California BanCorp \ CA

Previous wording

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 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. In addition, we are a participant in the Certificate of Deposit Account Registry Service (“CDARS”) and IntraFi Network Insured Cash Sweep (“ICS”) 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. We also provide treasury management services including online banking, cash vault, sweep accounts and lock box services.

Current wording

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, including 11 commercial banking offices, serving 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. In addition, we are a participant in the Certificate of Deposit Account Registry Service (“CDARS”) and IntraFi Network Insured Cash Sweep (“ICS”) 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. We also provide treasury management services including online banking, cash vault, sweep accounts and lock box services.

Previous wording

In California, overall consumer prices are predicted to go up 3.8% on an annualized basis in the fourth quarter of 2025, then gradually decline to 3.6% in the first quarter of 2026 and 3.4% in the second quarter, according to the UCLA Anderson Forecast. Moody’s anticipates GDP growth in California to decelerate to 1.4% in 2025 and to continue to decrease to 1.1% in 2026. The state has shifted to the position of the world’s fifth-largest economy, following a decline from its previous fourth-place ranking. California’s economy is cooling off, with slower payroll growth and downward revisions widening the gap with national trends. Challenges in the tech sector are expected to persist amid ongoing uncertainty. Building permits declined in 2024 and have yet to show signs of recovery. With the trade war still ongoing, 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 wording

Moody’s anticipates GDP growth in California to grow to 2.3% in 2026 and to have a slight decrease to 1.5% in 2027. The state has shifted to the position of the world’s fifth-largest economy, following a decline from its previous fourth-place ranking. California’s economy is cooling off, with slower payroll growth and downward revisions widening the gap with national trends. Challenges in the tech sector are expected to persist amid ongoing uncertainty. Ongoing trade‑related uncertainty and heightened geopolitical tensions have contributed to a more cautious business and investment environment. We have observed that some clients are delaying or reassessing the timing of certain projects amid continued economic uncertainty.

Previous wording

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 wording

Inflation has had a material impact on the growth of total assets within the banking industry, prompting the need for some institutions 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.

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. We are nearing the completion of derisking our consolidated balance sheets, having significantly reduced our exposure in the Sponsor Finance portfolio, decreased our reliance on brokered deposits and improved 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, from the fourth quarter of 2024 through the second quarter of 2025. Additionally, our non-performing assets to total assets ratio of 0.38% at September 30, 2025, declined from 0.76% at December 31, 2024, along with a decrease in substandard loans since year-end.

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. In 2025 and in the first quarter of 2026, we made significant progress in derisking our consolidated balance sheets, reducing our exposure in the Sponsor Finance portfolio, eliminating our reliance on brokered deposits and improving overall credit quality.

Previous wording

Per the regulatory definition of commercial real estate, at September 30, 2025, our concentration of such loans represented 466% of our total risk-based capital. In addition, at September 30, 2025, total loans secured by commercial real estate under construction and land development represented 35% 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, 2025 were $13.6 million and there were $1.7 million charge-offs during the nine months ended September 30, 2025. At September 30, 2025, there was no OREO.

Current wording

Per the regulatory definition of commercial real estate, at March 31, 2026, our concentration of such loans represented 450% of our total risk-based capital. In addition, at March 31, 2026, total loans secured by commercial real estate under construction and land development represented 27% of our total risk-based capital. The non-performing loans for these segments per the regulatory definition of commercial real estate loans at March 31, 2026 were $28.7 million and there were $5 thousand net recoveries during the three months ended March 31, 2026. At March 31, 2026, there was $8.6 million of OREO.

Previous wording

Given the nature of our commercial banking business, approximately 49% of our total deposits exceeded the FDIC deposit insurance limits at September 30, 2025.

Current wording

Given the nature of our commercial banking business, approximately 50% of our total deposits exceeded the FDIC deposit insurance limits at March 31, 2026.

Previous wording

We strategically manage an investment portfolio focused on high-quality, resilient securities. At September 30, 2025, the amortized cost of our held-to-maturity debt securities was $53.0 million, or approximately 1.3% of total assets. The fair value of our available-for-sale debt securities was $209.4 million, or approximately 5.1% of total assets. The 10-Year Treasury Bond was approximately at 4.2% at the end of September 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 September 30, 2025. At September 30, 2025, our accumulated other comprehensive loss, net of taxes, decreased to $2.1 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 $5.0 million at September 30, 2025. The results of our stress testing on our debt security portfolio at September 30, 2025, illustrated that our losses, net of taxes on both held-to-maturity and available-for-sale debt securities would increase to $30.7 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 March 31, 2026, the amortized cost of our held-to-maturity debt securities was $52.8 million, or approximately 1.3% of total assets. The fair value of our available-for-sale debt securities was $298.6 million, or approximately 7.4% of total assets. The 10-Year Treasury Bond was approximately 4.3% at March 31, 2026, compared to 4.2% at December 31, 2025. The increase in the 10-Year Treasury Bond in 2026, resulted in higher net unrealized losses on our debt securities at March 31, 2026. At March 31, 2026, our accumulated other comprehensive loss, net of taxes, increased to $3.8 million, compared to $1.6 million at December 31, 2025. 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 $6.9 million at March 31, 2026. The results of our stress testing on our debt security portfolio at March 31, 2026, illustrated that our losses, net of taxes on both held-to-maturity and available-for-sale debt securities would increase to $49.3 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

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 2024 Annual Report on Form 10-K.

Current wording

We have chosen accounting policies that we believe are appropriate to accurately and fairly report our operating results and financial position, and we apply those accounting policies in a consistent manner. There have been no significant changes to our accounting policies since December 31, 2025. 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 2025 Annual Report on Form 10-K.

Previous wording

(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.

Current wording

(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.

Previous wording

(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.

Current wording

(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.

Previous wording

(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.

Current wording

(4) Return on average assets is computed by dividing annualized net income by average assets. Return on average equity is computed by dividing net income by average shareholders’ equity.

Previous wording

(6) Return on average tangible common equity is computed by dividing net 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.

Current wording

(5) Return on average tangible common equity is computed by dividing net income by average tangible common equity.

Previous wording

Net income for the third quarter of 2025 was $15.7 million, or $0.48 per diluted share, compared to $14.1 million, or $0.43 per diluted share in the second quarter of 2025. Pre-tax, pre-provision income (non-GAAP 1) for the third quarter was $21.8 million, an increase of $2.4 million from the prior quarter. The net income and diluted earnings per share increases were largely driven by slightly higher net interest income after reversal of provision for credit losses and lower noninterest expense, partially offset by lower noninterest income.

Current wording

Net income for the first quarter of 2026 was $13.8 million, or $0.42 per diluted share, compared with $16.4 million, or $0.50 per diluted share in the fourth quarter of 2025. Pre-tax, pre-provision income (non-GAAP) for the first quarter was $18.7 million, an increase of $717 thousand from the prior quarter. The $2.6 million decrease in net income and $0.08 decrease in diluted earnings per share were largely driven by a $4.0 million decrease in reversal of provision for credit losses, an $821 thousand decrease in net interest income and $858 thousand decrease in the noninterest income, partially offset by a lower noninterest expense of $2.4 million.

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 $5.2 million, $5.6 million and $4.7 million for the three months ended September 30, 2025, June 30, 2025, and September 30, 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 $3.9 million, $4.4 million and $6.1 million for the three months ended March 31, 2026, December 31, 2025, and March 31, 2025, respectively.

Previous wording

(3)Average noninterest-bearing deposits represent 34.89%, 36.21% and 33.61% of average total deposits for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, respectively.

Current wording

(3)Average noninterest-bearing deposits represent 34.95%, 35.39% and 37.37% of average total deposits for the three months ended March 31, 2026, December 31, 2025, and March 31, 2025, respectively.

Previous wording

Net interest income for the third quarter of 2025 was $42.5 million, compared with $41.4 million in the prior quarter. The increase in net interest income was primarily due to a $1.4 million increase in total interest and dividend income, partially offset by a $304 thousand increase in total interest expense in the third quarter of 2025, as compared to the prior quarter. During the third quarter of 2025, loan interest income decreased by $359 thousand, including a decrease of $713 thousand of accretion income from the net purchase accounting discounts on acquired loans, partially offset by increases of $389 thousand in total debt securities income and $1.4 million in interest and dividend income from other financial institutions. The increase in interest income was mainly due to increases in average deposits in other financial institutions of $157.0 million and average total debt securities of $27.0 million, partially offset by decreases in average total loan balances of $18.1 million and average Fed funds sold/resale agreements of $36.0 million. The increase in interest expense for the third quarter of 2025 was primarily due to a $621 thousand increase in interest expense on interest-bearing deposits, the result of a $130.1 million increase in average interest-bearing deposits, partially offset by a $317 thousand decrease in total borrowing costs mostly related to the redemption of $18.0 million of 5.50% subordinated notes in June 2025.

Current wording

Net interest income for the first quarter of 2026 was $42.1 million, compared with $42.9 million in the prior quarter. The decrease in net interest income was primarily due to a $2.4 million decrease in total interest and dividend income, partially offset by a $1.6 million decrease in total interest expense in the first quarter of 2026, as compared with the prior quarter. The decrease in net interest income was also impacted by two fewer days in the current quarter than the prior quarter. During the first quarter of 2026, loan interest income decreased by $1.8 million, including a decrease of $575 thousand in accretion from the net purchase accounting discounts on acquired loans and a reversal of nonaccrual loans’ interest income of $479 thousand, coupled with a decrease of $1.4 million in interest income from deposits in other financial institutions, partially offset by an increase of $375 thousand in total debt securities income and an increase of $367 thousand in dividend income from restricted stock investments and other bank stock. The decrease in interest income was mainly due to a ten basis point decrease in the yield on interest-earning assets and a decrease in average deposits in other financial institutions of $88.9 million, partially offset by increases in average total loans of $32.3 million, average total debt securities of $35.3 million and average Fed funds sold/resale agreements of $8.0 million. The decrease in interest expense for the first quarter of 2026 was primarily due to a $1.6 million decrease in interest expense on total interest-bearing deposits, the result of a 23 basis point decrease in the cost of average total interest-bearing deposits, coupled with a $7.4 million decrease in average total interest-bearing deposits.

Previous wording

Net interest margin for the third quarter of 2025 was 4.52%, compared with 4.61% in the prior quarter. The decrease was primarily related to a 13 basis point decrease in the total interest-earning assets yield, partially offset by a 4 basis point decrease in the cost of funds. The yield on total average interest-earning assets in the third quarter of 2025 was 6.08%, compared with 6.21% in the prior quarter. The yield on average total loans in the third quarter of 2025 was 6.50%, a decrease of 8 basis points from 6.58% in the prior quarter. Accretion income from the net purchase accounting discounts on acquired loans was $4.5 million, increasing the yield on average total loans by 59 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 $559 thousand, the combination of which increased the net interest margin by 41 basis points in the third quarter of 2025. 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.

Current wording

Net interest margin for the first quarter of 2026 was 4.47%, compared with 4.44% in the prior quarter. The increase was primarily related to the 14 basis point decrease in the cost of funds outpacing the ten basis point decrease in the total interest-earning assets yield. The yield on total average interest-earning assets in the first quarter of 2026 was 5.72%, compared with 5.82% in the prior quarter. The yield on average total loans in the first quarter of 2026 was 6.14%, a decrease of 17 basis points from 6.31% in the prior quarter. The yield on average total loans in the first quarter of 2026 included the impact of the reversal of nonaccrual loan interest noted above, which decreased the overall loan yield by six basis points. There was no significant reversal of interest income in the prior quarter. Accretion income from the net purchase accounting discounts on acquired loans was $3.2 million, increasing the yield on average total loans by 44 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 $388 thousand, the combination of which increased the net interest margin by 30 basis points in the first quarter of 2026. In the prior quarter, accretion income from the net purchase accounting discounts on acquired loans was $3.8 million, increasing the yield on average total loans by 51 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 $389 thousand, the combination of which increased the net interest margin by 36 basis points.

Previous wording

Cost of funds for the third quarter of 2025 was 1.69%, a decrease of 4 basis points from 1.73% in the prior quarter. The decrease was primarily driven by a drop of 20 basis points in the cost of total borrowings, which was primarily due to the decrease in average total borrowings of $14.2 million from the redemption of the $18.0 million subordinated notes in June 2025, coupled with a 6 basis point decrease in the cost of average interest-bearing deposits. The amortization expense of $559 thousand from the purchase accounting discounts on acquired subordinated debt contributed 6 basis points to the cost of funds. Average noninterest-bearing demand deposits increased $3.5 million to $1.18 billion and represented 34.9% of total average deposits for the third quarter of 2025, compared with $1.18 billion and 36.2%, respectively, in the prior quarter; average interest-bearing deposits increased $130.1 million to $2.21 billion during the third quarter of 2025. The total cost of deposits in the third quarter of 2025 was maintained at 1.59%, the same as the prior quarter. The cost of total interest-bearing deposits decreased 6 basis points primarily due to the Company’s ongoing strategy to pay off high cost money market deposits, savings deposits and time deposits in the third quarter of 2025.

Current wording

Cost of funds for the first quarter of 2026 was 1.36%, a decrease of 14 basis points from 1.50% in the prior quarter. The decrease was primarily driven by 23 basis point decrease in the cost of average total interest-bearing deposits. The amortization expense of $389 thousand from the purchase accounting discounts on acquired subordinated debt contributed five basis points to the cost of funds. Average noninterest-bearing demand deposits decreased $27.4 million to $1.21 billion and represented 34.9% of total average deposits for the first quarter of 2026, compared with $1.23 billion and 35.4%, respectively, in the prior quarter; average interest-bearing deposits decreased $7.4 million to $2.24 billion during the first quarter of 2026. The total cost of deposits in the first quarter of 2026 was 1.29%, compared with 1.43% in the prior quarter. The cost of total interest-bearing deposits decreased 23 basis points, driven primarily by the Company’s ongoing deposit pricing and mix strategy in the first quarter of 2026.

Previous wording

Net interest margin for the three months ended September 30, 2025 was 4.52%, compared with 4.43% for the same 2024 period. The 9 basis point increase was primarily related to a 41 basis point decrease 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 50 basis point decrease in the cost of funds. The yield on total average earning assets during the three months ended September 30, 2025 was 6.08%, compared with 6.49% for the same 2024 period. The yield on average loans during the three months ended September 30, 2025 was 6.50%, a decrease of 29 basis points from 6.79% for the same 2024 period. Accretion income from the net purchase accounting discounts on acquired loans was $4.5 million, increasing the yield on average total loans by 59 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 $559 thousand, the combination of which increased the net interest margin by 41 basis points in the third quarter of 2025. Accretion income from the net purchase accounting discounts on acquired loans

Current wording

Average interest-earning assets increased $135.1 million, resulting primarily from a $110.2 million increase in average deposits in other financial institutions, a $116.7 million increase in total average debt securities, and a $4.4 million increase in average Fed funds sold/resale agreements, partially offset by a $96.3 million decrease in average total loans. The yield on total average earning assets during the three months ended March 31, 2026 was 5.72%, compared with 6.26% for the same 2025 period. The yield on average loans decreased 47 basis points to 6.14% from 6.61% year over year. The yield on total debt securities increased to 4.13% from 4.01% for the same 2025 period. Accretion income from the net purchase accounting discounts on acquired loans was $3.2 million, increasing the yield on average total loans by 44 basis point; the net amortization expense from the purchase accounting discounts on acquired subordinated debt and acquired time deposits premium increased the interest expense by $388 thousand, the combination of which increased the net interest margin by 30 basis points in the first quarter of 2026. For the three months ended March 31, 2025, 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.

Previous wording

During the three months ended September 30, 2025, total interest expense decreased by $2.5 million to $14.7 million, comprised primarily of a $2.6 million decrease in interest expense on interest-bearing deposits primarily due to a decrease in the cost of interest-bearing deposits resulting from our deposit repricing strategy and the ongoing reduction of high cost brokered deposits, partially offset by the increase in average interest-bearing liabilities resulting from the Merger.

Current wording

During the three months ended March 31, 2026, total interest expense decreased by $2.9 million to $11.7 million, comprised primarily of a $2.2 million decrease in interest expense on interest-bearing deposits primarily due to a decrease in the cost of interest-bearing deposits resulting from our deposit repricing strategy and the ongoing reduction of high cost brokered deposits, partially offset by the increase in average interest-bearing deposits between periods.

Previous wording

Average total borrowings increased $95 thousand to $53.0 million for the three months ended September 30, 2025 resulting from an increase of $706 thousand in average subordinated debt from the $50.8 million in fair value of subordinated debt acquired in the Merger, partially offset by a $611 thousand decrease in average FHLB advances and a $17.9 million decrease as a result of the redemption of the $18 million subordinated notes in June 2025 and $20 million subordinated notes in September 2025. The average cost of total borrowings was 8.33% for the three months ended September 30, 2025, a 62 basis point increase from 7.71% 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.

Current wording

Average total borrowings decreased $35.7 million to $34.4 million for the three months ended March 31, 2026 resulting from a decrease of $36.0 million in average subordinated debt from the redemption of the $18 million subordinated debts in June 2025 and $20 million subordinated notes in September 2025, partially offset by a $333 thousand increase in average FHLB advances. The average cost of total borrowings was 8.25% for the three months ended March 31, 2026, a 19 basis point increase from 8.06% for the same 2025 period. The increase was primarily attributable to amortization of purchase accounting discounts associated with the acquired subordinated debt.

Previous wording

We recorded a reversal of provision for credit losses of $15 thousand for the third quarter of 2025, compared to $634 thousand in the prior quarter. Total net charge-offs were $39 thousand in the third quarter of 2025, which consisted of $323 thousand of gross charge-offs, offset by $284 thousand of gross recoveries. The reversal of provision for credit losses in the third quarter of 2025 included a $236 thousand reversal of provision for credit losses for unfunded loan commitments related to the decrease in unfunded loan commitments during the third quarter of 2025, coupled with a decrease in average funding rates used to estimate the allowance for credit losses on unfunded commitments. Total unfunded loan commitments decreased $22.2 million to $879.0 million at September 30, 2025, compared to $901.2 million in unfunded loan commitments at June 30, 2025.

Current wording

The Company recorded a reversal of provision for credit losses of $381 thousand for the first quarter of 2026, compared with $4.4 million in the prior quarter. The reversal of provision for credit losses in the first quarter of 2026 was related to the ALL. There was no reversal of provision for credit losses for unfunded loan commitments during the first quarter of 2026. Total unfunded loan commitments increased modestly by $38.7 million to $925.1 million at March 31, 2026, compared to $886.4 million in unfunded loan commitments at December 31, 2025.

Previous wording

The provision for credit losses for loans held for investment in the third quarter of 2025 was $221 thousand, an increase of $884 thousand from a reversal of provision for credit losses of $663 thousand in the prior quarter. The increase was driven primarily by changes in the reasonable and supportable forecast, primarily related to the economic outlook for California, and an increase in the allowance for a collateral-dependent loan, partially offset by changes in the composition of the loans held for investment portfolio, and changes in qualitative factors. 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 provision for credit losses for loans held for investment in the first quarter of 2026 was a reversal of $381 thousand, a decrease of $3.8 million from a reversal of provision for credit losses of $4.2 million in the prior quarter. The decrease was driven primarily by the changes in the reasonable and supportable forecast, primarily related to the economic outlook for California, coupled with a decrease in loan balances, changes in the portfolio mix, and changes in the qualitative factors, partially offset by an increase in the criticized loan loss rates, which are updated annually in the model, despite a decline in criticized loan balances. The Company’s management continues to monitor macroeconomic variables including changes in interest rates, uncertainty in the current economic environment, and elevated geopolitical risks related to ongoing conflicts in the Middle East. Management believes it has appropriately provisioned for the current environment.

Previous wording

We recorded a reversal of provision for credit losses of $15 thousand for the three months ended September 30, 2025, compared to a provision for credit losses of $23.0 million for the same 2024 period. The provision for credit losses for the three months ended September 30, 2024 included a $19.7 million provision for credit losses on loans held for investment and a $3.3 million provision for credit losses for unfunded loan commitments, primarily due to the impact of the Merger.

Current wording

We recorded a reversal of provision for credit losses of $381 thousand for the three months ended March 31, 2026, compared to $3.8 million for the same 2025 period. The reversal of provision for credit losses for the three months ended March 31, 2025 included a $3.2 million reversal of provision for credit losses on loans held for investment and a $618 thousand reversal of provision for credit losses for unfunded loan commitments, primarily due to the decrease in unfunded loan commitments during the first quarter of 2025, coupled with lower loss rates and funding rates used to estimate the allowance for credit losses on unfunded commitments, despite total unfunded loan commitments increasing modestly by $33.1 million to $925.1 million at March 31, 2026, compared to $892.1 million in unfunded loan commitments at March 31, 2025.

Previous wording

The reversal of provision for credit losses for loans held for investment in the nine months ended September 30, 2025 was $3.6 million, compared with a provision for credit losses of $22.4 million in the same 2024 period. The reversal of provision for 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 wording

The reversal of provision for credit losses for the loans held for investments for the three months ended March 31, 2025 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.

Previous wording

Total noninterest income was $2.7 million in the third quarter of 2025, a decrease of $188 thousand compared to $2.9 million in the second quarter of 2025. Other charges and fees decreased $456 thousand in the third quarter due primarily to lower income from equity investments. Bank owned life insurance income increased $380 thousand in the third quarter primarily related to a $400 thousand death benefit recognized in the current quarter. No comparable death benefit income was recognized in the prior quarter.

Current wording

Total noninterest income was $2.1 million in the first quarter of 2026, a decrease of $858 thousand compared with $3.0 million in the fourth quarter of 2025. Other charges and fees decreased $820 thousand in the first quarter due primarily to lower income from equity investments of $181 thousand in the first quarter compared to $948 thousand in the prior quarter

Previous wording

Core deposit intangible amortization increased $261 thousand during the three months ended September 30, 2025. The increase in core deposit intangible amortization was primarily driven by a full quarter’s worth of amortization from the $22.7 million core deposit intangible acquired in the Merger.

Current wording

Core deposit intangible amortization decreased $148 thousand during the three months ended March 31, 2026. The decrease in core deposit intangible amortization was primarily driven by lower amortization costs as acquired core deposit intangible are amortized on an accelerated basis.

Previous wording

Other expenses were $2.1 million during the three months ended September 30, 2025, compared to $1.7 million for the same 2024 period. The $350 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.

Current wording

Other expenses were $2.5 million during the three months ended March 31, 2026, compared to $2.0 million for the same 2025 period. The $488 thousand increase was due primarily to the increases in loan related expenses, customer service related expenses, travel expenses, marketing expenses, and valuation allowances on loans held for sale.

Previous wording

Income tax expense for the three months ended September 30, 2025 was $6.1 million, compared to income tax benefit of $6.1 million for the same 2024 period. The effective rate was 28.1% during the three months ended September 30, 2025, compared to 26.9% for the same 2024 period. The increase in the effective tax rate between periods was primarily due to the impact of the non-tax-deductible portion of the merger expenses, the vesting and exercise of equity awards combined with changes in the Company's stock price over time, and the increase of the tax exempt death benefit payout of the bank-owned life insurance.

Current wording

Income tax expense for the three months ended March 31, 2026 was $5.3 million, compared to $6.8 million for the same 2025 period. The effective rate was 27.8% during the three months ended March 31, 2026, compared to 28.8% for the same 2025 period. The decrease in the effective tax rate between periods was primarily attributable to the impact of favorable book-to-tax differences relative to lower pre-tax income.

Previous wording

Total assets at September 30, 2025 were $4.10 billion, an increase of $69.6 million or 1.7% from December 31, 2024. The increase in total assets from December 31, 2024 was primarily related to increases in cash and cash equivalents of $171.1 million and in available-for-sale debt securities of $67.4 million, partially offset by a decrease in loans, including loans held for sale, of $159.4 million, as compared to year-end.

Current wording

Total assets at March 31, 2026 were $4.05 billion, an increase of $15.3 million or 0.4% from December 31, 2025. The increase in total assets from December 31, 2025 was primarily related to increases in cash and cash equivalents of $11.2 million and in available-for-sale debt securities of $63.7 million, partially offset by a decrease in loans, including loans held for sale, of $62.1 million, as compared to year-end.

Previous wording

Total liabilities were $3.54 billion at September 30, 2025, an increase of $16.7 million from $3.52 billion at December 31, 2024. The increase in total liabilities primarily related to a $60.9 million increase in total deposits, partially offset by a $36.3 million decrease in borrowing due to the redemption of $18.0 million and $20.0 million of its 5.50% and 5.00% fixed-to-floating rate subordinated notes, respectively, both due in 2030 at par value and a $8.8 million decrease in accrued interest payable and other liabilities.

Current wording

Total liabilities were $3.47 billion at March 31, 2026, an increase of $14.1 million from $3.46 billion at December 31, 2025. The increase in total liabilities primarily related to a $22.9 million increase in total deposits, partially offset by a $9.4 million decrease in accrued interest and other liabilities primarily due to the settlement of accrued expenses.

Previous wording

Shareholders’ equity was $564.7 million at September 30, 2025, an increase of $52.9 million from $511.8 million at December 31, 2024. The increase in shareholders’ equity was primarily driven by $46.6 million of net income, $4.5 million related to stock-based compensation activity, and a $4.6 million decrease in net of tax unrealized losses on available-for-sale debt securities, partially offset by the repurchase of common stock under the Company’s share repurchase program of $1.4 million during the nine months ended September 30, 2025.

Current wording

Shareholders’ equity was $577.8 million at March 31, 2026, an increase of $1.2 million from $576.6 million at December 31, 2025. The increase in shareholders’ equity was primarily driven by $13.8 million of net income, $1.4 million related to stock-based compensation activity, partially offset by a $2.1 million increase in net of tax unrealized losses on available-for-sale debt securities, the repurchase of common stock in settlement of restricted stock units of $1.3 million, common stock dividends of $3.2 million and the repurchase of common stock under the Company’s share repurchase program of $7.4 million during the three months ended March 31, 2026.

Previous wording

Our debt securities portfolio consists of both held-to-maturity and available-for-sale securities aggregating $262.4 million and $195.3 million at September 30, 2025 and December 31, 2024, respectively. The $67.1 million increase in debt securities was primarily related to purchases of available-for-sale securities and reductions in net unrealized losses, partially offset by paydowns, maturities and calls. Our held-to-maturity debt securities and available-for-sale debt securities represented 1.29% and 5.11%, respectively, of total assets at September 30, 2025, compared to 1.32% and 3.52%, respectively, at December 31, 2024.

Current wording

Our debt securities portfolio consists of both held-to-maturity and available-for-sale debt securities aggregating $351.5 million and $287.8 million at March 31, 2026 and December 31, 2025, respectively. The $63.6 million increase in debt securities was primarily related to purchases of available-for-sale securities, partially offset by increases in net unrealized losses, and paydowns. There were no maturities or calls of debt securities during the three months ended March 31, 2026. Our held-to-maturity debt securities and available-for-sale debt securities represented 1.31% and 7.38%, respectively, of total assets at March 31, 2026, compared to 1.31% and 5.82%, respectively, at December 31, 2025.

Previous wording

During the three and nine months ended September 30, 2025, there were no transfers between held-to-maturity and available-for-sale debt securities.

Current wording

During the three months ended March 31, 2026, there were no transfers between held-to-maturity and available-for-sale debt securities.

Previous wording

At September 30, 2025 and December 31, 2024, available-for-sale debt securities with an amortized cost of $2.9 million and $3.0 million, respectively, were pledged to the Federal Reserve Bank (“Federal Reserve”) as collateral for a secured public deposits and for other purposes as required by law or contract provisions, in addition to held-to-maturity debt securities with an amortized cost of $53.0 million and $53.3 million, respectively, were pledged as collateral for a secured line of credit with the Federal Reserve.

Current wording

At March 31, 2026 and December 31, 2025, available-for-sale debt securities with an amortized cost of $87.8 million and $27.6 million, respectively, were pledged to the Federal Reserve Bank (“Federal Reserve”) as collateral for a secured public deposits and for other purposes as required by law or contract provisions, in addition to held-to-maturity debt securities with an amortized cost of $52.8 million and $52.9 million, respectively, pledged as collateral for a secured line of credit with the Federal Reserve. The Company also pledged $14.7 million available-for-sale debt securities to another financial institution to support the collateralization requirement against certain customers’ standby lines of credit.

Previous wording

At September 30, 2025, we had 61 held-to-maturity debt securities in a gross unrecognized loss position with an amortized cost basis of $53.0 million with pre-tax unrecognized losses of $4.2 million, compared to 61 held-to-maturity debt securities with an amortized cost basis of $53.3 million with pre-tax unrecognized losses of $5.5 million at December 31, 2024. The effective duration of the held-to-maturity debt securities was 6.23 years and 6.52 years at September 30, 2025 and December 31, 2024, 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.

Current wording

At March 31, 2026, we had 61 held-to-maturity debt securities in a gross unrecognized loss position with an amortized cost basis of $52.8 million with pre-tax unrecognized losses of $4.4 million, compared to 61 held-to-maturity debt securities with an amortized cost basis of $52.9 million with pre-tax unrecognized losses of $3.6 million at December 31, 2025. The effective duration of the held-to-maturity debt securities was 6.07 years and 5.94 years at March 31, 2026 and December 31, 2025, 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.

Previous wording

All held-to-maturity debt securities were municipal securities, and historically have had limited credit loss experience. At September 30, 2025 and December 31, 2024, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities were $487 thousand and $463 thousand, respectively, and $48.3 million and $47.4 million, respectively. At September 30, 2025 and December 31, 2024, the total held-to-maturity debt securities rated AA and above was $45.6 million and $44.7 million, respectively, and rated AA- was $3.2 million and $3.2 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, 2025 and December 31, 2024.

Current wording

All held-to-maturity debt securities were municipal securities, and historically have had limited credit loss experience. At March 31, 2026 and December 31, 2025, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities were $488 thousand and $492 thousand, respectively, and $48.0 million and $48.8 million, respectively. At March 31, 2026 and December 31, 2025, the total held-to-maturity debt securities rated AA and above was $45.3 million and $46.0 million, respectively, and rated AA- was $3.2 million and $3.3 million, respectively. Accordingly, we applied a zero credit loss assumption for these securities and no allowance for credit loss was recorded as of March 31, 2026 and December 31, 2025.

Previous wording

The estimated fair value of available-for-sale debt securities was $209.4 million at September 30, 2025, an increase of $67.4 million, from $142.0 million at December 31, 2024. The increase was primarily due to purchases of $91.3 million and fair value market adjustments of $6.5 million, partially offset by maturities of $10.8 million, and principal reductions and amortization of discounts and premiums aggregating to $19.6 million.

Current wording

The estimated fair value of available-for-sale debt securities was $298.6 million at March 31, 2026, an increase of $63.7 million, from $234.9 million at December 31, 2025. The increase was primarily due to purchases of $73.2 million, partially offset by fair value market adjustments of $3.1 million, and principal reductions and amortization of discounts and premiums aggregating to $6.4 million.

Previous wording

At September 30, 2025, we had 76 available-for-sale debt securities in a gross unrealized loss position with an amortized cost basis and fair value of $108.2 million and $103.1 million, respectively, with pre-tax unrealized losses of $5.1 million, compared to 89 available-for-sale debt securities with an amortized cost basis and fair value of $124.2 million and $114.6 million, respectively with pre-tax unrealized holding losses of $9.6 million at December 31, 2024. 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 5.08 years and 4.60 years at September 30, 2025 and December 31, 2024, 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.

Current wording

At March 31, 2026, we had 101 available-for-sale debt securities in a gross unrealized loss position with an amortized cost basis and fair value of $215.8 million and $208.9 million, respectively, with pre-tax unrealized losses of $7.0 million, compared to 78 available-for-sale debt securities with an amortized cost basis and fair value of $121.9 million and $117.1 million, respectively with pre-tax unrealized holding losses of $4.8 million at December 31, 2025. The net of tax unrealized loss on available-for-sale debt securities is reflected in accumulated other comprehensive loss, net of tax. The effective duration of this portfolio was 5.27 years and 5.21 years at March 31, 2026 and December 31, 2025, 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.

Previous wording

When market interest rates decrease, bond prices tend to increase and, consequently, the fair value of our securities may also increase. The 10-Year Treasury Bond was approximately 4.2% at the end of September 30, 2025, compared to 4.6% at December 31, 2024. The decrease in the 10-Year Treasury Bond in the first nine months of 2025, resulted in a decrease in the net unrealized losses on our debt securities at September 30, 2025. The changes in the net unrealized losses on our available-for-sale debt securities would affect our total and tangible shareholders’ equity.

Current wording

When market interest rates increase, bond prices tend to decrease and, consequently, the fair value of our securities may also decrease. The 10-Year Treasury Bond was approximately 4.3% at the end of March 31, 2026, compared to 4.2% at December 31, 2025. The 10‑Year Treasury yield increased slightly during Q1 2026 due to a combination of inflation dynamics, interest‑rate expectations, and term‑premium pressures, rather than a signal of strong economic acceleration, resulted in an increase in the net unrealized losses on our debt securities at March 31, 2026. The changes in the net unrealized losses on our available-for-sale debt securities would affect our total and tangible shareholders’ equity.