California BanCorp \ CA
For the period ended Jun 30, 2025. Filed Aug 8, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 8, 2025
BCAL$21.79+0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0001795815-25-000010
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-08.
0001795815-25-000014
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 242 previous paragraphs and 267 current paragraphs.
124 unchanged; 100 reworded; 28 added; 15 removed; 3 previous and 15 current paragraphs rearranged.
Tables are not compared: 35 previous and 38 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (28)
Current report
Market and Banking Industry Updates
Current report
The recently passed One Big Beautiful Bill Act includes a broad range of tax reform provisions impacting individuals and businesses, along with substantial cuts to social programs and reduced funding for financial oversight agencies, including the Consumer Financial Protection Bureau. These changes may affect deposit customers, borrowers, and the banking industry. The full impact of the Act is still being assessed and remains uncertain at this time. Separately, California’s single sales factor apportionment bill for financial institutions does not have a material impact on our estimated income tax expense, deferred taxes, or other comprehensive income.
Current report
At the July 30, 2025, Federal Open Market Committee meeting, members voted to maintain the target range for the Fed funds rate between 4.25%and 4.50%. Regarding the effects of tariffs on the economy, the Chairman observed that changes to government policies continue to evolve, and their effects on the economy remain uncertain and that higher tariffs have begun to show through more clearly in the prices of some goods, but their overall effects on economic activity and inflation remains to be seen. The Fed is being conservative by keeping rates where they are given all the uncertainty around inflation and the economy. With borrowing costs holding steady, the net interest margins may remain stable in the short term. However, anticipated rate cuts could pressure margins if long-term rates begin to decline.
Current report
The Chairman pointed out that the growth of economic activity has moderated, particularly due to a slowdown in consumer spending, while business investment has picked up. GDP rose at a 1.2 percent pace in the first half of the year, down from 2.5 percent last year. This mixed outlook suggests credit risk could rise if economic conditions weaken further.
Current report
In California, Moody’s anticipates GDP growth to decelerate to 1.6% in 2025 and to continue to decrease to 1.5% in 2026. Despite this slowdown, the state retains its status as the world’s fourth-largest economy; however, California’s economy is cooling off, with slower payroll growth and downward revisions widening the gap with national trends. The tech sector is experiencing a sharp downturn, with most consumer-oriented industries under pressure. Building permits declined in 2024 and have yet to recover. With the trade war heating up, growing uncertainty is prompting businesses and investors to scale back and proceed cautiously. We have observed that some clients have expressed hesitancy in initiating projects due to the uncertain economic environment.
Current report
Inflation has had a material impact on the growth of total assets within the banking industry, prompting the need to raise equity capital at accelerated rates to preserve a healthy equity-to-assets ratio. It also drives increases in other operating expenses. Management views interest rate risk as the key challenge in mitigating inflation's impact. We undertake substantial efforts to maintain a strategic balance between our rate-sensitive assets and liabilities across economic cycles to reduce volatility in net interest income.
Current report
•Struggles to drive efficiencies across functions while maintaining cost-effectiveness;
Current report
•The rising threat of cyberattacks and substantial investment required for protection; and
Current report
Net income for the six months ended June 30, 2025 was $31.0 million, or $0.95 per diluted share, compared to net income of $5.1 million, or $0.27 per diluted share in the prior year. The $25.8 million increase in net income from the prior year was primarily due to a $42.2 million increase in net interest income, a $7.0 million decrease in the provision for credit losses, partially offset by a $15.8 million increase in noninterest expense, and a $10.4 million increase in income taxes. Pre-tax, pre-provision income for the six months ended June 30, 2025 was $39.3 million, an increase of $29.2 million, or 289.6% compared to pre-tax, pre-provision income of $10.1 million for the six months ended June 30, 2024.
Current report
(3)Average noninterest-bearing deposits represent 36.80%, and 34.20% of average total deposits for the six months ended June 30, 2025 and 2024, respectively.
Current report
Average total borrowings increased $21.9 million to $67.2 million for the three months ended June 30, 2025 resulting from an increase of $49.3 million in average subordinated debt from the $50.8 million in fair value of subordinated debt acquired in the Merger, partially offset by a $27.4 million decrease in average FHLB advances. Additionally, average total borrowings decreased in the second quarter of 2025, as a result of the redemption of the $18 million subordinated notes in June 2025. The average cost of total borrowings was 8.53% for the three months ended June 30, 2025, a 269 basis point increase from 5.84% for the same 2024 period. The increase was primarily attributable to borrowing costs associated with the acquired subordinated debt, including net amortization of purchase accounting discounts, coupled with a higher borrowing expense related to those subordinated notes converting to a floating-rate and up to redemption during the second quarter of 2025.
Current report
Net interest income for the six months ended June 30, 2025 was $83.7 million, compared to $41.5 million for the six months ended June 30, 2024. The increase was primarily due to a $49.5 million increase in total interest income, offset by a $7.3 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 six months ended June 30, 2025, total loan interest income increased $42.1 million, of which $10.8 million was related to accretion income from the net purchase accounting discounts on acquired loans, total debt securities income increased $830 thousand, and interest and dividend income from other financial institutions and other interest-earning assets increased $6.5 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 36 basis point increase in yield on the total average interest-earning assets for the six months ended June 30, 2025 compared to the same 2024 period. Total average interest-earning assets increased $1.48 billion, resulting from a $1.15 billion increase in average total loans, a $26.4 million increase in total average debt securities, a $255.3 million increase in average deposits in other financial institutions, and a $33.7 million increase in average Fed funds sold/resale agreements.
Current report
During the six months ended June 30, 2025, total interest expense increased by $7.3 million to $28.9 million as compared to the same period in 2024, comprised primarily of a $6.1 million increase in interest on average interest-bearing liabilities driven by the increase in average interest-bearing liabilities from the Merger, partially offset by the decrease in the cost of interest-bearing deposits between periods.
Current report
Net interest margin for the six months ended June 30, 2025 was 4.63%, compared with 3.87% for the six months ended June 30, 2024. The increase was primarily related to a 46 basis point decrease in the cost of funds and a 36 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 six months ended June 30, 2025 was 6.24%, compared with 5.88% for the six months ended June 30, 2024. The yield on average total loans during the six months ended June 30, 2025 was 6.59%, a 48 basis point increase from 6.11% for the six months ended June 30, 2024. The cost on total interest-bearing liabilities during the six months ended June 30, 2025 was 2.70%, a 58 basis point decrease from 3.28% for the same 2024 period. Accretion income from the net purchase accounting discounts on acquired loans was $10.8 million and the amortization expense impact on interest expense was $1.1 million, the combination of which increased the net interest margin by 54 basis points for the six months ended June 30, 2025. Accretion income from the net purchase accounting discounts on acquired loans increased the yield on average total loans by 72 basis points for the six months ended June 30, 2025.
Current report
Total cost of funds for the six months ended June 30, 2025 was 1.73%, a decrease of 46 basis points from 2.19% for the six months ended June 30, 2024. The decrease was primarily driven by a 65 basis point decrease in the cost of interest-bearing deposits, coupled with an increase in average noninterest-bearing deposits, partially offset by increases in average total borrowings and cost of total borrowings. Average noninterest-bearing demand deposits increased $558.0 million to $1.22 billion and represented 36.8% of total average deposits for the six months ended June 30, 2025, compared with $659.6 million and 34.2%, respectively, for the same 2024 period; average interest-bearing deposits increased $822.4 million to $2.09 billion during the six months ended June 30, 2025. The total cost of deposits for the six months ended June 30, 2025 was 1.59%, down 49 basis points from 2.08% for the same 2024 period.
Current report
The increase was primarily attributable to borrowing costs associated with the acquired subordinated debt, including net amortization of purchase accounting discounts, coupled with a higher borrowing expense related to those subordinated notes converting to a floating-rate and up to redemption during the second quarter of 2025.
Current report
We recorded a reversal of credit losses of $634 thousand for the three months ended June 30, 2025, compared to a provision for credit losses of $2.9 million for the same 2024 period. The provision for credit losses for the three months ended June 30, 2024 included a $3.0 million provision for credit losses on loans held for investment, partially offset by a $97 thousand reversal of credit provision for unfunded loan commitments primarily due to the impact of lower unfunded loan commitments.
Current report
We recorded a reversal of credit losses of $4.4 million for the six months ended June 30, 2025, compared to a provision for credit losses of $2.6 million for the same 2024 period. Total net charge-offs were $5.6 million in the six months ended June 30, 2025, which consisted of $7.4 million of gross charge-offs, offset by $1.8 million of gross recoveries. The net charge-offs resulted from the Company’s continuing strategy to derisk the consolidated balance sheet by reducing our exposure to criticized loans. The reversal of credit losses in the six months ended June 30, 2025 included a $589 thousand reversal of credit losses for unfunded loan commitments primarily related to the decreases in unfunded loan commitments and loss rate used to estimate the allowance for credit losses on unfunded commitments during the six months ended June 30, 2025. Total unfunded loan commitments was $371.5 million at June 30, 2024.
Current report
The reversal of credit losses for loans held for investment in the six months ended June 30, 2025 was $3.8 million, compared with a provision for credit losses of $2.7 million in the same 2024 period. The reversal of credit losses for loans held for investment was driven primarily by the decrease in the balance of loans held for investment, changes in the composition of the loans held for investment portfolio, and changes in qualitative factors, partially offset by the net charge-offs and changes in the reasonable and supportable forecast, primarily related to the economic outlook for California.
Current report
The Company recorded noninterest income of $2.9 million in the second quarter of 2025, an increase of $290 thousand compared to $2.6 million in the first quarter of 2025. Other charges and fees increased $874 thousand in the second quarter due primarily to higher income from equity investments. There was no gain on sale of SBA 7A loans in the second quarter of 2025, compared to a gain on sale of loans from SBA 7A loan sales of $577 thousand in the prior quarter.
Current report
Total noninterest income during the six months ended June 30, 2025 was $5.4 million, an increase of $2.8 million compared to total noninterest income of $2.6 million for the same period in the prior year. The increase was due primarily to increases in service charges and fees on deposit accounts, bank owned life insurance income and servicing and related income on loans from the Merger. Additionally, other charges and fees increased $774 thousand due primarily to higher income from equity investments during the six months ended June 30, 2025.
Current report
Efficiency ratio for the second quarter of 2025 was 56.1%, compared to 55.6% in the prior quarter. The $862 thousand loss on sale of OREO negatively impacted the efficiency ratio by 1.9% during the second quarter of 2025.
Current report
Other real estate expenses were $862 thousand during the three months ended June 30, 2025, compared to $4.9 million for the same 2024 period. The $4.1 million decrease relates to the 2024 period including a $4.8 million loss from the sale of OREO, compared to a $862 thousand loss from the sale of OREO during the second quarter of 2025,
Current report
Our efficiency ratio for the three months ended June 30, 2025 was 56.1%, compared to 85.7% for the three months ended June 30, 2024. Excluding the merger and related expenses of $491 thousand, the efficiency ratio for the three months ended June 30, 2024 would have been 83.5%. The $862 thousand and $4.8 million losses on sale of OREO negatively impacted the efficiency ratio by 1.9% and 21.6%, respectively during the second quarter of 2025 and 2024, respectively.
Current report
Total noninterest expense during the six months ended June 30, 2025 was $49.8 million, an increase of $15.8 million compared with total noninterest expense of $34.0 million for the same 2024 period. The increase in most of the overhead expense categories was due to including CALB’s operations in the six months ended June 30, 2025, partially offset by lower OREO expenses and merger and related expenses.
Current report
Other real estate expenses were $930 thousand during the six months ended June 30, 2025, compared to $5.0 million for the same 2024 period. The $4.1 million decrease primarily relates to the 2024 period including a $4.8 million loss from the sale of OREO, compared to a $862 thousand loss from the sale of OREO during the second quarter of 2025,
Current report
2024 would have been 74.7%. The $930 thousand and $5.0 million losses on sale of OREO negatively impacted the efficiency ratio by 1.0% and 10.8%, respectively during the six months ended June 30, 2025 and 2024. respectively.
Current report
We had 12 loan modifications with borrowers that are experiencing financial difficulty that were modified as of June 30, 2025 totaling $16.3 million, of which $16.0 million of these loans are current. During the six months ended June 30, 2025, we modified an owner occupied CRE loan by granting a partial payment delay for 1-year and a 1-year maturity date extension. We modified 11 C&I loans: seven involved term extension, three involved payment delays, and one involved a combination of payment delay and term extension. These modifications allow the borrower short-term cash relief to allow them to improve their financial condition. During the three and six months ended June 30, 2024, there were no loan modifications or refinancings (including those with borrowers that are experiencing financial difficulty).
Removed paragraphs (15)
Previous report
Southern California Wildfires
Previous report
Early in the first quarter of 2025, several neighborhoods adjacent to Los Angeles were engulfed by wildfires fed by unusually strong Santa Ana winds. The Palisades and Eaton fires were the most damaging of these wildfires, destroying an estimated 12,000 structures between them. We are working with all our constituents to provide assistance during this difficult period, supporting clients and employees affected by the fires, as well as donating money to relief funds and providing volunteer assistance to them. The fires are expected to have a minimal impact on our loan portfolio.
Previous report
Impact of Changes in Federal Fund Interest Rate on the Economy and Banking Industry
Previous report
Between March 2022 and September 2023, the Federal Reserve raised interest rates 11 times by an aggregate of 525 basis points, to a range between 5.25% and 5.50%, the highest level in 22 years, in response to an increase in inflation that saw the Consumer Price Index rise to 9.1% in July 2022, which has since moderated to 2.4% in March 2025. At its September 2024 meeting, the Federal Reserve reduced the federal funds interest rate by 50 basis points, followed by two additional 25 basis point reductions in November and December 2024, for a total decrease of 100 basis points in 2024, ending the year in a range of 4.25% to 4.50%.
Previous report
Concerns regarding a potential recession have moderated with the full year 2024 U.S. GDP reported at 2.8%, slowing to 2.4% in the fourth quarter of 2024, with Moody’s full-year baseline 2025 GDP growth forecast estimate at 1.3%. California’s 2025 GDP is forecast by Moody’s to decrease to 1.6% in 2025. Despite the anticipated slowdown in California, it is still considered to have the fourth largest economy in the world; however, 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 and further layoffs are expected. The U.S. Bureau of Labor Statistics reports California’s March 2025 unemployment rate at 5.3%; it has been in a range between 5.0% and 5.5% since September 2023.
Previous report
In remarks delivered at the March 2025 U.S. Monetary Policy Forum in New York City Fed Chairman Jerome Powell said that the U.S. economy remains in a good place. However, policymakers are holding steady as they wait for greater clarity on the effects of the Trump administration’s numerous policy changes on the economy; officials are carefully monitoring the effects of the new administration’s policy changes in regard to trade, immigration, fiscal policy, and regulation. Uncertainty around such changes and their likely economic impacts remains high, especially since April 2, 2025, when the Trump administration unveiled a new tariff structure, which drove a correction in the equity markets. Chairman Powell believes that the Fed doesn’t need to move quickly to adjust policy in response yet, but noted the impact of the tariffs may lead to higher inflation and slower growth in the economy. They may also impact financial institutions.
Previous report
•Merger cost savings being less than anticipated;
Previous report
Reversal of Credit Losses
Previous report
The Company recorded noninterest income of $2.6 million in the first quarter of 2025, an increase of $1.6 million compared to $1.0 million in the fourth quarter of 2024. The Company reported a gain on sale of loans of $577 thousand from SBA 7A loan sales, in the first quarter of 2025, compared to a loss on sale of loans of $1.1 million related to the sale of certain Sponsor Finance loans in the prior quarter. Service charges and fees on deposit accounts of $1.2 million in the first quarter of 2025 increased $275 thousand from the prior quarter, related to the one-time waiver of analysis charges for certain deposit accounts in light of the core system conversion in the prior quarter. Bank owned life insurance income of $463 thousand in the first quarter of 2025 decreased $360 thousand from the prior quarter, primarily related to a $368 thousand death benefit income recorded in the prior quarter. No comparable death benefit income was recorded in the first quarter of 2025.
Previous report
Total noninterest expense for the first quarter of 2025 was $24.9 million, a decrease of $1.2 million from total noninterest expense of $26.1 million in the prior quarter, which was largely due to the decrease in merger related expenses.
Previous report
Salaries and employee benefits decreased $210 thousand during the quarter to $15.9 million. The decrease in salaries and employee benefits was primarily related to the decrease in average headcount.
Previous report
There were no merger related expenses in the first quarter of 2025, compared to $643 thousand in the prior quarter.
Previous report
Other real estate owned expense of $68 thousand in the first quarter of 2025 decreased by $152 thousand, due primarily to lower receivership expenses and property tax.
Previous report
Efficiency ratio (non-GAAP 1) for the first quarter of 2025 was 55.6%, compared to 57.4% in the prior quarter. Excluding the merger and related expenses of zero and $643 thousand, the efficiency ratio (non-GAAP 1) for the first quarter of 2025 and fourth quarter of 2024 would have been 55.6% and 55.9%, respectively.
Previous report
We had seven loan modifications with borrowers that are experiencing financial difficulty that were modified during the last twelve months ended March 31, 2025 totaling $19.9 million. These loans included five PCD loans, one non-PCD loan and one non-acquired loan. During the three months ended March 31, 2025, there was one PCD Construction and land loan and one PCD C&I loan modification that was classified as modifications with borrowers that are experiencing financial difficulty. During the three months ended March 31, 2024, There were no loan modifications or refinancings (including those with borrowers that are experiencing financial difficulty).
Reworded paragraphs (100)
Previous wording
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 CALB’s one full-service bank branch and its four loan production offices in Northern California to the Bank’s 13 full-service bank branches located throughout the Southern California region for a total of 14 Bank branches.
Current wording
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 provided 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 CALB’s one full-service bank branch and its four loan production offices in Northern California to the Bank’s 13 full-service bank branches located throughout the Southern California region for a total of 14 Bank branches.
Previous wording
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 Information - Item 1. Financial Statements of this filing for more information regarding business combinations and related activity.
Current wording
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 -
Previous wording
Markets have been volatile lately with the recent changes in tariff policies and given the fluid dynamics of the situation we are reaching out to our clients to assess the potential impact of these changing policies on their businesses.
Current wording
Markets have been volatile lately due to the recent changes in tariff policies and given the fluid dynamics of the situation we are reaching out to our clients to assess the potential impact of these changing policies on their businesses. We continue to monitor the effect of tariffs and trade negotiations on our clients and we do not expect to see an impact on client operations from those events. We have minimal exposure to international trade, although some of our clients do source materials from outside the country.
Previous wording
We have a strong consolidated balance sheet with diversified deposit and loan portfolios, with very little sector or individual customer concentration, other than our CRE concentration. Our relationship-based business banking model is founded on strong, ongoing relationships with our commercial clients, which represent a broad variety of industries. We have 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.
Current wording
We have a strong consolidated balance sheet with diversified deposit and loan portfolios, with very little sector or individual customer concentration, other than our CRE concentration. Our relationship-based business banking model is founded on strong, ongoing relationships with our commercial clients, which represent a broad variety of industries. We have no meaningful exposure to cryptocurrency or venture capital business models, our accumulated other comprehensive loss on our available-for-sale debt securities is manageable, and our capital position is strong. We have made significant progress in derisking our consolidated balance sheets by decreasing our exposure in the Sponsor Finance portfolio, reducing our reliance on brokered deposits and improving overall credit quality. The reduction in credit risk in our total loan portfolio is reflected in the reversal of provision for loan losses over three consecutive quarters, a significant decrease in our non-performing assets to total assets ratio to 0.46% at June 30, 2025 from 0.68% at December 31, 2024, as well as a significant decrease in special mention and substandard loans since year-end.
Previous wording
Per the regulatory definition of commercial real estate, at March 31, 2025, our concentration of such loans represented 439% of our total risk-based capital. In addition, at March 31, 2025, total loans secured by commercial real estate under construction and land development represented 43% of our total risk-based capital.
Current wording
Per the regulatory definition of commercial real estate, at June 30, 2025, our concentration of such loans represented 454% of our total risk-based capital. In addition, at June 30, 2025, total loans secured by commercial real estate under construction and land development represented 37% of our total risk-based capital. The non-performing loans for these segments per the regulatory definition of commercial real estate loans at June 30, 2025 were $16.4 million and there were $2.0 million charge-offs during the six months ended June 30, 2025. At June 30, 2025, there was no OREO.
Previous wording
Given the nature of our commercial banking business, approximately 47% of our total deposits exceeded the FDIC deposit insurance limits at March 31, 2025.
Current wording
Given the nature of our commercial banking business, approximately 48% of our total deposits exceeded the FDIC deposit insurance limits at June 30, 2025.
Previous wording
We have a small investment portfolio of high-quality securities. At March 31, 2025, the amortized cost of our held-to-maturity debt securities was $53.2 million, or approximately 1.3% of total assets. The fair value of our available-for-sale debt securities was $131.6 million, or approximately 3.3% of total assets. The 10-Year Treasury Bond was approximately 4.2% at the end of March 31, 2025. The decreases in the 10-Year Treasury Bond in the first quarter, resulted in a lower net unrealized losses on our debt securities at March 31, 2025. At March 31, 2025, our accumulated other comprehensive loss, net of taxes, decreased to $4.4 million, compared to $6.6 million at December 31, 2024. 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 $8.5 million at March 31, 2025. The results of our stress testing on our debt security portfolio at March 31, 2025, illustrated that our losses, net of taxes on both held-to-maturity and available-for-sale debt securities would increase to $27.5 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.
Current wording
We strategically manage an investment portfolio focused on high-quality, resilient securities. At June 30, 2025, the amortized cost of our held-to-maturity debt securities was $53.1 million, or approximately 1.3% of total assets. The fair value of our available-for-sale debt securities was $188.2 million, or approximately 4.8% of total assets. The 10-Year Treasury Bond was approximately at 4.2% at the end of June 30, 2025, compared to 4.6% at December 31, 2024. The decrease in the 10-Year Treasury Bond in the in the first half of 2025, resulted in a lower net unrealized losses on our debt securities at June 30, 2025. At June 30, 2025, our accumulated other comprehensive loss, net of taxes, decreased to $3.7 million, compared to $6.6 million at December 31, 2024. 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 $7.7 million at June 30, 2025. The results of our stress testing on our debt security portfolio at June 30, 2025, illustrated that our losses, net of taxes on both held-to-maturity and available-for-sale debt securities would increase to $36.1 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.
Previous wording
•Liquidity stresses to maintain sufficient levels of high-quality liquid assets and access to borrowing lines; and
Current wording
•Liquidity stresses to maintain sufficient levels of high-quality liquid assets and access to borrowing lines;
Previous wording
The comparability of our financial information is affected by the merger with CALB. We completed this Merger on July 31, 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.
Current wording
The comparability of our financial information is affected by the merger with CALB. We completed the Merger on July 31, 2024. The 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.
Previous wording
Net income for the three months ended March 31, 2025 was $16.9 million, or $0.52 per diluted share, compared to $16.8 million or $0.51 per diluted share in the prior quarter. The $81 thousand increase in net income from the prior quarter was primarily due to a $1.6 million increase in noninterest income, coupled with a $1.2 million decrease in noninterest expense, partially offset by a $2.3 million decrease in net interest income. Pre-tax, pre-provision income for the three months ended March 31, 2025 was $19.9 million, an increase of $481 thousand, or 2.5% compared to pre-tax, pre-provision income of $19.4 million for the three months ended December 31, 2024.
Current wording
Net income for the three months ended June 30, 2025 was $14.1 million, or $0.43 per diluted share, compared to $16.9 million or $0.52 per diluted share in the prior quarter. The $2.8 million decrease in net income from the prior quarter was primarily due to a decrease in the reversal of provision for loan losses of $3.1 million and a $838 thousand decrease in net interest income, partially offset by a $290 thousand increase in noninterest income and a $87 thousand decrease in noninterest expense. Pre-tax, pre-provision income for the three months ended June 30, 2025 was $19.4 million, a decrease of $461 thousand, or 2.3% compared to pre-tax, pre-provision income of $19.9 million for the three months ended March 31, 2025.
Previous wording
Net income for the three months ended March 31, 2025 was $16.9 million, or $0.52 per diluted share, compared to $4.9 million, or $0.26 per diluted share for the same 2024 period. The $11.9 million increase in net income from the three months ended March 31, 2024 was primarily due to a $21.8 million increase in net interest income from higher average interest-earning assets resulting from the CALB merger, a $1.2 million increase in noninterest income and a $3.4 million increase in reversal of credit losses, partially offset by a $9.9 million increase in noninterest expense. Pre-tax, pre-provision income for the three months ended March 31, 2025 was $19.9 million, an increase of $13.0 million, or 187.3% compared to pre-tax, pre-provision income of $6.9 million for the same 2024 period.
Current wording
Net income for the three months ended June 30, 2025 was $14.1 million, or $0.43 per diluted share, compared to $190 thousand, or $0.01 per diluted share for the same 2024 period. The $13.9 million increase in net income from the three months ended June 30, 2024 was primarily due to a $20.4 million increase in net interest income from higher average interest-earning assets resulting from the Merger, a $1.7 million increase in noninterest income and a $3.5 million decrease in the provision for credit losses, partially offset by a $5.8 million increase in noninterest expense. Pre-tax, pre-provision income for the three months ended June 30, 2025 was $19.4 million, an increase of $16.3 million, or 513.1% compared to pre-tax, pre-provision income of $3.2 million for the same 2024 period.
Previous wording
(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 $6.1 million, $6.7 million and $604 thousand for the three months ended March 31, 2025, December 31, 2024, and March 31, 2024, respectively.
Current wording
(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, $6.1 million and $386 thousand for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively.
Previous wording
(3)Average noninterest-bearing deposits represent 37.37%, 36.27% and 34.35% of average total deposits for the three months ended March 31, 2025, December 31, 2024, and March 31, 2024, respectively.
Current wording
(3)Average noninterest-bearing deposits represent 36.21%, 37.37% and 34.05% of average total deposits for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively.
Previous wording
Net interest income for the first quarter of 2025 was $42.3 million, compared with $44.5 million in the prior quarter. The decrease in net interest income was primarily due to a $5.7 million decrease in total interest and dividend income, partially offset by a $3.4 million decrease in total interest expense in the first quarter of 2025, as compared to the prior quarter. During the first quarter of 2025, loan interest income decreased by $4.1 million, including a decrease of $421 thousand of accretion income from the net purchase accounting discounts on acquired loans, total debt securities income decreased $174 thousand, and interest and dividend income from other financial institutions decreased $1.5 million. The decrease in interest income was mainly due to decreases in average loan balances and average deposits in other financial institutions. Average total interest-earning assets decreased $160.8 million in the first quarter of 2025, the result of a $75.2 million decrease in average total loans, an $8.5 million decrease in average total debt securities, a $105.5 million decrease in average deposits in other financial institutions, partially offset by a $27.1 million increase in average Fed funds sold/resale agreements and a $1.3 million increase in average restricted stock investments and other bank stock. The decrease in interest expense for the first quarter of 2025 was primarily due to a $3.4 million decrease in interest expense on interest-bearing deposits, the result of a $151.1 million decrease in average interest-bearing deposits and a 39 basis point decrease in average interest-bearing deposit costs in the first quarter of 2025.
Current wording
Net interest income for the second quarter of 2025 was $41.4 million, compared with $42.3 million in the prior quarter. The decrease in net interest income was primarily due to a $1.0 million decrease in total interest and dividend income, partially offset by a $201 thousand decrease in total interest expense in the second quarter of 2025, as compared to the prior quarter. During the second quarter of 2025, loan interest income decreased by $1.6 million, including a decrease of $496 thousand of accretion income from the net purchase accounting discounts on acquired loans, partially offset by increases of $226 thousand in total debt securities income and $341 thousand in interest and dividend income from other financial institutions. The decrease in interest income was mainly due to decreases in average total loan balances. Average total interest-earning assets decreased $78.2 million in the second quarter of 2025, the result of a $117.4 million decrease in average total loans and a $21.0 million decrease in average deposits in other financial institutions, partially offset by a $25.0 million increase in average total debt securities and a $35.2 million increase in average Fed funds sold/resale agreements. The decrease in interest expense for the second quarter of 2025 was primarily due to a $239 thousand decrease in interest expense on interest-bearing deposits, the result of a $26.4 million decrease in average interest-bearing deposits and a 4 basis point decrease in average interest-bearing deposit costs in the second quarter of 2025.
Previous wording
Net interest margin for the first quarter of 2025 was 4.65%, compared with 4.61% in the prior quarter. The increase was primarily related to a 27 basis point decrease in the cost of funds, partially offset by a 22 basis point decrease in the total interest-earning assets yield. The yield on total average interest-earning assets in the first quarter of 2025 was 6.26%, compared with 6.48% in the prior quarter. The yield on average total loans in the first quarter of 2025 was 6.61%, a decrease of 23 basis points from 6.84% in the prior quarter. Accretion income from the net purchase accounting discounts on acquired loans was $5.7 million, increasing the yield on average total loans by 62 basis points; the net amortization expense from the purchase accounting discounts on acquired subordinated debt and acquired time deposits premium increased the interest expense by $526 thousand, the combination of which increased the net interest margin by 57 basis points in the first quarter of 2025. In the prior quarter, accretion income from the net purchase accounting discounts on acquired loans was $6.1 million, increasing the yield on average total loans by 76 basis points; the net amortization expense from the purchase accounting discounts on acquired subordinated debt and acquired time deposits premium increased the interest expense by $467 thousand, the combination of which increased the net interest margin by 58 basis points.
Current wording
Net interest margin for the second quarter of 2025 was 4.61%, compared with 4.65% in the prior quarter. The decrease was primarily related to a 5 basis point decrease in the total interest-earning assets yield, coupled with a 1 basis point increase in the cost of funds. The yield on total average interest-earning assets in the second quarter of 2025 was 6.21%, compared with 6.26% in the prior quarter. The yield on average total loans in the second quarter of 2025 was 6.58%, a decrease of 3 basis points from 6.61% in the prior quarter. Accretion income from the net purchase accounting discounts on acquired loans was $5.2 million, increasing the yield on average total loans by 69 basis points; the net amortization expense from the purchase accounting discounts on acquired subordinated debt and acquired time deposits premium increased the interest expense by $555 thousand, the combination of which increased the net interest margin by 51 basis points in the second quarter of 2025. In the prior quarter, accretion income from the net purchase accounting discounts on acquired loans was $5.7 million, increasing the yield on average total loans by 74 basis points; the net amortization expense from the purchase accounting discounts on acquired subordinated debt and acquired time deposits premium increased the interest expense by $526 thousand, the combination of which increased the net interest margin by 57 basis points.
Previous wording
Cost of funds for the first quarter of 2025 was 1.72%, a decrease of 27 basis points from 1.99% in the prior quarter. The decrease was primarily driven by a 39 basis point decrease in the cost of average interest-bearing deposits, partially offset by an increase of 9 basis points in the cost of total borrowings, which was driven primarily by the amortization expense of $559 thousand from the purchase accounting discounts on acquired subordinated debt which increased the cost on total borrowings by 7 basis points. Average noninterest-bearing demand deposits decreased $27.7 million to $1.26 billion and represented 37.4% of total average deposits for the first quarter of 2025, compared with $1.28 billion and 36.3%, respectively, in the prior quarter; average interest-bearing deposits decreased $151.1 million to $2.10 billion during the first quarter of 2025. The total cost of deposits in the first quarter of 2025 was 1.59%, a decrease of 28 basis points from 1.87% in the prior quarter. The cost of total interest-bearing deposits decreased primarily due to the Company’s deposit repricing strategy and the ongoing pay off of high cost brokered deposits in the first quarter of 2025.
Current wording
Cost of funds for the second quarter of 2025 was 1.73%, a slight increase of 1 basis point from 1.72% in the prior quarter. The increase was primarily driven by an increase of 47 basis points in the cost of total borrowings, which was driven mostly by the decrease in average total borrowings of $2.9 million from the redemption of the $18 million subordinated notes in June 2025, coupled with higher borrowing expense related to those subordinated notes converting to a floating-rate during the second quarter of 2025 and up to redemption, partially offset by a 4 basis point decrease in the cost of average interest-bearing deposits. The amortization expense of $560 thousand from the purchase accounting discounts on acquired subordinated debt contributed 7 basis points to the cost on funds. Average noninterest-bearing demand deposits decreased $76.1 million to $1.18 billion and represented 36.2% of total average deposits for the second quarter of 2025, compared with $1.26 billion and 37.4%, respectively, in the prior quarter; average interest-bearing deposits decreased $26.4 million to $2.08 billion during the second quarter of 2025. The total cost of deposits in the second quarter of 2025 was maintained at 1.59%, the same as the prior quarter. The cost of total interest-bearing deposits decreased 4 basis points primarily due to the Company’s ongoing strategy to pay off high cost brokered deposits and listing money market deposits in the second quarter of 2025.
Previous wording
Average total borrowings increased $607 thousand to $70.0 million in the first quarter of 2025, primarily due to the amortization related to the purchase accounting discounts on acquired subordinated debt. The average cost of total borrowings was 8.06% for the first quarter of 2025, up from 7.97% in the prior quarter.
Current wording
Average total borrowings decreased $2.9 million to $67.2 million in the second quarter of 2025, primarily due to the redemption of the $18 million subordinated notes in June 2025. The average cost of total borrowings was 8.53% for the second quarter of 2025, up from 8.06% in the prior quarter.
Previous wording
Net interest income for the three months ended March 31, 2025 was $42.3 million, compared to $20.5 million for the three months ended March 31, 2024. The increase in interest income primarily relates to increases in total average interest-earning assets due to the Merger during the third quarter of 2024. The $21.8 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.
Current wording
Net interest income for the three months ended June 30, 2025 was $41.4 million, compared with $21.0 million for the three months ended June 30, 2024. The increase in interest income primarily relates to increases in total average interest-earning assets due to the Merger during the third quarter of 2024. The
Previous wording
Net interest margin for the three months ended March 31, 2025 was 4.65%, compared with 3.80% for the same 2024 period. The 85 basis point increase was primarily related to a 47 basis point increase in the total average interest-earning assets yield resulting from higher accretion income from the net purchase accounting discounts on acquired loans and a change in our average interest-earning asset mix, coupled with a 45 basis point decrease in the cost of funds. The yield on total average earning assets during the three months ended March 31, 2025 was 6.26%, compared with 5.79% for the same 2024 period. The yield on average loans during the three months ended March 31, 2025 was 6.61%, an increase of 59 basis points from 6.02% for the same 2024 period. Accretion income from the net purchase accounting discounts on acquired loans was $5.7 million and the amortization expense impact on interest expense was $526 thousand, the combination of which increased the net interest margin by 57 basis points in the first quarter of 2025.
Current wording
Net interest margin for the three months ended June 30, 2025 was 4.61%, compared with 3.94% for the same 2024 period. The 67 basis point increase was primarily related to a 24 basis point increase in the total average interest-earning assets yield resulting from higher accretion income from the net purchase accounting discounts on acquired loans and a change in our average interest-earning asset mix, coupled with a 48 basis point decrease in the cost of funds. The yield on total average earning assets during the three months ended June 30, 2025 was 6.21%, compared with 5.97% for the same 2024 period. The yield on average loans during the three months ended June 30, 2025 was 6.58%, an increase of 37 basis points from 6.21% for the same 2024 period. Accretion income from the net purchase accounting discounts on acquired loans was $5.2 million, increasing the yield on average total loans by 69 basis points; the net amortization expense from the purchase accounting discounts on acquired subordinated debt and acquired time deposits premium increased the interest expense by $555 thousand, the combination of which increased the net interest margin by 51 basis points in the second quarter of 2025.
Previous wording
During the three months ended March 31, 2025, total interest income increased $25.6 million, comprised of a $22.1 million increase in total loan interest income, of which $5.7 million was related to accretion income from the net purchase accounting discounts on acquired loans, a $310 thousand increase in total debt securities income, and a $3.1 million increase in 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 $1.51 billion, resulting primarily from a $1.20 billion increase in average total loans, a $262.5 million increase in average deposits in other financial institutions, a $12.4 million increase in total average debt securities, a $15.2 million increase in average restricted stock investments and other bank stock, and a $20.6 million increase in average Fed fund sold/resale agreements.
Current wording
During the three months ended June 30, 2025, total interest income increased $23.9 million, comprised of a $20.0 million increase in total loan interest income, of which $5.2 million was related to accretion income from the net purchase accounting discounts on acquired loans, a $520 thousand increase in total debt securities income, and a $3.4 million increase in 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 $1.46 billion, resulting primarily from a $1.11 billion increase in average total loans, a $248.2 million increase in average deposits in other financial institutions, a $40.3 million increase in total average debt securities, a $14.6 million increase in average restricted stock investments and other bank stock, and a $46.5 million increase in average Fed funds sold/resale agreements.
Previous wording
During the three months ended March 31, 2025, total interest expense increased by $3.8 million to $14.6 million, comprised primarily of a $3.4 million increase in interest expense on interest-bearing deposits due primarily to an increase in average interest-bearing liabilities resulting from the Merger, partially offset by a decrease in the cost of interest- bearing deposits resulting from our deposit repricing strategy and the ongoing pay off of high cost brokered deposits.
Current wording
During the three months ended June 30, 2025, total interest expense increased by $3.5 million to $14.4 million, comprised primarily of a $2.8 million increase in interest expense on interest-bearing liabilities primarily driven by the increase in average interest-bearing liabilities resulting from the Merger, partially offset by a decrease in the cost of interest-bearing deposits resulting from our deposit repricing strategy and the ongoing reduction of high cost brokered deposits.
Previous wording
Total cost of funds for the three months ended March 31, 2025 was 1.72%, a decrease of 45 basis points from 2.17% for the same 2024 period. The decrease was primarily driven by a 58 basis point decrease in the cost of interest-bearing deposits, coupled with an increase in average noninterest-bearing deposits, partially offset by an increase of 231 basis points in the cost of total borrowings. Average noninterest-bearing demand deposits increased $594.6 million to $1.26 billion and represented 37.4% of total average deposits for the three months ended March 31, 2025, compared with $661.3 million and 34.3%, respectively, for the same 2024 period; average interest-bearing deposits increased $840.8 million to $2.10 billion during the three months ended March 31, 2025. The total cost of deposits for the three months ended March 31, 2025 was 1.59%, down 46 basis points from 2.05% for the same 2024 period.
Current wording
Total cost of funds for the three months ended June 30, 2025 was 1.73%, a decrease of 48 basis points from 2.21% for the same 2024 period. The decrease was primarily driven by a 71 basis point decrease in the cost of interest-bearing deposits, coupled with an increase in average noninterest-bearing deposits, partially offset by an increase of 269 basis points in the cost of total borrowings. Average noninterest-bearing demand deposits increased $521.8 million to $1.18 billion and represented 36.2% of total average deposits for the three months ended June 30, 2025, compared with $658.0 million and 34.1%, respectively, for the same 2024 period; average interest-bearing deposits increased $804.1 million to $2.08 billion during the three months ended June 30, 2025. The total cost of deposits for the three months ended June 30, 2025 was 1.59%, down 53 basis points from 2.12% for the same 2024 period.
Previous wording
Average total borrowings increased $1.6 million to $70.0 million for the three months ended March 31, 2025 resulting from an increase of $52.1 million in average subordinated debt from the $50.8 million in fair value of subordinated debt acquired in the Merger, partially offset by a $50.6 million decrease in average FHLB advances. The average cost of total borrowings was 8.06% for the three months ended March 31, 2025, a 231 basis point increase from 5.75% for the same 2024 period.
Current wording
Average total borrowings increased $11.7 million to $68.6 million for the six months ended June 30, 2025, resulting primarily from a $50.7 million increase in subordinated debt from the $50.8 million in fair value of subordinated debt acquired in the Merger, partially offset by a $39.0 million decrease in average FHLB advances. Additionally, average total borrowings decreased in the six months ended June 30, 2025 as a result of the redemption of the $18 million subordinated notes in June 2025. The average cost of total borrowings was 8.29% for the six months ended June 30, 2025, a 250 basis point increase from 5.79% for the same 2024 period.
Previous wording
The Company recorded a reversal of credit losses of $3.8 million in both the first quarter of 2025 and the prior quarter. Total net charge-offs were $1.5 million in the first quarter of 2025, which included $273 thousand from an acquired consumer solar loan portfolio, $1.2 million from commercial and industrial dental loans acquired from the Merger and $1.7 million from a purchase credit deteriorated (“PCD”) commercial real-estate loan, partially offset by a $1.6 million recovery from a PCD commercial and industrial loan. The reversal of credit losses in the first quarter of 2025 included a $618 thousand reversal of credit losses for unfunded loan commitments related to the decrease in unfunded loan commitments during the first quarter of 2025, coupled with lower loss rates used to estimate the allowance for credit losses on unfunded commitments. Total unfunded loan commitments decreased $33.2 million to $892.1 million at March 31, 2025, compared to $925.3 million in unfunded loan commitments at December 31, 2024.
Current wording
The Company recorded a reversal of credit losses of $634 thousand for the second quarter of 2025, compared to $3.8 million in the prior quarter. Total net charge-offs were $4.1 million in the second quarter of 2025, which consisted of $4.2 million of gross charge-offs, offset by $181 thousand of gross recoveries. The net charge-offs resulted from the Company’s continuing strategy to derisk the consolidated balance sheet by reducing our exposure to criticized loans. The reversal of credit losses in the second quarter of 2025 included a $29 thousand provision for credit losses for unfunded loan commitments related to the increase in unfunded loan commitments during the second quarter of 2025, partially offset by a decrease in average funding rates used to estimate the allowance for credit losses on unfunded commitments. Total unfunded loan commitments increased $9.1 million to $901.2 million at June 30, 2025, compared to $892.1 million in unfunded loan commitments at March 31, 2025.
Previous wording
The reversal of credit losses for loans held for investment in the first quarter of 2025 was $3.2 million, an increase of $291 thousand from a reversal of credit losses of $2.9 million in the prior quarter. The increase was driven primarily by changes in the composition of the loans held for investment portfolio, coupled with changes in qualitative factors and the reasonable and supportable forecast, primarily related to the economic outlook for California. The Company’s management continues to monitor macroeconomic variables related to changes in interest rates and the concerns of an economic downturn, and believes it has appropriately provisioned for the current environment.
Current wording
The reversal of credit losses for loans held for investment in the second quarter of 2025 was $663 thousand, a decrease of $2.5 million from a reversal of credit losses of $3.2 million in the prior quarter. The decrease was driven primarily by the decrease in the balance of loans held for investment, changes in the composition of the loans held for investment portfolio, and changes in qualitative factors, partially offset by the net charge-offs and changes in the reasonable and supportable forecast, primarily related to the economic outlook for California. The Company’s management continues to monitor macroeconomic variables related to changes in interest rates and the concerns of an economic downturn, and believes it has appropriately provisioned for the current environment.
Previous wording
We recorded a reversal of credit losses of $3.8 million for the three months ended March 31, 2025, compared to a reversal of credit losses of $331 thousand for the same 2024 period. The reversal of provision for credit losses for the three months ended March 31, 2024 included a $17 thousand negative provision for unfunded loan commitments primarily due to the impact of lower unfunded loan commitments. The reversal of credit losses for the loans held for investments for the three months ended March 31, 2024 was $314 thousand, The decrease was driven primarily by decreases in net charge-offs, loans held for investment and substandard accruing loans, coupled with changes in the portfolio mix, and a change in our reasonable and supportable forecast, primarily related to the economic outlook for California and a change in historical prepayment and curtailment rates analysis, partially offset by an increase in special mention loans.
Current wording
We recorded a provision for credit losses of $2.6 million for the six months ended June 30, 2024. The provision for credit losses for the six months ended June 30, 2024 included a $2.7 million provision for credit losses on loans held for investment, partially offset by a $114 thousand reversal of credit provision for unfunded loan commitments primarily due to the impact of lower unfunded loan commitments. The provision for credit losses on loans held for investment from the six months ended June 30, 2024 was primarily driven by increases in special mention loans and substandard accruing loans, net charge-offs, and a change in our reasonable and supportable forecast, partially offset by a decline in loan growth and changes in qualitative factors.
Previous wording
Total noninterest income during the three months ended March 31, 2025 was $2.6 million, an increase of $1.2 million compared to total noninterest income of $1.4 million for the same 2024 period. The increase was due primarily to the impact of the Merger, which resulted in increases in service charges and fees on deposit accounts, interchange and ATM income, bank owned life insurance income, and servicing and related income on loans.
Current wording
Total noninterest income during the three months ended June 30, 2025 was $2.9 million, an increase of $1.7 million compared to total noninterest income of $1.2 million for the same 2024 period. The increase was due primarily to the impact of the Merger, which resulted in increases in service charges and fees on deposit accounts, interchange and ATM income, bank owned life insurance income, and servicing and related income on loans. Additionally, other charges and fees increased $714 thousand due primarily to higher income from equity investments.
Previous wording
Gain on sale of loans during the three months ended March 31, 2025 was $577 thousand, compared to $415 thousand for the same 2024 period. There were eight SBA 7(a) loans sold, totaling $9.0 million, at an average premium of 6.44% during the three months ended March 31, 2025 and six loans sold, totaling $6.3 million, at an average premium of 6.56% during the same 2024 period.
Current wording
Gain on sale of loans was $577 thousand during the six months ended June 30, 2025, compared to $415 thousand for the same 2024 period. The $162 thousand increase was primarily due to higher SBA 7(a) loan sales during the six months ended June 30, 2025. During the six months ended June 30, 2025, we sold eight SBA loans with a net carrying value of $9.0 million, resulting in a gain of $577 thousand, at an average premium of 6.44%. In the same 2024 period, we sold six SBA 7(a) loans with a net carrying value of $6.3 million, resulting in a gain on sale 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.
Previous wording
Regulatory assessments of $722 thousand increased $286 thousand due to an increase in the FDIC assessment rates.
Current wording
Total noninterest expense for the second quarter of 2025 was $24.8 million, a slight decrease of $87 thousand from total noninterest expense of $24.9 million in the prior quarter. Salaries and employee benefits decreased $571 thousand during the second quarter of 2025 to $15.3 million. The decrease in salaries and employee benefits was primarily related to the decrease in payroll taxes, coupled with the increase in the deferred loan origination costs with increased loan origination activity. Regulatory assessments of $545 thousand decreased $177 thousand due to a decrease in the FDIC assessment rates in the second quarter of 2025. During the second quarter of 2025, the Company sold other real estate owned (“OREO”) and recognized a $862 thousand loss. There was no comparable transaction in the prior quarter.
Previous wording
Total noninterest expense during the three months ended March 31, 2025 was $24.9 million, an increase of $9.9 million compared with total noninterest expense of $15.0 million for the same 2024 period. The increase was largely due to increases related to the Merger, including increases in salaries and employee benefits, occupancy and equipment, data processing and communications, core deposit intangible amortization, and other expenses, partially offset by lower merger and related expenses.
Current wording
Total noninterest expense during the three months ended June 30, 2025 was $24.8 million, an increase of $5.8 million compared with total noninterest expense of $19.0 million for the same 2024 period. The increase was primarily due to higher costs as a result of the Merger, including increases in core deposit amortization, partially offset by a decrease in OREO expenses and merger and related expenses.
Previous wording
There were no merger and related expenses during the three months ended March 31, 2025, compared to $549 thousand for the same 2024 period.
Current wording
There were no merger and related expenses during the three months ended June 30, 2025, compared to $491 thousand for the same 2024 period.
Previous wording
Other expenses were $2.0 million during the three months ended March 31, 2025, compared to $1.0 million for the same 2024 period. The $1.0 million 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.
Current wording
Other expenses were $1.9 million during the three months ended June 30, 2025, compared to $1.0 million for the same 2024 period. The $919 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 the Merger.
Previous wording
Salaries and employee benefits were $15.9 million during the three months ended March 31, 2025, compared to $9.6 million during the prior year. The $6.3 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 March 31, 2025 was 290 compared to 200 FTE employees for the same 2024 period.
Current wording
Salaries and employee benefits were $31.2 million during the six months ended June 30, 2025, compared to $18.4 million during the prior year. The $12.8 million increase in salaries and benefits was driven primarily by higher headcount as a result of the Merger. The average FTE employees for the six months ended June 30, 2025 was 290 compared to 195 FTE employees for the same 2024 period.
Previous wording
Intangible assets amortization increased $883 thousand during the three months ended March 31, 2025. The increase in amortization was primarily driven by the additional amortization from the $22.7 million of intangible assets, consisting primarily of core deposit intangible, acquired in the Merger.
Current wording
Intangible assets amortization increased $1.8 million during the six months ended June 30, 2025. The increase in amortization was primarily driven by the additional amortization from the $22.7 million of intangible assets, consisting primarily of core deposit intangible, acquired in the Merger.
Previous wording
Our efficiency ratio (non-GAAP) for the three months ended March 31, 2025 and 2024 was 55.6% and 68.4%, respectively. For the three months ended March 31, 2024, excluding the merger and related expenses of $549 thousand, the efficiency ratio (non-GAAP 1) would have been 65.9%.
Current wording
Our efficiency ratio for the six months ended June 30, 2025 and 2024 was 55.8% and 77.1%, respectively. Excluding the merger and related expenses of $1.0 million, the efficiency ratio for the six months ended June 30,
Previous wording
In the first quarter of 2025, the Company’s income tax expense was $6.8 million, compared with $6.5 million in the fourth quarter of 2024. The effective rate was 28.8% for the first quarter of 2025 and 27.9% for the fourth quarter of 2024. The increase in the effective tax rate for the first quarter of 2025 was primarily attributable 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 the tax on excess executive compensation.
Current wording
In the second quarter of 2025, the Company’s income tax expense was $6.0 million, compared with $6.8 million for the first quarter of 2025. The effective rate was 29.8% for the second quarter of 2025 and 28.8% for the first quarter of 2025. The increase in the effective tax rate for the second quarter of 2025 was primarily attributable to the vesting and exercise of equity awards combined with changes in the Company's stock price over time.
Previous wording
Income tax expense for the three months ended March 31, 2025 was $6.8 million, compared to income tax expense of $2.3 million for the same 2024 period. The effective rate was 28.8% during the three months ended March 31, 2025, compared to 32.0% for the same 2024 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.
Current wording
Income tax expense for the three months ended June 30, 2025 was $6.0 million, compared to income tax expense of $88 thousand for the same 2024 period. The effective rate was 29.8% during the three months ended June 30, 2025, compared to 31.7% for the same 2024 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.
Previous wording
Total assets at March 31, 2025 were $3.98 billion, a decrease of $48.6 million or 1.2% from December 31, 2024. The decrease in total assets from the prior quarter was primarily related to a decrease in loans, including loans held for sale, of $82.9 million, partially offset by an increase in cash and cash equivalents of $51.1 million as compared to the prior quarter. The decrease in assets primarily relates to the decreases in wholesale funding sources and loan sales and payoffs.
Current wording
Total assets at June 30, 2025 were $3.95 billion, a decrease of $77.9 million or 1.9% from December 31, 2024. The decrease in total assets from December 31, 2024 was primarily related to a decrease in loans, including loans held for sale, of $158.7 million, partially offset by an increase in cash and cash equivalents of $42.0 million as compared to year-end. The decrease in assets primarily relates to the decreases in wholesale funding sources and loan sales and payoffs.
Previous wording
Total liabilities were $3.45 billion at March 31, 2025, a decrease of $68.1 million from $3.52 billion at December 31, 2024. The decrease in total liabilities primarily related to a $56.3 million decrease in total deposits and a $11.3 million decrease in accrued interest payable and other liabilities.
Current wording
Total liabilities were $3.41 billion at June 30, 2025, a decrease of $113.7 million from $3.52 billion at December 31, 2024. The decrease in total liabilities primarily related to a $86.5 million decrease in total deposits, a $16.8 million decrease in borrowing due to the redemption of $18.0 million of its 5.50% fixed-to-floating rate subordinated notes due in 2030 at par value, and a $8.8 million decrease in accrued interest payable and other liabilities.
Previous wording
Shareholders’ equity was $531.4 million at March 31, 2025, an increase of $19.5 million from $511.8 million at December 31, 2024. The increase in shareholders’ equity was primarily driven by $16.9 million of net income, $1.5 million related to stock-based compensation activity, and a $2.2 million decrease in net of tax unrealized losses on available-for-sale debt securities during the three months ended March 31, 2025.
Current wording
Shareholders’ equity was $547.6 million at June 30, 2025, an increase of $35.8 million from $511.8 million at December 31, 2024. The increase in shareholders’ equity was primarily driven by $31.0 million of net income, $3.0 million related to stock-based compensation activity, and a $2.9 million decrease in net of tax unrealized losses on available-for-sale debt securities during the six months ended June 30, 2025.
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Rearranged current paragraphs (15)
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
(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 $11.7 million and $990 thousand for the six months ended June 30, 2025 and 2024, respectively.
Current report — wording carried from elsewhere
(2)Tax-exempt debt securities yields are presented on a tax equivalent basis using a 21% tax rate.
Current report — wording carried from elsewhere
(4)Annualized net interest income divided by average interest-earning assets.
Current report — wording carried from elsewhere
(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.
Current report — wording carried from elsewhere
(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.
Current report — wording carried from elsewhere
$20.4 million increase in net interest income was due to higher average balances and yields on interest-earning assets coupled with lower costs of interest-bearing liabilities, partially offset by higher average balances of interest-bearing liabilities.
Current report — wording carried from elsewhere
(Reversal of) Provision for Credit Losses
Current report — wording carried from elsewhere
The provision for credit losses for the loans held for investments for the three months ended June 30, 2024 was driven primarily by increases in net charge-offs, and substandard accruing loans, coupled with changes in the portfolio mix, and a change in our reasonable and supportable forecast, primarily related to the economic outlook for California, partially offset by decreases in special mention loans and loans held for investment.
Current report — wording carried from elsewhere
Salaries and employee benefits were $15.3 million during the three months ended June 30, 2025, compared to $8.8 million for the same 2024 period. The $6.5 million increase in salaries and benefits was driven primarily by higher headcount as a result of the Merger.
Current report — wording carried from elsewhere
Core deposit intangible amortization increased $883 thousand during the three months ended June 30, 2025. 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.
Current report — wording carried from elsewhere
There were no merger and related expenses during the six months ended June 30, 2025, compared to $1.0 million for the same 2024 period.
Current report — wording carried from elsewhere
Other expenses were $3.9 million during the six months ended June 30, 2025, compared to $1.9 million for the same 2024 period. The $1.9 million increase was due primarily to the increases in loan related expenses, customer service related expenses, travel expenses, insurance expenses and other expenses primarily as a result of the Merger.
Current report — wording carried from elsewhere
Income tax expense for the six months ended June 30, 2025 was $12.8 million, compared to $2.4 million for the same 2024 period. The effective rate was 29.3% during the six months ended June 30, 2025, compared to 32.0% for the same 2024 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.
Current report — wording carried from elsewhere
Our debt securities portfolio consists of both held-to-maturity and available-for-sale securities aggregating $241.3 million and $195.3 million at June 30, 2025 and December 31, 2024, respectively. The
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
The non-performing loans for these segments per the regulatory definition of commercial real estate loans at March 31, 2025 were $16.4 million and there were $1.7 million charge-offs during the three months ended March 31, 2025. At March 31, 2025, our only OREO, carried at $4.1 million, was from a multifamily nonaccrual loan we foreclosed on in the third quarter of 2024.
Previous report — wording carried elsewhere
Other expenses of $2.0 million in the first quarter of 2025 decreased by $175 thousand, due primarily to lower loan related expenses, customer service related expenses, travel expenses and insurance expenses.
Previous report — wording carried elsewhere
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 March 31, 2025, we used a probability-weighted two-scenario forecast, 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 100 basis points during 2024, 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 March 31, 2025 and December 31, 2024.