

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rules at the bank holding company level. Beginning in the third quarter of 2024, the holding company became subject to the consolidated capital rules at the bank holding company level. The Company’s leverage capital ratio and total risk-based capital ratio were 10.55% and 12.65%, respectively, at September 30, 2024. The Bank’s leverage capital ratio and total risk-based capital ratio were 12.41% and 12.53%, respectively, at September 30, 2024.

Liquidity and Market Risk Management

Liquidity

Liquidity is a measure of our ability to meet our cash flow requirements, including inflows and outflows of cash for depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs. Several factors influence our liquidity needs, including depositor and borrower activity, interest rate trends, changes in the economy, maturities, re-pricing and interest rate sensitivity of our debt securities, loan portfolio and deposits. We attempt to maintain a total liquidity ratio (liquid assets, including cash and due from banks, federal funds sold, fully disbursed loans held for sale, investments maturing one year or less, and available-for-sale debt securities not pledged as collateral expressed as a percentage of total deposits and short term debt) above approximately 10.0%. Our total liquidity ratios were 21.0% at September 30, 2024 and 11.1% at December 31, 2023. During the nine months ended September 30, 2024, we deployed our excess liquidity to repay high cost FHLB overnight advances of $85.0 million and callable and noncallable brokered time deposits totaling $131.9 million during the third quarter of 2024.

For additional information regarding our operating, investing, and financing cash flows, see “Consolidated Statements of Cash Flows” in our consolidated financial statements contained in Item I. Financial Information, Part 1. Financial Statements of this filing.

California Bank of Commerce, N.A. (formerly Bank of Southern California, N.A.)

The Bank’s primary sources of liquidity are derived from deposits from customers, principal and interest payments on loans and debt securities, FHLB advances and other borrowings. The Bank’s primary uses of liquidity include customer withdrawals of deposits, extensions of credit to borrowers, operating expenses, and repayment of FHLB advances and other borrowings. While maturities and scheduled amortization of loans and debt securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and competition.

At September 30, 2024, we had a secured line of credit of $786.1 million from the FHLB, of which $663.6 million was available. This secured borrowing arrangement is collateralized under a blanket lien on qualifying real estate loans and is subject to us providing adequate collateral and continued compliance with the Advances and Security Agreement and other eligibility requirements established by the FHLB. At September 30, 2024, we had pledged qualifying loans with an unpaid principal balance of $1.44 billion for this line. In addition, at September 30, 2024, we used $122.5 million of our secured FHLB borrowing capacity to have the FHLB issue letters of credit to meet collateral requirements for deposits from the State of California and other public agencies. There were no overnight borrowings at September 30, 2024.

At September 30, 2024, we had credit availability of $446.4 million at the Federal Reserve discount window to the extent of collateral pledged. At September 30, 2024, we had pledged our debt securities with an amortized cost of $56.3 million, and qualifying loans with an unpaid principal balance of $466.8 million as collateral through the Borrower-in-Custody (“BIC”) program. We had no discount window borrowings at September 30, 2024 and December 31, 2023.

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We have six overnight unsecured credit lines from correspondent banks totaling $110.5 million. The lines are subject to annual review. There were no outstanding borrowings under these lines at September 30, 2024 and December 31, 2023.

California BanCorp

The primary sources of liquidity of the Company, on a stand-alone holding company basis, are derived from dividends from the Bank, borrowings, and its ability to issue debt and raise capital. The Company’s primary uses of liquidity are operating expenses and payments of interest and principal on borrowings. At September 30, 2024 and December 31, 2023, the cash and due from banks was $4.6 million and $3.6 million, respectively.

The Company maintains a revolving line of credit with a commitment of $3.0 million, This revolving line of credit bears interest, due quarterly, at a rate of Prime plus 0.40% and has a one-year term that matures in November 2024. This facility is secured by 100% of the common stock of the Bank. The revolving line of credit contains certain financial covenants, including but not limited to, minimum capital, classified asset, nonperforming asset, primary and secondary liquidity, and debt service coverage ratios. At September 30, 2024, the Company was in compliance with all covenants under the revolving line of credit. There were no borrowings under this revolving line of credit at September 30, 2024.

On May 28, 2020, we issued $18 million of 5.50% Fixed-to-Floating Rate Subordinated Notes Due 2030 (the “Notes”). The Notes which mature March 25, 2030 accrue interest at a fixed rate of 5.50% through the fixed rate period to March 26, 2025, after which interest accrues at a floating rate of 90-day SOFR plus 3.50% until maturity, unless redeemed early, at our option, after the end of the fixed rate period. Issuance costs of $475 thousand were incurred and are being amortized over the first 5-year fixed term of the Notes; unamortized issuance costs at September 30, 2024 and December 31, 2023, were $63 thousand and $135 thousand, respectively. The net unamortized issuance costs are netted against the balance and recorded in the borrowings in the consolidated balance sheets. The amortization expenses are recorded in interest expense on the consolidated statements of operations. At September 30, 2024, we were in compliance with all covenants and terms of the Notes.

In connection with the Merger, the Company assumed $20 million in subordinated debt, with a fixed interest rate of 5.00% and a stated maturity of September 30, 2030. Beginning September 30, 2025, the interest rate changes to a quarterly variable rate equal to the then current 90-day SOFR plus 4.88%, until maturity, unless redeemed early, at the Company’s option, after the end of the fixed-rate period. The subordinated debt was initially recognized with a fair value discount of $794 thousand. At September 30, 2024, the net unamortized fair value discount was $688 thousand. The net unamortized fair value discount is netted against the balance and recorded in borrowings in the consolidated balance sheets. The amortization of the fair value discount is recorded in interest expense in the consolidated statements of operations. At September 30, 2024, the Company was in compliance with all covenants and terms of these notes.

The Company also assumed in the Merger an additional $35 million in subordinated debt, with a fixed interest rate of 3.50% and a stated maturity of September 1, 2031. Beginning August 17, 2026, the interest rate changes to a quarterly variable rate equal to the then current 90-day SOFR plus 2.86%, until maturity, unless redeemed early, at the Company’s option, after the end of the fixed-rate period. The subordinated debt was initially recognized with a fair value discount of $3.4 million. At September 30, 2024, the net unamortized fair value discount was $3.1 million. The net unamortized fair value discount is netted against the balance and recorded in borrowings in the consolidated balance sheets. The amortization of the fair value discount is recorded in interest expense in the consolidated statements of operations. At September 30, 2024, the Company was in compliance with all covenants and terms of these notes.

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At September 30, 2024, consolidated cash and cash equivalents totaled $614.4 million, an increase of $527.6 million from $86.8 million at December 31, 2023. The increase in cash and cash equivalents is the result of $26.7 million in net cash provided by operating cash flows, $431.7 million net cash provided by investing cash flows, partially offset by $69.3 million of net cash flows used in financing cash flows.

Our operating cash flows are comprised of net income, adjusted for certain non-cash transactions, including but not limited to, depreciation and amortization, provision for credit losses, loans originated for sale and related gains and proceeds from sales, stock-based compensation, and amortization of net deferred loan costs and premiums. Net cash flows from operating cash flows were $26.7 million for the nine months ended September 30, 2024, compared to $41.5 million for the same 2023 period. The $14.9 million decrease was primarily due to a decrease in net income generated during the nine months ended September 30, 2024, and a $8.1 million decrease in net cash provided by sales of loans held for sale, net of originations, partially offset by a $4.8 million increase in loss on sale of OREO and a $25.4 million increase in provision of credit losses primarily related to the initial allowance for credit losses on acquired loans and unfunded commitments from the Merger.

Our investing cash flows are primarily comprised of cash inflows and outflows from our debt securities and loan portfolios, net cash acquired in business combinations, as applicable, and to a lesser extent, purchases of stock investments, purchases and proceeds from bank-owned life insurance, and capital expenditures. Net cash provided by investing activities was $431.7 million for the year ended September 30, 2024, compared to net cash used in investing activities of $42.7 million for the same 2023 period. The $474.4 million decrease in cash provided by investing activities was primarily due to the impact of the Merger and resulting cash acquired of $336.3 million, a decrease in net loan fundings of $110.6 million and a decrease in net investment securities purchased of $19.4 million, partially offset by proceeds from the sale of other real estate owned of $8.3 million.

Our financing cash flows are primarily comprised of inflows and outflows of deposits, borrowing activity, proceeds from the issuance of common shares, and to a lesser extent, repurchases of common shares and cash flows from share-based compensation arrangements. Net cash used in financing activities was $69.3 million for the nine months ended September 30, 2024, compared to net cash provided by financing activities of $9.5 million for the same 2023 period. The $59.7 million increase in financing cash flows was primarily due to a $102.6 million net increase in deposit cash flows, offset by a $43.0 million increase in net repayment activity on overnight FHLB advances.

We believe that our liquidity sources are stable and are adequate to meet our day-to-day cash flow requirements as of September 30, 2024.

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Commitments and Contractual Obligations

The following table presents information regarding our outstanding commitments and contractual obligations as of September 30, 2024:

(Dollars in thousands)						One Year of Less						Over One Year to Three Years						Over Three Years to Five Years						More than Five Years						Total
Commitments to extend credit						$	693,463					$	228,027					$	51,669					$	59,896					$	1,033,055
Letters of credit issued to customers						17,738						240						—						—						17,978
Total commitments						$	711,201					$	228,267					$	51,669					$	59,896					$	1,051,033
FHLB advances						$	—					$	—					$	—					$	—					$	—
Subordinated notes(1)						—						—						—						73,000						73,000
Certificates of deposit						436,189						5,779						251						—						442,219
Lease obligations						4,058						7,825						4,737						2,591						19,211
Total contractual obligations						$	440,247					$	13,604					$	4,988					$	75,591					$	534,430

(1)Amounts exclude net unamortized issuance costs and fair value adjustments.

At September 30, 2024 and December 31, 2023, we also had unfunded commitments of $7.3 million and $3.2 million, respectively, for investments in other equity investments.

Capital Resources

Maintaining adequate capital is always an important objective of the Company. Abundant and high quality capital helps weather economic downturns and market volatility, protect depositors’ funds, and support growth, such as expanding the operations or making acquisitions. Capital is also a source of funds for loan demand and enables the Company to effectively manage its assets and liabilities. We are authorized to issue 50,000,000 shares of common stock of which 32,142,427 have been issued as of September 30, 2024. We are also authorized to issue 50,000,000 shares of preferred stock, of which none have been issued as of September 30, 2024. On June 14, 2023, we announced an authorized share repurchase plan, providing for the repurchase of up to 550,000 shares of our outstanding common stock, or approximately 3% of our then outstanding shares.

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Prior to the Merger with CALB during the third quarter of 2024, the holding company qualified for treatment under the Small Bank Holding Company Policy Statement (Regulation Y, Appendix C) and, therefore, was not subject to consolidated capital rules at the bank holding company level. Beginning in the third quarter of 2024, the Company became subject to the consolidated capital rules at the bank holding company level.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the holding company and the Bank must meet specific capital guidelines that involve quantitative measures of their respective assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. These capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. The holding company and Bank also elected to exclude the effects of credit loss accounting under CECL from common equity Tier 1 capital ratio for a three-year transitional period.

A holding company and bank considered to be “adequately capitalized” is required to maintain a minimum total capital ratio of 8.0%, a minimum Tier 1 capital ratio of 6.0%, a minimum common equity Tier 1 capital ratio of 4.5%, and a minimum leverage ratio of 4.0%. Banks considered to be “well capitalized” must

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maintain a minimum total capital ratio of 10.0%, a minimum Tier 1 capital ratio of 8.0%, a minimum common equity Tier 1 capital ratio of 6.5%, and a minimum leverage ratio of 5.0%.

Basel III, the comprehensive regulatory capital rules for U.S. banking organizations, requires all banking organizations to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively comprised of common equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not to the leverage ratio. Effective January 1, 2019, the capital conservation buffer increased by 0.625% to its fully phased-in 2.5%, such that the common equity Tier 1, Tier 1 and total capital ratio minimums inclusive of the capital conservation buffers were 7.0%, 8.5%, and 10.5% at June 30, 2024. At September 30, 2024, the Company and the Bank were in compliance with the capital conservation buffer requirements. To be categorized as well capitalized, the Company and the Bank must maintain minimum ratios as set forth in the table below.

As of September 30, 2024, the Company’s and the Bank’s regulatory capital ratios exceeded the regulatory capital requirements and the Bank is considered to be “well capitalized” under the regulatory framework for prompt corrective action (“PCA”). As of December 31, 2023, the Bank’s regulatory capital ratios exceeded the regulatory capital requirements and the Bank is considered to be “well capitalized” under the regulatory framework for PCA. Management believes, as of September 30, 2024 and December 31, 2023, that the Company and the Bank met all capital adequacy requirements to which each is subject.

To be categorized as well-capitalized, the Bank must maintain minimum ratios as set forth in the table below. The following table also sets forth the Bank’s actual capital amounts and ratios:

															Amount of Capital Required
															To be												To be Well-
															Adequately												Capitalized under
			Actual												Capitalized												PCA Provisions
(dollars in thousands)			Amount						Ratio						Amount						Ratio						Amount						Ratio
As of September 30, 2024:
California BanCorp:
Total Capital (to Risk-Weighted Assets)			$	478,321					12.65		%				$	302,513					8.0		%				N/A						N/A
Tier 1 Capital (to Risk-Weighted Assets)			$	365,382					9.66		%				$	226,885					6.0		%				N/A						N/A
CET1 Capital (to Risk-Weighted Assets)			$	365,382					9.66		%				$	170,163					4.5		%				N/A						N/A
Tier 1 Capital (to Average Assets)			$	365,382					10.55		%				$	138,588					4.0		%				N/A						N/A
California Bank of Commerce, N.A.:
Total Capital (to Risk-Weighted Assets)			$	473,738					12.53		%				$	302,427					8.0		%				$	378,033					10.0		%
Tier 1 Capital (to Risk-Weighted Assets)			429,941						11.37		%				226,820						6.0		%				302,427						8.0		%
CET1 Capital (to Risk-Weighted Assets)			429,941						11.37		%				170,115						4.5		%				245,722						6.5		%
Tier 1 Capital (to Average Assets)			429,941						12.41		%				138,572						4.0		%				173,215						5.0		%
As of December 31, 2023:
California Bank of Commerce, N.A.:
Total Capital (to Risk-Weighted Assets)			$	289,743					13.51		%				$	171,575					8.0		%				$	214,469					10.0		%
Tier 1 Capital (to Risk-Weighted Assets)			270,341						12.61		%				128,681						6.0		%				171,575						8.0		%
CET1 Capital (to Risk-Weighted Assets)			270,341						12.61		%				96,511						4.5		%				139,405						6.5		%
Tier 1 Capital (to Average Assets)			270,341						11.65		%				92,818						4.0		%				116,022						5.0		%

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Dividend Restrictions

The primary source of funds for the Company is dividends from the Bank. Under federal law, the Bank may not declare a dividend in excess of its undivided profits and, absent the approval of the OCC, the Bank’s primary banking regulator, if the total amount of dividends declared by the Bank in any calendar year exceeds the total of the Bank’s retained net income of that current period, year to date, combined with its retained net income for the preceding two years. The Bank also is prohibited from declaring or paying any dividend if, after making the dividend, the Bank would be considered “undercapitalized” (as defined by reference to other OCC regulations). Federal bank regulatory agencies have authority to prohibit banking institutions from paying dividends if those agencies determine that, based on the financial condition of the bank, such payment will constitute an unsafe or unsound practice.

The Bank did not pay dividends to the Company during the three and nine months ended September 30, 2024 and 2023.

The Federal Reserve limits the amount of dividends that bank holding companies may pay on common stock to income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. It is also the Federal Reserve’s policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of strength to its banking subsidiaries. Additionally, in consideration of the current financial and economic environment, the Federal Reserve has indicated that bank holding companies should carefully review their dividend policies.

During the three and nine months ended September 30, 2024 and 2023, there were no dividends declared to shareholders by the Company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk Management

Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. Our primary market risk is interest rate risk, which is the risk of loss of net interest income or net interest margin resulting from changes in market interest rates.

Interest Rate Risk

Interest rate risk results from the following risks:

•Repricing risk — timing differences in the repricing and maturity of interest-earning assets and interest-bearing liabilities;

•Option risk — changes in the expected maturities of assets and liabilities, such as borrowers’ ability to prepay loans at any time and depositors’ ability to redeem certificates of deposit before maturity;

•Yield curve risk — changes in the yield curve where interest rates increase or decrease in a nonparallel fashion; and

•Basis risk — changes in spread relationships between different yield curves, such as U.S. Treasuries, U.S. Prime Rate, Constant Maturity Treasury Rates (“CMT”).

Because our earnings are primarily dependent on our ability to generate net interest income, we focus on actively monitoring and managing the effects of adverse changes in interest rates on our net interest income. Our interest rate risk is overseen by our management Asset Liability Committee (“ALCO”). ALCO monitors our

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compliance with regulatory guidance in the formulation and implementation of our interest rate risk program. ALCO reviews the results of our interest rate risk modeling quarterly to assess whether we have appropriately measured our interest rate risk, mitigated our exposures appropriately and any residual risk is acceptable. In addition to our annual review of this policy, our Board of Directors explicitly reviews the interest rate risk policy limits at least annually.

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints. Changes in interest rates may result in interest-earning assets and interest-bearing liabilities maturing or repricing at different times, on a different basis or in unequal amounts. In addition, it is not uncommon for rates on certain assets or liabilities to lag behind changes in the market rates of interest. Additionally, prepayments of loans and early withdrawals of certificates of deposit could cause interest sensitivities to vary.

Our interest rate risk exposure is measured and monitored through various risk management tools, including a simulation model that performs interest rate sensitivity analysis under multiple scenarios. The simulation model is based on the actual maturities and re-pricing characteristics of the Bank’s interest-rate sensitive assets and liabilities. The simulated interest rate scenarios include an instantaneous parallel shift in the yield curve. In order to model and evaluate interest rate risk, we use two approaches: Net Interest Income at Risk (“NII at Risk”), and Economic Value of Equity (“EVE”). Under NII at Risk, the impact on net interest income from changes in interest rates on interest-earning assets and interest-bearing liabilities is modeled over the

next 12 months from immediate and sustained changes in interest rates utilizing various assumptions for assets and liabilities. EVE measures the period end market value of assets minus the market value of liabilities and the change in this value as rates change. EVE is a period end measurement.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by our management with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the Company’s quarter ended September 30, 2024, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The Company and its subsidiaries are parties to various claims and lawsuits arising in the course of their normal business activities. Although the ultimate outcome of these suits cannot be ascertained at this time, it is the opinion of management that none of these matters, even if it resolved adversely to the Company, will have a material adverse effect on the Company’s consolidated financial position.

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Item 1A. Risk Factors

There were no material changes to the Company’s risk factors described under Item 1A. “Risk Factors” disclosed in Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 15, 2024.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On June 14, 2023, we announced an authorized share repurchase plan, providing for the repurchase of up to 550,000 shares of our outstanding common stock, or approximately 3% of our then outstanding shares. The repurchase program has no expiration date and may be suspended, modified, or terminated at any time without prior notice. There were no shares repurchased under this share repurchase plan during the three months ended September 30, 2024.

The following table presents information with respect to purchases made by or on behalf of us or any “affiliated purchases” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our common stock during the periods indicated:

						(a)						(b)						(c)						(d)
Period						Total number of shares (or units) purchased						Average price paid per share (or unit)						Total number of shares (or units) purchased as part of publicly announced plans or programs						Maximum number of shares (or units) that may yet be purchased under the plans or programs
July 1 - 31, 2024						—						$	—					—						550,000
August 1 - 31, 2024						—						$	—					—						550,000
September 1 - 30, 2024						—						$	—					—						550,000
Total						—						$	—					—

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5.    Other Information

None of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarter ended September 30, 2024.

Item 6.    Exhibits

Exhibit No.						Description

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2.1						Agreement and Plan of Merger and Reorganization, dated as of January 30, 2024 by and between Southern California Bancorp and California BanCorp (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed on January 30, 2024)
3.1						Restated Articles of Incorporation of California BanCorp
3.2						Agreement of Merger dated as of July 31, 2024 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on July 31, 2024)
3.3						Bylaws of California BanCorp (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed on July 31, 2024)
10.1						Executive Supplemental Compensation Agreement by and between California Bank of Commerce and Steven E. Shelton* (incorporated by reference to the Exhibit 10.14 to CBC’s Form 10 filed with the SEC on March 4, 2020)
10.2						Amendment to Executive Supplemental Compensation Agreement by and between California Bank of Commerce, N.A. and Steven E. Shelton dated as of July 31, 2024* (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed on July 31, 2024)
10.3						Second Amended and Restated Split-Dollar Agreement effective January 13, 2019 by and between California Bank of Commerce and Steven E. Shelton* (incorporated by reference to Exhibit 10.18 to CBC’s Form 10 filed with the SEC on March 4, 2020)
10.4						Executive Supplemental Compensation Agreement by and between California Bank of Commerce and Thomas A. Sa* (incorporated by reference to Exhibit 10.15 to CBC’s Form 10 filed with the SEC on March 4, 2020)
10.5						California Bank of Commerce Split-Dollar Agreement dated January 14, 2020 by and between California Bank of Commerce and Thomas A. Sa* (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K, filed on July 31, 2024)
10.6						Separation and Release Agreement dated as of September 20, 2024, by and among Thomas A. Sa, California BanCorp and California Bank of Commerce, N.A.
10.7						California Bancorp 2017 Amended and Restated Equity Incentive Plan* (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K, filed on July 31, 2024)
10.8						Form of Restricted Stock Unit Award Agreement under the Amended and Restated California BanCorp 2017 Equity Incentive Plan* (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K, filed on July 31, 2024)
31.1						Rule 13a-14(a) Certification (Principal Executive Officer)
31.2						Rule 13a-14(a) Certification (Principal Financial Officer)
32						Rule 13a-14(b) and 18 U.S.C. 1350 Certification
101						The following financial statements and footnotes from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Income (Loss); (iv) Consolidated Statements of Changes in Shareholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) the Notes to Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
104						Cover Page Interactive Data File (embedded within the Inline XBRL document)
*						Indicates a management contract or compensatory plan.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

						CALIFORNIA BANCORP
Date: November 14, 2024						/s/ Steven E. Shelton
						Steven E. Shelton
						Chief Executive Officer
						(Principal Executive Officer)
Date: November 14, 2024						/s/ Thomas Dolan
						Thomas Dolan
						Chief Financial Officer
						(Principal Financial Officer)

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