California Bancorp

08/08/2025 | Press release | Distributed by Public on 08/08/2025 14:17

Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our consolidated financial condition and consolidated results of operations should be read in conjunction with our consolidated financial statements and related notes. Historical consolidated results of operations and the percentage relationships among any amounts included, and any trends that may appear, may not indicate trends in operations or consolidated results of operations for any future periods. We are a bank holding company and we conduct all of our material business operations through the Bank. As a result, the discussion and analysis below primarily relate to activities conducted at the Bank level.
Overview
California BanCorp is a California corporation incorporated on October 2, 2019, and headquartered in Del Mar, California. On May 15, 2020, we completed a reorganization whereby California Bank of Commerce, N.A. became the wholly owned subsidiary of the Company. California Bank of Commerce, N.A. has a wholly-owned subsidiary, BCAL OREO1, LLC, which was incorporated on February 14, 2024. BCAL OREO1, LLC is used for holding other real estate owned and other assets acquired by foreclosure. We are regulated as a bank holding company by the Board of Governors of the Federal Reserve System ("Federal Reserve"). The Bank operates under a national charter and is regulated by the Office of Comptroller of the Currency ("OCC").
We are a relationship-focused community bank and we offer a range of financial products and services to individuals, professionals, and small- to medium-sized businesses through our 14 branch offices serving 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"), IntraFi Network Insured Cash Sweep ("ICS"), and Reich & Tang Deposit Solutions ("R&T") networks. We receive an equal dollar amount of deposits ("reciprocal deposits") from other participating banks in exchange for the deposits we place into the networks to fully qualify large customer deposits for FDIC insurance. We also provide treasury management services including online banking, cash vault, sweep accounts and lock box services.
Recent Developments
Merger with California BanCorp ("CALB")
On July 31, 2024, the Company completed its all-stock merger with CALB on the terms set forth in the Agreement and Plan of Merger and Reorganization, dated January 30, 2024, by and between the Company and CALB. At July 31, 2024, CALB had total loans of $1.43 billion, total assets of $1.91 billion, and total deposits of $1.64 billion. Immediately following the merger of CALB with and into the Company, California Bank of Commerce, a California state-chartered bank and wholly-owned subsidiary of CALB, merged with and into the Bank. Effective with these mergers, the corporate names of Southern California Bancorp and Bank of Southern California, N.A. were changed to California BanCorp and California Bank of Commerce, N.A., respectively. The merger expands the Company's footprint into Northern California and 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.
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 Combinationsof the Notes to Consolidated Financial Statements included in Part I - Financial Information- Item 1. Financial Statementsof this filing for more information regarding business combinations and related activity.
Market and Banking Industry Updates
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.
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.
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.
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.
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.
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.
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.
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.
Given the nature of our commercial banking business, approximately 48% of our total deposits exceeded the FDIC deposit insurance limits at June 30, 2025.
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.
We continue to monitor macroeconomic variables related to changes in interest rates, inflation, and concerns regarding an economic downturn, and its potential effects on our business, customers, employees, communities and markets. The following challenges could have an impact on our business, consolidated financial condition or near- or longer-term consolidated results of operations:
•Slower loan growth and declining deposits;
•Difficulty retaining and attracting deposit relationships;
•Credit quality deterioration of our loan portfolio resulting in additional provision for credit losses and impairment charges;
•Margin pressure in response to changes in interest rates;
•Struggles to drive efficiencies across functions while maintaining cost-effectiveness;
•Liquidity stresses to maintain sufficient levels of high-quality liquid assets and access to borrowing lines;
•The rising threat of cyberattacks and substantial investment required for protection; and
•Potential negative effects of current and future governmental, monetary and fiscal policies, such as the implementation of tariffs and counter-tariffs on future business conditions.
Critical Accounting Policies and Estimates
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. The Significant Accounting Policies are summarized in Note 1 - Basis of Presentation and Summary of Significant Accounting Policiesof the Notes to Consolidated Financial Statements included in Part I - Financial Information- Item 1. Financial Statementsincluded in the 2024 Annual Report on Form 10-K.
Financial Highlights
The following table sets forth certain of our financial highlights as of and for each of the periods presented. This data should be read in conjunction with our consolidated financial statements and related notes included herein at Part I - Financial Information, Item 1 - Financial Statementsof this filing.
Three Months Ended
Six Months Ended June 30,
($ in thousands except share and per share data) June 30,
2025 		March 31,
2025 		June 30,
2024 		2025 2024
EARNINGS
Net interest income $ 41,417 $ 42,255 $ 21,007 $ 83,672 $ 41,501
(Reversal of) provision for credit losses
$ (634) $ (3,776) $ 2,893 $ (4,410) $ 2,562
Noninterest income $ 2,856 $ 2,566 $ 1,169 $ 5,422 $ 2,582
Noninterest expense $ 24,833 $ 24,920 $ 19,005 $ 49,753 $ 33,986
Income tax expense
$ 5,975 $ 6,824 $ 88 $ 12,799 $ 2,410
Net income
$ 14,099 $ 16,853 $ 190 $ 30,952 $ 5,125
Pre-tax pre-provision income(1)
$ 19,440 $ 19,901 $ 3,171 $ 39,341 $ 10,097
Adjusted pre-tax pre-provision income(1)
$ 19,440 $ 19,901 $ 3,662 $ 39,341 $ 11,137
Diluted earnings per share
$ 0.43 $ 0.52 $ 0.01 $ 0.95 $ 0.27
Ending shares outstanding 32,463,311 32,402,140 18,547,352 32,463,311 18,547,352
PERFORMANCE RATIOS
Return on average assets 1.45 % 1.71 % 0.03 % 1.58 % 0.45 %
Adjusted return on average assets(1)
1.45 % 1.71 % 0.11 % 1.58 % 0.53 %
Return on average common equity 10.50 % 13.18 % 0.26 % 11.81 % 3.53 %
Adjusted return on average common equity(1)
10.50 % 13.18 % 0.82 % 11.81 % 4.19 %
Yield on loans 6.58 % 6.61 % 6.21 % 6.59 % 6.11 %
Yield on earning assets 6.21 % 6.26 % 5.97 % 6.24 % 5.88 %
Cost of deposits 1.59 % 1.59 % 2.12 % 1.59 % 2.08 %
Cost of funds 1.73 % 1.72 % 2.21 % 1.73 % 2.19 %
Net interest margin 4.61 % 4.65 % 3.94 % 4.63 % 3.87 %
Efficiency ratio(1)
56.1 % 55.6 % 85.7 % 55.8 % 77.1 %
Adjusted efficiency ratio(1)
56.1 % 55.6 % 83.5 % 55.8 % 74.7 %
Net charge-offs to average loans held-for-investment
(0.54) % (0.20) % (0.31) % (0.37) % (0.15) %
June 30,
2025 		December 31,
2024
CAPITAL
Tangible equity to tangible assets(1)
10.89 % 9.69 %
Book value (BV) per common share $ 16.87 $ 15.86
Tangible BV per common share(1)
$ 12.82 $ 11.71
ASSET QUALITY
Allowance for loan losses (ALL) $ 41,110 $ 50,540
Reserve for unfunded loan commitments 2,514 3,103
Allowance for credit losses (ACL) $ 43,624 $ 53,643
Allowance for loan losses to nonperforming loans 224 % 190 %
ALL to total loans 1.37 % 1.61 %
ACL to total loans 1.46 % 1.71 %
30-89 days past due, excluding nonaccrual loans $ 546 $ 12,082
Over 90 days past due, excluding nonaccrual loans $ - $ 150
Special mention loans $ 65,264 $ 69,339
Special mention loans to total loans held for investment 2.18 % 2.21 %
Substandard loans $ 81,456 $ 117,598
Substandard loans to total loans held for investment 2.72 % 3.75 %
Nonperforming loans $ 18,354 $ 26,536
Nonperforming loans to total loans held for investment 0.61 % 0.85 %
Other real estate owned $ - $ 4,083
Nonperforming assets $ 18,354 $ 30,619
Nonperforming assets to total assets 0.46 % 0.76 %
END OF PERIOD BALANCES
Total loans, including loans held for sale $ 2,997,648 $ 3,156,345
Total assets $ 3,953,717 $ 4,031,654
Deposits $ 3,312,278 $ 3,398,760
Loans to deposits 90.5 % 92.9 %
Shareholders' equity $ 547,593 $ 511,836
(1) Refer to Non-GAAP Financial Measures in the Management's Discussion and Analysis of Financial Condition and Results of Operations of this filing.
Non-GAAP Financial Measures
This filing contains certain non-GAAP financial measures in addition to results presented in accordance with GAAP. We believe the presentation of certain non-GAAP financial measures provides information useful to assess our consolidated financial condition and consolidated results of operations and to assist investors in evaluating our consolidated financial results relative to our peers. These non-GAAP financial measures complement our GAAP reporting and are presented below to provide investors and others with information that we use to manage the business each period. Because not all companies use identical calculations, the presentation of these non-GAAP financial measures may not be comparable to other similarly titled measures used by other companies. These non-GAAP measures should be taken together with the corresponding GAAP measures and should not be considered a substitute of the GAAP measures.
(1) Efficiency ratio is computed by dividing noninterest expense by total net interest income and noninterest income. We measure our success and the productivity of our operations through monitoring of the efficiency ratio. Adjusted noninterest expense is computed by adjusting noninterest expense for merger related expense for the period indicated. Adjusted efficiency ratio is computed by dividing adjusted noninterest expense by total net interest income and noninterest income.
(2) Pre-tax pre-provision income is computed by adding net interest income and noninterest income and subtracting noninterest expense. This non-GAAP financial measure provides a greater understanding of pre-tax profitability before giving effect to credit loss expense. Adjusted pre-tax pre-provision income is computed by adding net interest income and noninterest income and subtracting adjusted noninterest expense.
(3) Adjusted net income is computed by adjusting net income for the tax-effected merger related expense adjustments for the periods indicated.
(4) Average tangible common equity is computed by subtracting average goodwill and average core intangible deposits ("net average intangible assets"), from average shareholders' equity.
(5) Adjusted return on average assets is computed by dividing annualized adjusted net income by average assets. Adjusted return on average equity is computed by dividing annualized adjusted net income by average shareholders' equity.
(6) Return on average tangible common equity is computed by dividing net income by average tangible common equity. Adjusted return on average tangible common equity is computed by dividing adjusted net income by average tangible common equity.
(7) Tangible common equity and tangible assets are computed by subtracting goodwill and core deposit intangibles, net, from total shareholders' equity and total assets, respectively.
(8) Tangible common equity to tangible assets ratio is computed by dividing tangible common equity by tangible assets.
(9) Tangible book value per share is computed by dividing tangible common equity by total common shares outstanding. We consider tangible book value per share a meaningful measure because it suggests what our common shareholders can expect to receive if we are in financial distress and are forced to liquidate our assets at the book value price. Intangible assets like goodwill are not a part of the process since they cannot be sold for cash during liquidation.
We consider average tangible common equity, tangible common equity, and the tangible common equity to tangible asset ratio as useful additional methods to evaluate our capital utilization and adequacy to withstand unexpected market conditions. These ratios differ from the regulatory capital ratios principally in that the numerator excludes goodwill and other intangible assets.
The following tables present a reconciliation of non-GAAP financial measures to GAAP measures for the periods indicated:
Three Months Ended
Six Months Ended June 30,
(dollars in thousands) June 30,
2025 		March 31,
2025 		June 30,
2024 		2025 2024
Efficiency Ratio
Noninterest expense $ 24,833 $ 24,920 $ 19,005 $ 49,753 $ 33,986
Less: Merger and related expenses - - 491 - 1,040
Adjusted noninterest expense $ 24,833 $ 24,920 $ 18,514 $ 49,753 $ 32,946
Net interest income 41,417 42,255 21,007 83,672 41,501
Noninterest income 2,856 2,566 1,169 5,422 2,582
Total net interest income and noninterest income $ 44,273 $ 44,821 $ 22,176 $ 89,094 $ 44,083
(1) Efficiency ratio (non-GAAP) 56.1 % 55.6 % 85.7 % 55.8 % 77.1 %
(1) Adjusted efficiency ratio (non-GAAP) 56.1 % 55.6 % 83.5 % 55.8 % 74.7 %
Pre-tax Pre-provision Income
Net interest income $ 41,417 $ 42,255 $ 21,007 $ 83,672 $ 41,501
Noninterest income 2,856 2,566 1,169 5,422 2,582
Total net interest income and noninterest income 44,273 44,821 22,176 89,094 44,083
Less: Noninterest expense 24,833 24,920 19,005 49,753 33,986
(2) Pre-tax pre-provision income (non-GAAP) $ 19,440 $ 19,901 $ 3,171 $ 39,341 $ 10,097
Add: Merger and related expenses - - 491 - 1,040
(2) Adjusted pre-tax pre-provision income (non-GAAP) $ 19,440 $ 19,901 $ 3,662 $ 39,341 $ 11,137
Return on Average Assets, Equity, and Tangible Equity
Net income
$ 14,099 $ 16,853 $ 190 $ 30,952 $ 5,125
Add: After-tax merger and related expenses (1)
- - 412 - 959
(3) Adjusted net income (non-GAAP)
$ 14,099 $ 16,853 $ 602 $ 30,952 $ 6,084
Average assets $ 3,905,279 $ 3,999,509 $ 2,294,678 $ 3,952,134 $ 2,302,252
Average shareholders' equity 538,378 518,543 294,121 528,516 291,942
Less: Average intangible assets 132,600 133,567 38,900 133,081 38,932
(4) Average tangible common equity (non-GAAP) $ 405,778 $ 384,976 $ 255,221 $ 395,435 $ 253,010
Return on average assets 1.45 % 1.71 % 0.03 % 1.58 % 0.45 %
(5) Adjusted return on average assets (non-GAAP) 1.45 % 1.71 % 0.11 % 1.58 % 0.53 %
Return on average equity 10.50 % 13.18 % 0.26 % 11.81 % 3.53 %
(5) Adjusted return on average equity (non-GAAP) 10.50 % 13.18 % 0.82 % 11.81 % 4.19 %
(6) Return on average tangible common equity (non-GAAP) 13.94 % 17.75 % 0.30 % 15.78 % 4.07 %
(6) Adjusted return on average tangible common equity (non-GAAP) 13.94 % 17.75 % 0.95 % 15.78 % 4.84 %
(1) After-tax merger and related expenses are presented using a 29.56% tax rate.
(dollars in thousands, except per share amounts) June 30,
2025 		December 31,
2024
Tangible Common Equity Ratio/Tangible Book Value Per Share
Shareholders' equity $ 547,593 $ 511,836
Less: Intangible assets 131,309 134,058
(7) Tangible common equity (non-GAAP) $ 416,284 $ 377,778
Total assets $ 3,953,717 $ 4,031,654
Less: Intangible assets 131,309 134,058
(7) Tangible assets (non-GAAP) $ 3,822,408 $ 3,897,596
Equity to asset ratio 13.85 % 12.70 %
(8) Tangible common equity to tangible asset ratio (non-GAAP) 10.89 % 9.69 %
Book value per share $ 16.87 $ 15.86
(9) Tangible book value per share (non-GAAP) $ 12.82 $ 11.71
Shares outstanding 32,463,311 32,265,935
Impact of Merger on Earnings
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 Combinationsof the Notes to Consolidated Financial Statements included in Part I - Financial Information- Item 1. Financial Statementsof this filing for more information regarding business combinations and related activity.
Results of Operations
Net Income
Three Months Ended June 30, 2025 Compared to Three Months Ended March 31, 2025
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.
Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024
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.
Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024
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 $10.1 million for the six months ended June 30, 2024.
Net Interest Income and Margin
Net interest income is our primary source of revenue, which is the difference between interest income on loans, debt securities and other investments (collectively, "interest-earning assets") and interest expense on deposits and borrowings (collectively, "interest-bearing liabilities"). Net interest margin represents net interest income expressed as a percentage of interest-earning assets. Net interest income is affected by changes in volume, mix, and rates of interest-earning assets and interest-bearing liabilities, as well as days in a period. We closely monitor both total net interest income and the net interest margin and seek to maximize net interest income without exposing us to an excessive level of interest rate risk through our asset and liability management policies. The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs for the periods indicated:
Three Months Ended
June 30, 2025 March 31, 2025 June 30, 2024
Average Balance Income/Expense Yield/Cost Average Balance Income/Expense Yield/Cost Average Balance Income/Expense Yield/Cost
Assets ($ in thousands)
Interest-earning assets:
Total loans(1)
$2,992,299 $49,080 6.58 % $3,109,722 $50,686 6.61 % $1,882,845 $29,057 6.21 %
Taxable debt securities 164,558 1,751 4.27 % 139,481 1,524 4.43 % 123,906 1,229 3.99 %
Tax-exempt debt securities(2)
53,438 304 2.89 % 53,522 305 2.93 % 53,754 306 2.90 %
Deposits in other financial institutions 295,602 3,270 4.44 % 316,582 3,468 4.44 % 47,417 638 5.41 %
Fed funds sold/resale agreements 65,568 730 4.47 % 30,413 335 4.47 % 19,062 261 5.51 %
Restricted stock investments and other bank stock 31,672 651 8.24 % 31,657 507 6.50 % 17,091 358 8.42 %
Total interest-earning assets 3,603,137 55,786 6.21 % 3,681,377 56,825 6.26 % 2,144,075 31,849 5.97 %
Total noninterest-earning assets 302,142 318,132 150,603
Total assets $ 3,905,279 $ 3,999,509 $ 2,294,678
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing NOW accounts $ 763,987 $ 3,666 1.92 % $ 735,209 $ 3,366 1.86 % $ 361,244 $ 2,134 2.38 %
Money market and savings accounts 1,149,286 7,724 2.70 % 1,161,960 7,750 2.70 % 653,244 4,905 3.02 %
Time deposits 165,049 1,550 3.77 % 207,519 2,063 4.03 % 259,722 3,145 4.87 %
Total interest-bearing deposits 2,078,322 12,940 2.50 % 2,104,688 13,179 2.54 % 1,274,210 10,184 3.21 %
Borrowings:
FHLB advances - - - % - - - % 27,391 387 5.68 %
Subordinated debt 67,159 1,429 8.53 % 70,027 1,391 8.06 % 17,901 271 6.09 %
Total borrowings 67,159 1,429 8.53 % 70,027 1,391 8.06 % 45,292 658 5.84 %
Total interest-bearing liabilities 2,145,481 14,369 2.69 % 2,174,715 14,570 2.72 % 1,319,502 10,842 3.30 %
Noninterest-bearing liabilities:
Noninterest-bearing deposits(3)
1,179,791 1,255,883 658,001
Other liabilities 41,629 50,368 23,054
Shareholders' equity 538,378 518,543 294,121
Total Liabilities and Shareholders' Equity $ 3,905,279 $ 3,999,509 $ 2,294,678
Net interest spread 3.52 % 3.54 % 2.67 %
Net interest income and margin(4)
$ 41,417 4.61 % $ 42,255 4.65 % $ 21,007 3.94 %
Cost of deposits(5)
$3,258,113 $12,940 1.59 % $3,360,571 $13,179 1.59 % $1,932,211 $10,184 2.12 %
Cost of funds(6)
$3,325,272 $14,369 1.73 % $3,430,598 $14,570 1.72 % $1,977,503 $10,842 2.21 %
(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 $386 thousand for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively.
(2)Tax-exempt debt securities yields are presented on a tax equivalent basis using a 21% tax rate.
(3)Average noninterest-bearing deposits represent 36.21%, 37.37% and 34.05% of average total deposits for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively.
(4)Annualized net interest income divided by average interest-earning assets.
(5)Total deposits is the sum of interest-bearing deposits and noninterest-bearing deposits. The cost of deposits is calculated as annualized total interest expense on deposits divided by average total deposits.
(6)Total funding is the sum of total interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.
Six Months Ended
June 30, 2025 June 30, 2024
Average Balance Income/Expense Yield/Cost Average Balance Income/Expense Yield/Cost
Assets ($ in thousands)
Interest-earning assets:
Total loans(1)
$ 3,050,686 $ 99,766 6.59 % $ 1,896,058 $ 57,641 6.11 %
Taxable debt securities 152,089 3,275 4.34 % 125,355 2,442 3.92 %
Tax-exempt debt securities(2)
53,480 609 2.91 % 53,798 612 2.90 %
Deposits in other financial institutions 306,034 6,738 4.44 % 50,737 1,354 5.37 %
Fed funds sold/resale agreements 48,088 1,065 4.47 % 14,417 395 5.51 %
Restricted stock investments and other bank stock 31,665 1,158 7.37 % 16,752 669 8.03 %
Total interest-earning assets 3,642,042 112,611 6.24 % 2,157,117 63,113 5.88 %
Total noninterest-earning assets 310,092 145,135
Total assets $ 3,952,134 $ 2,302,252
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing NOW accounts $ 749,677 $ 7,032 1.89 % $ 360,514 $ 4,179 2.33 %
Money market and savings accounts 1,155,588 15,474 2.70 % 650,942 9,630 2.98 %
Time deposits 186,167 3,613 3.91 % 257,598 6,166 4.81 %
Total interest-bearing deposits 2,091,432 26,119 2.52 % 1,269,054 19,975 3.17 %
Borrowings:
FHLB advances - - - % 38,992 1,095 5.65 %
Subordinated debt 68,585 2,820 8.29 % 17,890 542 6.09 %
Total borrowings 68,585 2,820 8.29 % 56,882 1,637 5.79 %
Total interest-bearing liabilities 2,160,017 28,939 2.70 % 1,325,936 21,612 3.28 %
Noninterest-bearing liabilities:
Noninterest-bearing deposits(3)
1,217,627 659,633
Other liabilities 45,974 24,741
Shareholders' equity 528,516 291,942
Total Liabilities and Shareholders' Equity $ 3,952,134 $ 2,302,252
Net interest spread 3.54 % 2.60 %
Net interest income and margin (4)
$ 83,672 4.63 % $ 41,501 3.87 %
Cost of deposits (5)
$3,309,059 $26,119 1.59 % $1,928,687 $19,975 2.08 %
Cost of funds (6)
$3,377,644 $28,939 1.73 % $1,985,569 $21,612 2.19 %
(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 $990 thousand for the six months ended June 30, 2025 and 2024, respectively.
(2)Tax-exempt debt securities yields are presented on a tax equivalent basis using a 21% tax rate.
(3)Average noninterest-bearing deposits represent 36.80%, and 34.20% of average total deposits for the six months ended June 30, 2025 and 2024, respectively.
(4)Annualized net interest income divided by average interest-earning assets.
(5)Total deposits is the sum of interest-bearing deposits and noninterest-bearing deposits. The cost of deposits is calculated as annualized total interest expense on deposits divided by average total deposits.
(6)Total funding is the sum of total interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.
Rate/Volume Analysis
The following table presents the changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. Information is provided on changes attributable to (i) changes in volume multiplied by the prior rate and (ii) changes in rate multiplied by the prior volume. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.
Three Months Ended
June 30, 2025 vs. March 31, 2025
Three Months Ended
June 30, 2025 vs. June 30, 2024
Six Months Ended
June 30, 2025 vs. 2024
Increase (Decrease) Due to Increase (Decrease) Due to Increase (Decrease) Due to
Volume Rate Net Volume Rate Net Volume Rate Net
Interest-earning assets: ($ in thousands)
Total loans $ (1,363) $ (243) $ (1,606) $ 18,190 $ 1,833 $ 20,023 $ 37,302 $ 4,823 $ 42,125
Taxable debt securities 286 (59) 227 431 91 522 550 283 833
Tax-exempt debt securities 4 (5) (1) (1) (1) (2) (6) 3 (3)
Deposits in other financial institutions (194) (4) (198) 2,767 (135) 2,632 5,656 (272) 5,384
Fed fund sold/resale agreements 395 - 395 527 (58) 469 758 (88) 670
Restricted stock investments and other bank stock 6 138 144 301 (8) 293 548 (59) 489
Total interest-earning assets (866) (173) (1,039) 22,215 1,722 23,937 44,808 4,690 49,498
Interest-bearing liabilities:
Interest-bearing NOW accounts 173 127 300 2,005 (473) 1,532 3,765 (912) 2,853
Money market and savings accounts 1 (27) (26) 3,397 (578) 2,819 6,804 (960) 5,844
Time deposits (264) (249) (513) (591) (1,004) (1,595) (1,562) (991) (2,553)
Total interest-bearing deposits (90) (149) (239) 4,811 (2,055) 2,756 9,007 (2,863) 6,144
Borrowings:
FHLB advances - - - (193) (194) (387) (549) (546) (1,095)
Subordinated debt (44) 82 38 1,011 147 1,158 2,021 257 2,278
Total borrowings (44) 82 38 818 (47) 771 1,472 (289) 1,183
Total interest-bearing liabilities (134) (67) (201) 5,629 (2,102) 3,527 10,479 (3,152) 7,327
Net interest income $ (732) $ (106) $ (838) $ 16,586 $ 3,824 $ 20,410 $ 34,329 $ 7,842 $ 42,171
Three Months Ended June 30, 2025 Compared to Three Months Ended March 31, 2025
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.
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.
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.
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.
Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024
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
$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.
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.
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.
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.
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.
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.
Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024
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.
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.
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.
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.
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.
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.
(Reversal of) Provision for Credit Losses
Three Months Ended June 30, 2025 Compared to Three Months Ended March 31, 2025
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.
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.
Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024
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.
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.
Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024
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.
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.
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.
Noninterest Income
The following table sets forth the various components of our noninterest income for the periods indicated:
Three months ended Six Months Ended
(dollars in thousands) June 30,
2025 		March 31,
2025 		June 30,
2024 		June 30,
2025 		June 30,
2024
Service charges and fees on deposit accounts $ 802 $ 776 $ 378 $ 1,578 $ 740
Interchange and ATM income 376 410 190 786 353
Gain on sale of loans
- 577 - 577 415
Income from bank-owned life insurance 503 463 266 966 527
Servicing and related income on loans, net
102 142 (5) 244 68
Loss on sale and disposal of fixed assets - (1) (19) (1) (19)
Other charges and fees 1,073 199 359 1,272 498
Total noninterest income
$ 2,856 $ 2,566 $ 1,169 $ 5,422 $ 2,582
Three Months Ended June 30, 2025 Compared to Three Months Ended March 31, 2025
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.
Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024
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.
Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024
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.
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.
Noninterest Expense
The following table sets forth the various components of our noninterest expense for the periods indicated:
Three months ended Six Months Ended
(dollars in thousands) June 30,
2025 		March 31,
2025 		June 30,
2024 		June 30,
2025 		June 30,
2024
Salaries and employee benefits $ 15,293 $ 15,864 $ 8,776 $ 31,157 $ 18,386
Occupancy and equipment 2,094 2,152 1,445 4,246 2,897
Data processing and communications 1,831 1,935 1,186 3,766 2,336
Legal, audit and professional 972 859 557 1,831 1,073
Regulatory assessments 545 722 347 1,267 734
Director and shareholder expenses 395 404 229 799 432
Merger and related expenses - - 491 - 1,040
Intangible assets amortization
948 948 65 1,896 130
Other real estate owned expenses 862 68 4,935 930 5,023
Other expenses 1,893 1,968 974 3,861 1,935
Total noninterest expense $ 24,833 $ 24,920 $ 19,005 $ 49,753 $ 33,986
Three Months Ended June 30, 2025 Compared to Three Months Ended March 31, 2025
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.
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.
Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024
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.
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.
There were no merger and related expenses during the three months ended June 30, 2025, compared to $491 thousand for the same 2024 period.
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.
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,
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.
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.
Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024
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.
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.
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.
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.
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,
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.
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,
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.
Income Taxes
Three Months Ended June 30, 2025 Compared to Three Months Ended March 31, 2025
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.
Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024
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.
Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024
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.
Financial Condition
Summary
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.
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.
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.
Debt Securities
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
$46.0 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 1.34% and 4.76%, respectively, of total assets at June 30, 2025, compared to 1.32% and 3.52%, respectively, at December 31, 2024.
During the three and six months ended June 30, 2025, there were no transfers between held-to-maturity and available-for-sale debt securities.
At June 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 $53.1 million and $53.3 million, respectively, were pledged as collateral for a secured line of credit with the Federal Reserve.
Held-to-Maturity Debt Securities
The amortized cost of held-to-maturity debt securities and their approximate fair values at June 30, 2025 and December 31, 2024 were as follows:
(dollars in thousands) Amortized Cost
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Estimated Fair
Value
June 30, 2025
Taxable municipals $ 553 $ - $ (71) $ 482
Tax exempt bank-qualified municipals 52,555 - (5,499) 47,056
$ 53,108 $ - $ (5,570) $ 47,538
December 31, 2024
Taxable municipals $ 553 $ - $ (90) $ 463
Tax exempt bank-qualified municipals 52,727 - (5,367) 47,360
$ 53,280 $ - $ (5,457) $ 47,823
At June 30, 2025, we had 61 held-to-maturity debt securities in a gross unrecognized loss position with an amortized cost basis of $53.1 million with pre-tax unrecognized losses of $5.6 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 6.36 years and 6.52 years at June 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.
All held-to-maturity debt securities were municipal securities, and historically have had limited credit loss experience. At June 30, 2025 and December 31, 2024, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities were $482 thousand and $463 thousand, respectively, and $47.1 million and $47.4 million, respectively. At June 30, 2025 and December 31, 2024, the total held-to-maturity debt securities rated AA and above was $44.4 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 June 30, 2025 and December 31, 2024.
Available-for-Sale Debt Securities
The amortized cost of available-for-sale debt securities and their approximate fair values at June 30, 2025 and December 31, 2024 were as follows:
(dollars in thousands) Amortized Cost Gross
Unrealized
Gains 		Gross
Unrealized
Losses 		Estimated Fair
Value
June 30, 2025
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities $ 124,155 $ 815 $ (3,247) $ 121,723
SBA securities 4,380 8 (69) 4,319
U.S. Treasury 2,681 - (227) 2,454
U.S. Agency 2,000 - (254) 1,746
Collateralized mortgage obligations 58,412 283 (2,527) 56,168
Taxable municipal 1,007 - (79) 928
Tax exempt bank-qualified municipals 830 - (1) 829
$ 193,465 $ 1,106 $ (6,404) $ 188,167
December 31, 2024
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities $ 87,930 $ 109 $ (4,765) $ 83,274
SBA securities 5,423 7 (97) 5,333
U.S. Treasury 12,624 17 (315) 12,326
U.S. Agency 2,000 - (330) 1,670
Collateralized mortgage obligations 41,615 11 (3,963) 37,663
Taxable municipals 1,007 - (98) 909
Tax exempt bank-qualified municipals 830 - (4) 826
$ 151,429 $ 144 $ (9,572) $ 142,001
The estimated fair value of available-for-sale debt securities was $188.2 million at June 30, 2025, an increase of $46.2 million, from $142.0 million at December 31, 2024. The increase was primarily due to purchases of $65.7 million and fair value market adjustments of $4.1 million, partially offset by maturities of $10.0 million, and principal reductions and amortization of discounts and premiums aggregating to $13.7 million.
At June 30, 2025, we had 86 available-for-sale debt securities in a gross unrealized loss position with an amortized cost basis and fair value of $120.9 million and $114.5 million, respectively, with pre-tax unrealized losses of $6.4 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 4.73 years and 4.60 years at June 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.
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 June 30, 2025, compared to 4.6% at December 31, 2024. The decrease in the 10-Year Treasury Bond in the first half of 2025,
resulted in a decrease in the net unrealized losses on our debt securities at June 30, 2025. The changes in the net unrealized losses on our available-for-sale debt securities would affect our total and tangible shareholders' equity.
We determined that the unrealized losses related to each available-for-sale debt security at June 30, 2025 was primarily attributable to factors other than credit related, including general volatility in market conditions. Our available-for-sale debt securities consisted of U.S. Treasury, U.S. government and agency and government sponsored enterprise securities, and municipals which are issued, guaranteed, or supported by the U.S. government, and historically have had limited credit loss experience. In addition, we reviewed the credit rating of the municipal securities. At June 30, 2025, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities was $928 thousand and $829 thousand, respectively. All of these available-for-sale municipal debt securities rated AA and above totaled $1.8 million. At December 31, 2024, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities was $909 thousand and $826 thousand, respectively. All of these available-for-sale municipal debt securities rated AA and above totaled $1.7 million at December 31, 2024. Accordingly, we applied a zero credit loss assumption for these securities and no ACL was recorded as of June 30, 2025 and December 31, 2024.
The following table presents the amortized cost and weighted average yields using amortized cost of held-to-maturity debt securities as of June 30, 2025, based on the contractual maturity dates:
One Year or Less More than One Year through Five Years More than Five Years through Ten Years More than Ten Years Total
(dollars in thousands) Amortized
Cost 		Weighted
Average
Yield 		Amortized
Cost 		Weighted
Average
Yield 		Amortized
Cost 		Weighted
Average
Yield 		Amortized
Cost 		Weighted
Average
Yield 		Amortized
Cost 		Weighted
Average
Yield
Held-to-maturity:
Taxable municipals $ - - % $ - - % $ 553 2.29 % $ - - % $ 553 2.29 %
Tax exempt bank-qualified municipals - - % - - % 33,776 2.19 % 18,779 2.43 % 52,555 2.28 %
Total $ - - % $ - - % $ 34,329 2.19 % $ 18,779 2.43 % $ 53,108 2.27 %
The following table presents the fair value and weighted average yields using amortized cost of available-for-sale debt securities as of June 30, 2025, based on the contractual maturity dates:
One Year of Less More than One Year through Five Years More than Five Years through Ten Years More than Ten Years Total
(dollars in thousands) Fair
Value 		Weighted
Average
Yield 		Fair
Value 		Weighted
Average
Yield 		Fair
Value 		Weighted
Average
Yield 		Fair
Value 		Weighted
Average
Yield 		Fair
Value 		Weighted
Average
Yield
Available-for-sale:
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities $ 1,800 7.30 % $ 5,693 1.82 % $ 7,939 2.76 % $ 106,291 4.49 % $ 121,723 4.30 %
SBA securities - - % 2,827 5.32 % 778 3.09 % 714 4.51 % 4,319 4.77 %
U.S. Treasury - - % 2,454 0.93 % - - % - - % 2,454 - %
U.S. Agency - - % - - % 1,746 2.05 % - - % 1,746 - %
Collateralized mortgage obligations - - % - - % 1,817 4.92 % 54,351 4.53 % 56,168 - %
Taxable municipals - - % 500 5.24 % 428 1.73 % - - % 928 - %
Tax exempt bank-qualified municipals 829 2.50 % - - % - - % - - % 829 - %
Total $ 2,629 5.80 % $ 11,474 2.57 % $ 12,708 2.92 % $ 161,356 4.51 % $ 188,167 4.29 %
Loans Held for Sale
At June 30, 2025, loans held for sale totaled $6.1 million, consisting of only SBA 7(a) loans. At December 31, 2024, loans held for sale totaled $17.2 million, consisting of $10.3 million SBA 7(a) loans and $6.9 million of C&I loans transferred from loans held for investment. At June 30, 2025 and December 31, 2024, the fair value of loans held for sale totaled $6.4 million and $17.9 million, respectively.
Loans Held for Investment
The composition of our loans held for investment at June 30, 2025 and December 31, 2024 was as follows:
(dollars in thousands) June 30,
2025
% of
Total Loans
December 31,
2024
% of
Total Loans
Construction and land development $ 184,744 6.2 % $ 227,325 7.2 %
Real estate - other:
1-4 family residential 139,855 4.7 % 164,401 5.2 %
Multifamily residential 258,395 8.6 % 243,993 7.8 %
Commercial real estate and other 1,777,940 59.4 % 1,767,727 56.3 %
Commercial and industrial 607,836 20.3 % 710,970 22.7 %
Consumer 22,790 0.8 % 24,749 0.8 %
Loans(1)
2,991,560 100.0 % 3,139,165 100.0 %
Allowance for loan losses (41,110) (50,540)
Net loans $ 2,950,450 $ 3,088,625
(1) Loans held for investment includes net unearned fees of $2.2 million and $1.8 million and net unearned discounts of $46.1 million and $58.5 million at June 30, 2025 and December 31, 2024, respectively. We recognized $5.6 million and $6.1 million for the three months ended June 30, 2025 and 2024, respectively. We recognized $10.8 million and $129 thousand in interest accretion for acquired loans for the six months ended June 30, 2025 and 2024, respectively.
Total loans held for investment were $2.99 billion, or 75.7% of total assets, at June 30, 2025, a decrease of $147.6 million from $3.14 billion, or 77.9% of total assets, at December 31, 2024. The decrease during the six months ended June 30, 2025 was partly attributable to our derisking strategy by decreasing our exposure in the Sponsor Finance portfolio and criticized loans. During the six months ended June 30, 2025, loan originations totaled $175.7 million, partially offset by net paydowns of $67.2 million, charge-offs of $7.3 million, and payoffs and sales totaling $248.8 million.
Loans secured by real estate, defined as construction and land development loans and real estate - other loans, decreased by $42.5 million to $2.36 billion at June 30, 2025. The decrease in loans secured by real estate was primarily driven by a $42.6 million decrease in construction and land development loans and a $24.5 million decrease in 1-4 family residential loans, partially offset by a $14.4 million increase in multifamily residential loans and a $10.2 million increase in commercial real estate and other loans.
Commercial and industrial loans were $607.8 million at June 30, 2025, a decrease of $103.1 million from $711.0 million at December 31, 2024. The decrease in commercial and industrial loans during the six months ended June 30, 2025 was primarily attributable to originations of $55.7 million, partially offset by charge-offs of $4.9 million, net paydowns of $61.4 million and payoffs of $92.5 million.
Loan Maturities
The following table sets forth the amounts of gross loans, by maturity at June 30, 2025:
(dollars in thousands) Due in One Year or Less Due after One Year through Five Years Due after Five Years through Fifteen Years Due after Fifteen Years Total
Construction and land development $ 124,830 $ 57,029 $ 2,885 $ - $ 184,744
Real estate - other:
1-4 family residential 23,525 29,274 57,446 29,610 139,855
Multifamily residential 34,978 111,437 93,276 18,704 258,395
Commercial real estate and other 164,254 748,106 787,470 78,110 1,777,940
Commercial and industrial 292,946 235,041 79,845 4 607,836
Consumer 653 864 - 21,273 22,790
$ 641,186 $ 1,181,751 $ 1,020,922 $ 147,701 $ 2,991,560
The following table sets forth the amounts of gross loans, due after one year, presented by fixed or floating interest rates at June 30, 2025:
(dollars in thousands) Fixed
Rate 		Floating
Rate 		Total
Construction and land development $ 25,393 $ 34,521 $ 59,914
Real estate - other:
1-4 family residential 19,209 97,121 116,330
Multifamily residential 144,555 78,862 223,417
Commercial real estate and other 738,606 875,080 1,613,686
Commercial and industrial 172,714 142,176 314,890
Consumer 22,111 26 22,137
$ 1,122,588 $ 1,227,786 $ 2,350,374
Loan Concentrations
Commercial real estate loans are generally viewed as having more risk of default than residential real estate loans. They are also typically larger than most residential real estate loans and consumer loans and depend on cash flows from the owner's business or the property to service the debt. Because our loan portfolio, including loans held for sale, contains a number of CRE loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in our levels of nonperforming assets. Approximately 59.3% of our total loan portfolio, including loans held for sale, was comprised of commercial real estate loans as of June 30, 2025 as presented below:
(dollars in thousands) June 30,
2025 		Percentage
of CRE Portfolio 		Average
Loan Size
Weighted Average LTV (2)
Commercial real estate loans (1):
Industrial $ 516,800 29.1 % $ 1,879 48 %
Office 272,600 15.3 % 1,990 51 %
Retail 284,700 16.0 % 1,686 47 %
Hotel 169,500 9.5 % 10,591 46 %
Special purpose 119,800 6.7 % 2,066 41 %
Self storage 90,200 5.1 % 6,441 46 %
Other (3)
170,100 9.6 % 2,239 47 %
Medical/dental office 110,200 6.2 % 1,032 50 %
Restaurant 42,900 2.4 % 1,342 45 %
Total $ 1,776,800 100.0 % $ 2,010 48 %
(1)CRE loans include owner-occupied CRE and non-owner occupied CRE loans, but exclude farmland loans. Balance includes loans held for sale and loans held for investment.
(2)Weighted average loan-to-value ("LTV") is based on current loan balance as of June 30, 2025, and collateral value at origination or renewal.
(3)Other includes gas station, mixed use and retirement properties.
The following table presents the percentages of our commercial real estate loans broken out by occupancy as of June 30, 2025:
June 30, 2025
Owner Occupied Non-owner Occupied
(dollars in thousands) Balance % of Total Balance % of Total
Commercial real estate loans (1):
Industrial $ 298,900 48.3 % $ 217,900 18.8 %
Special purpose 78,200 12.6 % 41,600 3.6 %
Office 59,100 9.5 % 213,500 18.4 %
Retail 42,900 6.9 % 241,800 20.9 %
Medical/dental office 65,200 10.5 % 45,000 3.9 %
Other 66,000 10.7 % 104,100 9.1 %
Restaurant 9,100 1.5 % 33,800 2.9 %
Self storage - - % 90,200 7.8 %
Hotel - - % 169,500 14.6 %
Total $ 619,400 100.0 % $ 1,157,400 100.0 %
(1)CRE loans include owner-occupied CRE and non-owner occupied CRE loans, but exclude farmland loans. Balance includes loans held for sale and loans held for investment.
With the increases in remote work over the last few years, rising interest rates and increasing vacancy rates nationwide, commercial real estate loans collateralized by office properties have unique credit risks. We attempt to reduce our credit risk within this portfolio by emphasizing loan-to-value ratios and debt service ratios. The following table presents a summary of the balances and weighted average loan-to-values of office loans and
medical/dental office loans within our commercial real estate loan portfolio as of June 30, 2025:
(dollars in thousands) June 30,
2025
Weighted
Average LTV 1
Office loans:
Up to $500 $ 22,800 44 %
More than $500 through $2,000 97,100 47 %
More than $2,000 through $5,000 89,500 54 %
More than $5,000 through $10,000 66,700 53 %
More than $10,000 through $20,000 61,900 48 %
Greater than $20,000 44,800 58 %
Total $ 382,800 51 %
(1)Weighted average LTV is based on current loan balance as of June 30, 2025, and collateral value at origination or renewal.
Delinquent Loans
There were $546 thousand of past due loans still accruing at June 30, 2025, representing 0.02% of total loans held for investment, compared to 0.39% at December 31, 2024. Early stage delinquencies (accruing loans 30-89 days past due) of $546 thousand at June 30, 2025 decreased $11.5 million from December 31, 2024, and the change was largely driven by seasonality and a few isolated loans. The decrease during the six months ended June 30, 2025 included a $1.1 million C&I loan that was fully charged-off, a $4.5 million 1-4 family residential loan that was sold at par, a $1.7 million construction loan that was paid off, $3.9 million of loans that were brought current and $379 thousand C&I loan downgraded to nonaccrual during the six months ended June 30, 2025. There were no consumer solar loans that were over 90 days past due that were accruing interest at June 30, 2025, compared to $150 thousand as of December 31, 2024.
A summary of past due loans, loans still accruing and nonaccrual loans as of June 30, 2025 and December 31, 2024 follows:
(dollars in thousands) 30-59 Days
Past Due 		60-89 Days
Past Due 		Over 90 Days
Past Due 		Total
Past Due 		Nonaccrual
June 30, 2025
Construction and land development $ - $ - $ - $ - $ 14,659
Real estate - other:
1-4 family residential - - - - -
Multifamily residential - - - - -
Commercial real estate and other - 194 - 194 1,705
Commercial and industrial 67 - - 67 1,990
Consumer 134 151 - 285 -
$ 201 $ 345 $ - $ 546 $ 18,354
(dollars in thousands) 30-59 Days
Past Due 		60-89 Days
Past Due 		Over 90 Days
Past Due 		Total
Past Due 		Nonaccrual
December 31, 2024
Construction and land development $ 4,104 $ - $ - $ 4,104 $ 9,659
Real estate - other:
1-4 family residential 40 4,469 - 4,509 2,895
Multifamily residential - - - - -
Commercial real estate and other 195 - - 195 8,915
Commercial and industrial 1,866 1,113 - 2,979 4,917
Consumer 69 226 150 445 -
$ 6,274 $ 5,808 $ 150 $ 12,232 $ 26,386
Total nonaccrual loans decreased $8.0 million during the six months ended June 30, 2025 to $18.4 million. The decrease included a commercial real estate loan of $7.2 million that was sold, two C&I loans totaling $3.3 million that were paid off, a 1-4 family residential loan of $2.9 million upgraded to accrual status, partially offset by downgrades totaling $5.4 million to nonaccrual during the six months ended June 30, 2025.
The following table presents the risk categories for total loans by class of loans as of June 30, 2025 and December 31, 2024:
(dollars in thousands) Pass Special
Mention 		Substandard Total
June 30, 2025
Construction and land development $ 155,680 $ 14,328 $ 14,736 $ 184,744
Real estate - other:
1-4 family residential 137,157 - 2,698 139,855
Multifamily residential 255,394 3,001 - 258,395
Commercial real estate and other 1,718,624 40,757 18,559 1,777,940
Commercial and industrial 555,448 7,178 45,210 607,836
Consumer 22,537 - 253 22,790
$ 2,844,840 $ 65,264 $ 81,456 $ 2,991,560
(dollars in thousands) Pass Special
Mention 		Substandard Total
December 31, 2024
Construction and land development $ 203,484 $ 12,431 $ 11,410 $ 227,325
Real estate - other:
1-4 family residential 157,037 - 7,364 164,401
Multifamily residential 240,207 3,786 - 243,993
Commercial real estate and other 1,710,050 36,026 21,651 1,767,727
Commercial and industrial 617,106 17,096 76,768 710,970
Consumer 24,344 - 405 24,749
$ 2,952,228 $ 69,339 $ 117,598 $ 3,139,165
Special mention loans decreased by $4.1 million during the six months ended June 30, 2025 to $65.3 million at June 30, 2025. The decrease in the special mention loans was due mostly to $15.9 million downgrades to substandard loans, $12.2 million upgraded to pass loans, $9.6 million in payoffs, partially offset by $25.2 million downgrades from pass loans and $8.4 million in net advances.
Substandard loans decreased by $36.1 million during the six months ended June 30, 2025 to $81.5 million. The decrease in the substandard loans was due primarily to $45.1 million in payoffs and sales, $8.0
million in net paydowns, $5.8 million in charge-offs, and $779 thousand in upgrades to pass loans, partially offset by $7.6 million in downgrades from pass loans and $15.9 million in downgrades from special mention loans during the six months ended June 30, 2025.
There were no loans classified as doubtful or loss loans at June 30, 2025 and December 31, 2024.
Loan Modifications
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).
At December 31, 2024, we had six loan modifications with borrowers that are experiencing financial difficulty totaling $24.1 million, of which $2.0 million were past due. These loans included four PCD loans, one non-PCD loan and one non-acquired loan. Refer to Note 4 - Loans and Allowances for Credit Losses - Modified Loans to Borrowers Experiencing Financial Difficulty of the Notes to Consolidated Financial Statements included in Part I - Financial Information - Item 1. Financial Statements of this filing for more information regarding loan modifications.
Non-performing Assets
Nonperforming assets consist of loans on which we have ceased accruing interest (nonaccrual loans), OREO, and other repossessed assets owned. Nonaccrual loans consist of all loans 90 days or more past due and on loans where, in the opinion of management, there is reasonable doubt as to the collection of principal and interest.
The following table presents a summary of nonperforming assets, along with corresponding nonperforming asset ratios, as of June 30, 2025 and December 31, 2024:
(dollars in thousands) June 30,
2025 		December 31,
2024
Nonaccrual loans:
Construction and land development $ 14,659 $ 9,659
Real estate - other:
1-4 family residential - 2,895
Multifamily residential - -
Commercial real estate and other 1,705 8,915
Commercial and industrial 1,990 4,917
Consumer - -
Total nonaccrual loans 18,354 26,386
Loans past due over 90 days or more and still on accrual - 150
Total nonperforming loans 18,354 26,536
Other real estate owned - 4,083
Total nonperforming assets $ 18,354 $ 30,619
Allowance for loan losses to total loans 1.37 % 1.61 %
Nonaccrual loans to total loans 0.61 % 0.84 %
Allowance for loan losses to nonaccrual loans 224.0 % 191.5 %
Allowance for loan losses to nonperforming loans
224.0 % 190.5 %
Nonperforming assets to total assets 0.46 % 0.76 %
At June 30, 2025, nonaccrual loans and nonperforming loans were $18.4 million and $18.4 million, respectively, compared to $26.4 million and $26.5 million, respectively, at December 31, 2024. The decrease resulted from a commercial real estate loan of $7.2 million that was sold, two C&I loans totaling $3.3 million that were paid off, a 1-4 family residential loan of $2.9 million upgraded to accrual status, partially offset by downgrades totaling $5.4 million to nonaccrual during the six months ended June 30, 2025. At December 31, 2024, non-performing assets included OREO, net of $4.1 million which was sold in the second quarter of 2025, resulting in an $862 thousand loss.
Allowance for Credit Losses
Our ACL is an estimate of expected lifetime credit losses for loans held for investment at the time of origination or acquisition and is maintained at a level deemed appropriate by management to provide for expected lifetime credit losses in the portfolio. The ACL consists of: (i) a specific allowance established for CECL on loans individually evaluated, (ii) a quantitative allowance for current expected loan losses based on the portfolio and expected economic conditions over a reasonable and supportable forecast period that reverts back to long-term trends to cover the expected life of the loan, (iii) a qualitative allowance including management judgment to capture factors and trends that are not adequately reflected in the quantitative allowance, and (iv) the ACL for off-balance sheet credit exposure for unfunded loan commitments. Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts. We measure the ACL using a discounted cash flow methodology, which utilizes pool-level assumptions and cash flow projections on individual loan basis, which then aggregated at the portfolio segment level and supplemented by a qualitative reserve that is applied to each portfolio segment level. Our ACL model incorporates assumptions for our own historical quarterly prepayment and curtailment experience covering the
period starting from February 2021 to estimate the ACL, probability of default ("PD"), and loss given default ("LGD") to project each loan's cash flow throughout its entire life cycle.
Accrued interest receivable on loans receivable, net, totaled $9.7 million and $11.7 million at June 30, 2025 and December 31, 2024, respectively, and is included within accrued interest receivable and other assets in the accompanying consolidated balance sheets. Accrued interest receivable is excluded from the ACL.
The following tables present a summary of the changes in the ACL for the periods indicated:
Three Months Ended June 30, 2025
Three Months Ended June 30, 2024
(dollars in thousands) Allowance for Loan Losses ("ALL") Reserve for Unfunded Loan Commitments Total Allowance for Credit Losses Allowance for Loan Losses ("ALL") Reserve for Unfunded Loan Commitments Total Allowance for Credit Losses
Balance, beginning of period $ 45,839 $ 2,485 $ 48,324 $ 22,254 $ 916 $ 23,170
(Reversal of) provision for credit losses
(663) 29 (634) 2,990 (97) 2,893
Charge-offs (4,247) - (4,247) (1,456) - (1,456)
Recoveries 181 - 181 - - -
Net charge-offs
(4,066) - (4,066) (1,456) - (1,456)
Balance, end of period $ 41,110 $ 2,514 $ 43,624 $ 23,788 $ 819 $ 24,607
Six Months Ended June 30, 2025 Six Months Ended June 30, 2024
(dollars in thousands) Allowance for Loan Losses ("ALL") Reserve for Unfunded Loan Commitments Total Allowance for Credit Losses Allowance for Loan Losses ("ALL") Reserve for Unfunded Loan Commitments Total Allowance for Credit Losses
Balance, beginning of period $ 50,540 $ 3,103 $ 53,643 $ 22,569 $ 933 $ 23,502
(Reversal of) provision for credit losses
(3,821) (589) (4,410) 2,676 (114) 2,562
Charge-offs (7,406) - (7,406) (1,457) - (1,457)
Recoveries 1,797 - 1,797 - - -
Net charge-offs
(5,609) - (5,609) (1,457) - (1,457)
Balance, end of period $ 41,110 $ 2,514 $ 43,624 $ 23,788 $ 819 $ 24,607
The following table presents a summary of the ALL by portfolio segment, along with the corresponding percentage of each segment to total loans as of periods indicated:
June 30, 2025
December 31, 2024
(dollars in thousands) Amount Percent of loans in each category to total loans Amount Percent of loans in each category to total loans
Construction and land development $ 1,557 6.2 % $ 1,953 7.2 %
Real estate - other:
1-4 family residential 1,033 4.7 % 2,375 5.2 %
Multifamily residential 1,594 8.6 % 1,560 7.8 %
Commercial real estate and other 23,351 59.4 % 25,464 56.3 %
Commercial and industrial 12,585 20.3 % 18,056 22.7 %
Consumer 990 0.8 % 1,132 0.8 %
$ 41,110 100.0 % $ 50,540 100.0 %
Since we first adopted CECL in January 2023, and through June 2024, the economic environment has experienced volatility, which has made forecasting future economic outcomes challenging. Among these challenges were the highest levels of inflation seen since the 1970s, a very aggressive rate hiking policy by the Fed and other central banks to combat inflation, turmoil in the banking sector that resulted in several large bank failures early in 2023 and distress at New York Community Bank in early 2024, and significant global
geopolitical risks, as well as domestic political risks. On a quarterly basis, we evaluated numerous key macroeconomic variables within the economic forecast scenarios from Moody's Analyticsand determined that it was best to use acombination of these scenarios that would reflect the range of possible outcomes given the volatile economic environment. We also reviewed the underlying assumptions supporting each scenario along with other sources of economic forecasts and meeting minutes of the FOMC when determining the scenario weighting. At June 30, 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 maintaining the federal funds rate unchanged for the fourth consecutive meeting in June 2025, amid expectations of rising inflation and slowing economic growth ahead, while still pointing to two reductions later this year. Uncertainty about the economic outlook has diminished, but remains elevated, unemployment rate remains low, and labor market conditions remain solid. The use of two weighted scenarios is consistent with the methodology used in our ACL model at June 30, 2025 and December 31, 2024.
We used economic forecasts released by Moody's Analytics in the second week of June 2025 to update our ACL calculations for June 30, 2025. We updated our historical prepayment and curtailment rates analysis, and qualitative risk factors based on our judgment of the market area, industry or business specific data, changes in underlying loan composition of specific portfolios, trends relating to credit quality, delinquency, non-performing and adversely rated loans, model imprecision and reasonable and supportable forecasts of economic conditions that were not captured in the quantitative analysis. We continue to monitor macroeconomic variables related to changes in interest rates, inflation and the concerns of an economic downturn, and believe it is appropriately provisioned for the current environment.
The ALL was $41.1 million at June 30, 2025, compared to $50.5 million at December 31, 2024. The $9.4 million decrease in the ALL during the six months ended June 30, 2025 was driven by a number of factors, including net charge-offs of $5.6 million resulting from our continuing strategy to derisk the consolidated balance sheet by reducing our exposure to criticized loans. Other factors that decreased the ALL included changes in qualitative risk factors that decreased the ALL by $2.5 million, decreases in classified loans decreased the ALL by $6.7 million, changes in the loans held for investment volume and mix decreased the ALL by $1.1 million, and changes in the reasonable and supportable forecast, primarily related to the economic outlook, the scenario weightings, and the historical prepayment and curtailment rates analysis increased the ALL by $775 thousand.
At June 30, 2025, our ratio of ALL to total loans held for investment was 1.37%, a decrease from 1.61% at December 31, 2024.
The ACL process involves subjective and complex judgments and is reflective of significant uncertainties that could potentially result in materially different results under different assumptions and conditions. We review the level of the allowance at least quarterly and perform a sensitivity analysis on the significant assumptions utilized in estimating the ACL for collectively evaluated loans. Applying a 100% probability weighting to the downside scenario rather than using the probability-weighted two scenario approach would result in an increase in ACL by approximately $6.8 million, or an additional 20 basis points to the ALL to total loans held for investment ratio. This sensitivity analysis and related impact on the ACL is a hypothetical analysis and is not intended to represent management's judgments or assumptions of qualitative loss factors that were utilized at June 30, 2025.
The following table presents net charge-offs, average loans and net charge-offs as a percentage of average loans for the periods indicated:
Three Months Ended June 30, 2025
Three Months Ended June 30, 2024
(dollars in thousands) Net
(Charge-off)
Recovery 		Average
Loans
Net (Charge-off)
Recovery
Ratio
Net
(Charge-off)
Recovery 		Average
Loans
Net
(Charge-off)
Recovery
Ratio
Construction and land development $ - $ 198,590 - % $ - $ 232,350 - %
Real estate - other:
1-4 family residential - 141,564 - % - 148,351 - %
Multifamily residential - 240,275 - % (1,456) 186,509 (3.12) %
Commercial real estate and other (359) 1,737,238 (0.08) % - 1,015,943 - %
Commercial and industrial (3,442) 651,416 (2.11) % - 298,866 - %
Consumer (265) 23,028 (4.60) % - 636 - %
$ (4,066) $ 2,992,111 (0.54) % $ (1,456) $ 1,882,655 (0.31) %
Six Months Ended June 30, 2025
Six Months Ended June 30, 2024
(dollars in thousands) Net
(Charge-off)
Recovery 		Average
Loans
Net (Charge-off)
Recovery
Ratio
Net
(Charge-off)
Recovery 		Average
Loans
Net (Charge-off)
Recovery
Ratio
Construction and land development $ - $ 214,490 - % $ - $ 236,319 - %
Real estate - other:
1-4 family residential - 150,845 - % (1) 143,759 - %
Multifamily residential - 241,674 - % (1,456) 203,764 (1.43) %
Commercial real estate and other (2,011) 1,747,120 (0.23) % - 1,016,975 - %
Commercial and industrial (3,060) 673,289 (0.91) % - 293,484 - %
Consumer (538) 23,031 (4.67) % - 1,560 - %
$ (5,609) $ 3,050,449 (0.37) % $ (1,457) $ 1,895,861 (0.15) %
Allowance for Credit Losses on Off-Balance Sheet Commitments
We also maintain a separate allowance for off-balance sheet commitments, which is included in accrued interest payable and other liabilities in our consolidated balance sheets. Management evaluates the loss exposure for off-balance sheet commitments to extend credit following the same principles used for the ACL, with consideration for experienced utilization rates on client credit lines and the inherently lower risk of unfunded loan commitments relative to disbursed commitments. The allowance for off-balance sheet commitments totaled $2.5 million and $3.1 million at June 30, 2025 and December 31, 2024, respectively. The change in the allowance for off-balance sheet commitments between periods was the result of a $589 thousand reversal of credit losses on unfunded loan commitments from lower unfunded loan commitment balances at June 30, 2025, coupled with lower loss rates used to estimate the ACL on unfunded commitments. Total unfunded loan commitments decreased $24.1 million to $901.2 million at June 30, 2025, from $925.3 million at December 31, 2024.
Servicing Asset and Loan Servicing Portfolio
We sell loans in the secondary market and, for certain loans, retain the servicing responsibility. The loans serviced for others were accounted for as sales and are therefore not included in the accompanying consolidated balance sheets. We receive servicing fees ranging from 0.25% to 1.00% for the services provided over the life of the loan; the servicing asset is initially recognized at fair value based on the present value of the estimated future net servicing income, incorporating assumptions that market participants would use in their estimates of fair value. The risks inherent in the SBA servicing asset relate primarily to changes in prepayments that result from shifts in interest rates and a reduction in the estimated future cash flows. The servicing asset activity includes
additions from loan sales with servicing retained and acquired servicing rights and reductions from amortization as the serviced loans are repaid and servicing fees are earned. Loans serviced for others totaled $144.4 million and $138.0 million at June 30, 2025 and December 31, 2024, respectively. This includes SBA loans serviced for others of $37.4 million at June 30, 2025 and $33.2 million at December 31, 2024 for which there was a related servicing asset of $406 thousand and $344 thousand, respectively. The fair value of the servicing asset approximated its carrying value at June 30, 2025 and December 31, 2024. Consideration for each SBA loan sale includes the cash received and the fair value of the related servicing asset. The significant assumptions used in the valuation of the SBA servicing asset at June 30, 2025 included a weighted average discount rate of 16.2% and a weighted average prepayment speed assumption of 19.6%. The significant assumptions used in the valuation of the SBA servicing asset at December 31, 2024 included a weighted average discount rate of 14.3% and a weighted average prepayment speed assumption of 20.5%.
Goodwill and Intangibles Assets, Net
Goodwill totaled $110.9 million and $111.8 million at June 30, 2025 and December 31, 2024, respectively. In 2025, we recorded adjustments related to the Merger resulting in a decrease to goodwill of $853 thousand within the one-year measurement period subsequent to the Merger Date. These net of tax adjustments included a true-up of the acquired low-income housing tax credit investments, recoveries on acquired PCD loans previously charged-off prior to the Merger, and deferred tax adjustment related to CALB state net operating losses that cannot be utilized post-merger. On an ongoing basis, we qualitatively assess whether current events or circumstances warrant the need for an interim quantitative assessment of goodwill impairment. We also monitor fluctuations in our stock price. At June 30, 2025, we determined that it is not likely that the fair value of the reporting unit is less than its carrying amount.
Intangible assets totaled $20.4 million and $22.3 million at June 30, 2025 and December 31, 2024, respectively, and were comprised of the following:
(dollars in thousands) June 30,
2025 		December 31,
2024
Core deposit intangible
$ 20,213 $ 22,033
Trade name
162 238
Intangible assets, net
$ 20,375 $ 22,271
The $1.9 million decrease in the intangible assets between periods was the result of amortization during the period. At June 30, 2025, the intangible assets had a weighted average remaining amortization period of 8.8 years.
Refer to Note 2 - Business Combinationsand Note 6 - Goodwill and Other Intangible Assets of the Notes to Consolidated Financial Statements included in Part I - Financial Information- Item 1. Financial Statementsof this filing for more information regarding business combinations and related activity.
Deposits
The following table presents the composition of deposits, related percentage of total deposits, and spot rates, as of June 30, 2025 and December 31, 2024:
June 30, 2025
December 31, 2024
(dollars in thousands) Amount Percentage
of Total
Deposits
Spot Rate (1)
Amount Percentage
of Total
Deposits
Spot Rate (1)
Noninterest-bearing demand (2)
$ 1,218,072 36.8 % 0.0 % $ 1,257,007 37.0 % 0.0 %
Interest-bearing NOW accounts (3)
783,410 23.7 % 1.9 % 673,589 19.8 % 1.9 %
Money market and savings accounts (4)
1,146,548 34.6 % 2.7 % 1,182,927 34.8 % 2.7 %
Time deposits (5)
160,489 4.8 % 3.8 % 164,101 4.8 % 4.0 %
Broker time deposits 3,759 0.1 % 0.4 % 121,136 3.6 % 4.9 %
Total deposits $ 3,312,278 100.0 % 1.6 % $ 3,398,760 100.0 % 1.7 %
(1) Weighted average interest rates at June 30, 2025 and December 31, 2024.
(2) Included reciprocal deposit products of $7.9 million and $76.6 million at June 30, 2025 and December 31, 2024, respectively.
(3) Included reciprocal deposit products of $648.3 million and $536.0 million at June 30, 2025 and December 31, 2024, respectively.
(4) Included reciprocal deposit products of $13.6 million and $76.5 million at June 30, 2025 and December 31, 2024, respectively.
(5) Included CDARS deposits of $60.8 million and $65.4 million at June 30, 2025 and December 31, 2024, respectively.
We offer our depositors access to the Certificate of Deposit Account Registry Service ("CDARS"), IntraFi Network Insured Cash Sweep ("ICS"), and Reich & Tang Deposit Solutions ("R&T") networks. We receive an equal dollar amount of deposits ("reciprocal deposits") from other participating banks in exchange for the deposits we place into the networks to fully qualify large customer deposits for FDIC insurance. These reciprocal deposits are not required to be treated as brokered deposits up to the lesser of 20% of the Bank's total liabilities or $5 billion.
Our total reciprocal deposits decreased to $730.6 million, or 22.1% of total deposits and 21.7% of the Bank's total liabilities at June 30, 2025, compared to $754.4 million, or 22.2% of total deposits at December 31, 2024. The excess over 20% increased our wholesale funding to total assets ratio and net non-core funding dependence ratio. These two ratios were within the Bank's internal policy limit.
Total deposits were $3.31 billion at June 30, 2025, a decrease of $86.5 million from $3.40 billion at December 31, 2024. During the six months ended June 30, 2025, there was a $117.4 million decrease in brokered time deposits, a $2.5 million increase in interest-bearing NOW accounts, excluding reciprocal deposits, a $23.8 million increase in reciprocal deposits, partially offset by a $29.7 million increase in noninterest-bearing demand deposits, excluding reciprocal deposits, a $26.6 million increase in money market and savings accounts, excluding reciprocal deposits, and a $931 thousand increase in non-brokered time deposits, excluding CDARS.
At June 30, 2025, noninterest-bearing demand deposits totaled $1.22 billion and represented 36.8% of total deposits, compared to $1.26 billion or 37.0% at December 31, 2024. At June 30, 2025 and December 31, 2024, total deposits exceeding FDIC deposit insured limits were $1.59 billion, or 48% of total deposits and $1.56 billion, or 46% of total deposits, respectively.
The following table sets forth the average balance of deposit accounts and the weighted average rates paid for the periods indicated:
For the Three Months Ended June 30,
2025
2024
(dollars in thousands) Average
Balance 		Average
Rate Paid 		Average
Balance 		Average
Rate Paid
Noninterest-bearing demand $ 1,179,791 - % $ 658,001 - %
Interest-bearing NOW accounts 763,987 1.92 % 361,244 2.38 %
Money market and savings accounts 1,149,286 2.70 % 653,244 3.02 %
Time deposits 165,049 3.77 % 259,722 4.87 %
Total deposits $ 3,258,113 1.59 % $ 1,932,211 2.12 %
For the Six Months Ended June 30,
2025
2024
(dollars in thousands) Average
Balance 		Average
Rate Paid 		Average
Balance 		Average
Rate Paid
Noninterest-bearing demand $ 1,217,627 - % $ 659,633 - %
Interest-bearing NOW accounts 749,677 1.89 % 360,514 2.33 %
Money market and savings accounts 1,155,588 2.70 % 650,942 2.98 %
Time deposits 186,167 3.91 % 257,598 4.81 %
Total deposits $ 3,309,059 1.59 % $ 1,928,687 2.08 %
The decrease in the weighted average rate on deposits was primarily due to repricing deposits in the lower interest rate environment and peer bank deposit competition during the six months ended June 30, 2025. Beginning in March 2022 through September 2023, the Federal Reserve's FOMC raised the target Fed funds rate by 525 basis points. Beginning in September 2024 through December 2024, the FOMC reduced the target Fed funds rate by 100 basis points.
The following table sets forth the maturities of time deposits at June 30, 2025:
(dollars in thousands) Three Months
of Less 		Over
Three Months through
Six Months 		Over
Six Months through Twelve Months 		Over
Twelve
Months 		Total
Time deposits in amounts of $250,000 or less(1)
$ 50,107 $ 22,751 $ 6,829 $ 997 $ 80,684
Time deposits in amounts over $250,000(1)
41,046 26,889 15,629 - 83,564
Total time deposits $ 91,153 $ 49,640 $ 22,458 $ 997 $ 164,248
(1)Amounts exclude fair value adjustments for acquired time deposits.
Borrowings
Total borrowings decreased $16.8 million to $52.9 million at June 30, 2025 from $69.7 million at December 31, 2024. The decrease was attributable to the Company redeeming all $18.0 million of its 5.50% fixed-to-floating rate subordinated notes duein2030at par value during the second quarter of 2025(Refer to Note 8 - Borrowing Arrangementsof the Notes to Consolidated Financial Statements included in Part I - Financial Information, Part 1. Financial Statementsof this filing).
A summary of outstanding borrowings, and related information, as of June 30, 2025 and December 31, 2024 follows:
(dollars in thousands) June 30,
2025 		December 31,
2024
FHLB Advances
Outstanding balance $ - $ -
Weighted average interest rate, end of period - % - %
Average balance outstanding, end of period(2)
$ - $ 19,543
Weighted average interest rate, end of period(3)
- % 5.64 %
Maximum amount outstanding at any month-end during the period $ - $ 70,000
Subordinated Notes
Outstanding balance $ 55,000 $ 73,000
Carrying value(1)
$ 52,883 $ 69,725
Weighted average interest rate, end of period 4.05 % 4.40 %
Average balance outstanding, end of period(2)
$ 68,585 $ 39,479
Weighted average interest rate, end of period(3)
8.29 % 7.47 %
Maximum amount outstanding at any month-end during the period $ 73,000 $ 73,000
(1)Amount includes net unamortized issuance costs and fair value adjustments.
(2)Average balance outstanding includes average net unamortized issuance costs and average fair value adjustments at the end of the periods presented.
(3)Weighted average interest rate includes issuance costs and fair value adjustments at the end of the periods presented.
Shareholders' Equity
Total shareholders' equity was $547.6 million at June 30, 2025, compared to $511.8 million at December 31, 2024. The $35.8 million increase between periods was primarily due to net income of $31.0 million, a decrease in net of tax of unrealized losses on debt securities available-for-sale of $2.9 million, stock-based compensation expense of $3.0 million, and stock options exercised of $101 thousand, partially offset by the repurchase of shares in settlement of restricted stock units of $1.2 million.
On June 14, 2023, we announced an authorized share repurchase plan, providing for the repurchase of up to 550,000 shares of our outstanding common stock, or approximately 3% of our then outstanding shares. On May 1, 2025, we announced an increase in the number of shares authorized for repurchase to 1,600,000 shares. Repurchases under the program may occur from time to time in open market transactions, in privately negotiated transactions, or by other means in accordance with federal securities laws and other restrictions. We intend to fund its repurchases from available working capital and cash provided by operating activities. The timing of repurchases, as well as the number of shares repurchased, will depend on a variety of factors, including price; trading volume; business, economic and general market conditions; and the terms of any Rule 10b5-1 plan adopted by us. The repurchase program has no expiration date and may be suspended, modified, or terminated at any time without prior notice.
There were no shares repurchased under this share repurchase plan during the three and six months ended June 30, 2025.
Tangible book value per common share at June 30, 2025 was $12.82, compared with $11.71 at December 31, 2024. The $1.11 increase in tangible book value per common share during the six months ended June 30, 2025 was primarily the result of the net income during the period, other comprehensive income related to changes in unrealized losses, net of taxes on available-for-sale, and the impact of share-based compensation activity. Tangible book value per common share is also impacted by certain other items, including amortization of intangibles, and share changes resulting from share-based compensation results.
Prior to the Merger, the holding company qualified for treatment under the Small Bank Holding Company Policy Statement (Regulation Y, Appendix C) and, therefore, was not subject to consolidated capital rules at the bank holding company level. Beginning in the third quarter of 2024, the holding company became subject to the consolidated capital rules at the bank holding company level. The Company's leverage capital ratio and total risk-based capital ratio were 11.14% and 14.75%, respectively, at June 30, 2025. The Bank's leverage capital ratio and total risk-based capital ratio were 12.13% and 14.30%, respectively, at June 30, 2025.
Liquidity and Market Risk Management
Liquidity
Liquidity is a measure of our ability to meet our cash flow requirements, including inflows and outflows of cash for depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs. Several factors influence our liquidity needs, including depositor and borrower activity, interest rate trends, changes in the economy, maturities, re-pricing and interest rate sensitivity of our debt securities, loan portfolio and deposits. We attempt to maintain a total liquidity ratio (liquid assets, including cash and due from banks, federal funds sold, fully disbursed loans held for sale, investments maturing one year or less, and available-for-sale debt securities not pledged as collateral expressed as a percentage of total deposits and short term debt) above approximately 10.0%. Our total liquidity ratios were 18.2% at June 30, 2025 and 15.7% at December 31, 2024.
For additional information regarding our operating, investing, and financing cash flows, see "Consolidated Statements of Cash Flows"in our consolidated financial statements contained in Item I. Financial Information, Part 1. Financial Statementsof this filing.
California Bank of Commerce, N.A.
The Bank's primary sources of liquidity are derived from deposits from customers, principal and interest payments on loans and debt securities, FHLB advances and other borrowings. The Bank's primary uses of liquidity include customer withdrawals of deposits, extensions of credit to borrowers, operating expenses, and repayment of FHLB advances and other borrowings. While maturities and scheduled amortization of loans and debt securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and competition.
At June 30, 2025, we had a secured line of credit of $727.6 million from the FHLB, of which $682.6 million was available. This secured borrowing arrangement is collateralized under a blanket lien on qualifying real estate loans and is subject to us providing adequate collateral and continued compliance with the Advances and Security Agreement and other eligibility requirements established by the FHLB. At June 30, 2025, we had pledged qualifying loans with an unpaid principal balance of $1.32 billion for this line. In addition, at June 30, 2025, we used $45.0 million of our secured FHLB borrowing capacity to have the FHLB issue letters of credit to meet collateral requirements for deposits from the State of California and other public agencies. There were no borrowings at June 30, 2025 and December 31, 2024.
At June 30, 2025, we had credit availability of $320.4 million at the Federal Reserve discount window to the extent of collateral pledged. At June 30, 2025, we had pledged our held-to-maturity debt securities with an amortized cost of $53.1 million, and qualifying loans with an unpaid principal balance of $353.1 million as collateral through the BIC program. The Company also pledged available-for-sale debt securities with an amortized cost of $2.9 million as collateral for secured public deposits and for other purposes as required by law or contract provisions. We had no discount window borrowings at June 30, 2025 and December 31, 2024.
We have four overnight unsecured credit lines from correspondent banks totaling $90.5 million. The lines are subject to annual review. There were no outstanding borrowings under these lines at June 30, 2025 and December 31, 2024. Total available borrowing capacity was $1.09 billion at June 30, 2025. Additionally, we had
unpledged liquid securities at fair value of approximately $169.9 million and cash and cash equivalents of $430.1 million at June 30, 2025.
California BanCorp
The primary sources of liquidity of the Company, on a stand-alone holding company basis, are derived from dividends from the Bank, borrowings, and its ability to issue debt and raise capital. The Company's primary uses of liquidity are operating expenses and payments of interest and principal on borrowings. At June 30, 2025 and December 31, 2024, the cash and due from banks was $15.0 million and $4.1 million, respectively.
On May 28, 2020, we issued $18 million of 5.50% Fixed-to-Floating Rate Subordinated Notes Due 2030 (the "Notes"). The Notes were scheduled to mature on March 25, 2030 and accrued interest at a fixed rate of 5.50% through the fixed rate period to March 26, 2025, after which interest accrued at a floating rate of 90-day SOFR plus 3.50% until maturity, unless redeemed early, at our option, after the end of the fixed rate period. Issuance costs of $475 thousand were incurred and were being amortized over the first 5-year fixed term of the Notes; unamortized issuance costs at June 30, 2025 and December 31, 2024, were zero and $40 thousand, respectively. The net unamortized issuance costs was netted against the balance and recorded in the borrowings in the consolidated balance sheets. The amortization expenses were recorded in interest expense on the consolidated statements of operations. During the second quarter of 2025, the Company redeemed all $18 million of the Notes at par value.
In connection with the Merger, the Company assumed $20 million in subordinated debt, with a fixed interest rate of 5.00% and a stated maturity of September 30, 2030. Beginning September 30, 2025, the interest rate changes to a quarterly variable rate equal to the then current 90-day SOFR plus 4.88%, until maturity, unless redeemed early, at the Company's option, after the end of the fixed-rate period. The subordinated debt was initially recognized with a fair value discount of $794 thousand. At June 30, 2025 and December 31, 2024, the net unamortized fair value discount was $170 thousand and $509 thousand, respectively. The net unamortized fair value discount is netted against the balance and recorded in borrowings in the consolidated balance sheets. The amortization of the fair value discount is recorded in interest expense in the consolidated statements of operations. At June 30, 2025, the Company was in compliance with all covenants and terms of these notes.
The Company also assumed in the Merger an additional $35 million in subordinated debt, with a fixed interest rate of 3.50% and a stated maturity of September 1, 2031. Beginning August 17, 2026, the interest rate changes to a quarterly variable rate equal to the then current 90-day SOFR plus 2.86%, until maturity, unless redeemed early, at the Company's option, after the end of the fixed-rate period. The subordinated debt was initially recognized with a fair value discount of $3.4 million. At June 30, 2025 and December 31, 2024, the net unamortized fair value discount was $1.9 million and $2.7 million, respectively. The net unamortized fair value discount is netted against the balance and recorded in borrowings in the consolidated balance sheets. The amortization of the fair value discount is recorded in interest expense in the consolidated statements of operations. At June 30, 2025, the Company was in compliance with all covenants and terms of these notes.
At June 30, 2025, consolidated cash and cash equivalents totaled $430.1 million, an increase of $42.0 million from $388.2 million at December 31, 2024. The increase in cash and cash equivalents is the result of $20.4 million in net cash provided by operating cash flows, $127.1 million net cash provided by investing cash flows, partially offset by $105.6 million of net cash flows used in financing cash flows.
Our operating cash flows are comprised of net income, adjusted for certain non-cash transactions, including but not limited to, depreciation and amortization, provision for credit losses, loans originated for sale and related gains and proceeds from sales, stock-based compensation, and amortization of net deferred loan costs and premiums. Net cash flows from operating cash flows were $20.4 million for the six months ended June 30, 2025, compared to $8.4 million for the same 2024 period. The $12.0 million increase was primarily due to a
higher net income generated during the six months ended June 30, 2025, $7.0 million increase in deferred income taxes, a $1.8 million increase in other intangible amortization resulting from the Merger, and a $1.1 million increase in stock-based compensation, partially offset by a $10.7 million decrease in accretion of net discount and deferred loan fees, a $208 thousand decrease in net cash provided by sales of loans held for sale, net of originations, a $3.9 million decrease in loss on sale of OREO, a $1.3 million decrease in in other items, net, and a $7.0 million increase in reversal of credit losses.
Our investing cash flows are primarily comprised of cash inflows and outflows from our debt securities and loan portfolios, net cash acquired in business combinations, as applicable, and to a lesser extent, purchases of stock investments, purchases and proceeds from bank-owned life insurance, and capital expenditures. Net cash provided by investing activities was $127.1 million for the year ended June 30, 2025, compared to $77.2 million for the same 2024 period. The $49.9 million increase in cash provided by investing activities was primarily due to an increase in net loan repayments and proceeds from the sale of loans held for investment of $100.2 million and an increase in proceeds from debt securities maturities and paydowns of $18.4 million, partially offset by a decrease in debt securities, restricted stocks and other equity purchases of $63.4 million and a decrease in proceeds from sales of OREO of $6.9 million.
Our financing cash flows are primarily comprised of inflows and outflows of deposits, borrowing activity, proceeds from the issuance of common shares, and to a lesser extent, repurchases of common shares and cash flows from share-based compensation arrangements. Net cash used in financing activities was $105.6 million for the six months ended June 30, 2025, compared to $67.6 million for the same 2024 period. The $37.9 million decrease in financing cash flows was primarily due to a $78.7 million net decrease in deposit cash flows and $18.0 million related to the redemption of subordinated notes at par value during the second quarter of 2025, partially offset by a $60.0 million decrease in net repayment activity on overnight FHLB advances.
We believe that our liquidity sources are stable and are adequate to meet our day-to-day cash flow requirements as of June 30, 2025.
Commitments and Contractual Obligations
The following table presents information regarding our outstanding commitments and contractual obligations as of June 30, 2025:
(Dollars in thousands) One Year or Less Over One Year to Three Years Over Three Years to
Five Years 		More than Five Years Total
Commitments to extend credit $ 602,420 $ 204,026 $ 25,710 $ 59,365 $ 891,521
Letters of credit issued to customers 22,656 771 738 - 24,165
Total commitments $ 625,076 $ 204,797 $ 26,448 $ 59,365 $ 915,686
Subordinated notes(1)
- - - 55,000 55,000
Certificates of deposit 163,251 872 125 - 164,248
Lease obligations 4,222 7,081 3,838 1,574 16,715
Total contractual obligations $ 167,473 $ 7,953 $ 3,963 $ 56,574 $ 235,963
(1)Amounts exclude net unamortized issuance costs and fair value adjustments.
At June 30, 2025 and December 31, 2024, we also had unfunded commitments of $7.8 million and $5.9 million, respectively, for investments in other equity investments.
Capital Resources
Maintaining adequate capital is always an important objective of the Company. Abundant and high quality capital helps weather economic downturns and market volatility, protect depositors' funds, and support growth, such as expanding the operations or making acquisitions. Capital is also a source of funds for loan demand and enables the Company to effectively manage its assets and liabilities. We are authorized to issue 50,000,000 shares of common stock of which 32,463,311 have been issued as of June 30, 2025. We are also authorized to issue 50,000,000 shares of preferred stock, of which none have been issued as of June 30, 2025.
The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the holding company and the Bank must meet specific capital guidelines that involve quantitative measures of their respective assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. These capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. The holding company and Bank also elected to exclude the effects of credit loss accounting under CECL from common equity Tier 1 capital ratio for a three-year transitional period.
A holding company and bank considered to be "adequately capitalized" is required to maintain a minimum total capital ratio of 8.0%, a minimum Tier 1 capital ratio of 6.0%, a minimum common equity Tier 1 capital ratio of 4.5%, and a minimum leverage ratio of 4.0%. Banks considered to be "well capitalized" must maintain a minimum total capital ratio of 10.0%, a minimum Tier 1 capital ratio of 8.0%, a minimum common equity Tier 1 capital ratio of 6.5%, and a minimum leverage ratio of 5.0%.
Basel III, the comprehensive regulatory capital rules for U.S. banking organizations, requires all banking organizations to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively comprised of common equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not to the leverage ratio. Effective January 1, 2019, the capital conservation buffer increased by 0.625% to its fully phased-in 2.5%, such that the common equity Tier 1, Tier 1 and total capital ratio minimums inclusive of the capital conservation buffers were 7.0%, 8.5%, and 10.5% at June 30, 2024. At June 30, 2025, the Company and the Bank were in compliance with the capital conservation buffer requirements. To be categorized as well capitalized, the Company and the Bank must maintain minimum ratios as set forth in the table below.
As of June 30, 2025, the Company's and the Bank's regulatory capital ratios exceeded the regulatory capital requirements to be considered to be "well capitalized" under the regulatory framework for prompt corrective action ("PCA"). Management believes, as of June 30, 2025 and December 31, 2024, that the Company and the Bank met all capital adequacy requirements to which each is subject.
To be categorized as well-capitalized, the Company and the Bank must maintain minimum ratios as set forth in the table below. The following table also sets forth the Bank's actual capital amounts and ratios:
Amount of Capital Required
To be To be Well-
Adequately Capitalized under
Actual Capitalized PCA Provisions
(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
As of June 30, 2025:
California BanCorp:
Total Capital (to Risk-Weighted Assets) $ 511,692 14.75 % $ 277,610 8.0 %
N/A
N/A
Tier 1 Capital (to Risk-Weighted Assets) 421,351 12.14 % 208,207 6.0 % N/A N/A
CET1 Capital (to Risk-Weighted Assets) 421,351 12.14 % 156,155 4.5 % N/A N/A
Amount of Capital Required
To be To be Well-
Adequately Capitalized under
Actual Capitalized PCA Provisions
(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
Tier 1 Capital (to Average Assets) 421,351 11.14 % 151,325 4.0 % N/A N/A
California Bank of Commerce, N.A.:
Total Capital (to Risk-Weighted Assets) $ 496,111 14.30 % $ 277,472 8.0 % $ 346,840 10.0 %
Tier 1 Capital (to Risk-Weighted Assets) 458,653 13.22 % 208,104 6.0 % 277,472 8.0 %
CET1 Capital (to Risk-Weighted Assets) 458,653 13.22 % 156,078 4.5 % 225,446 6.5 %
Tier 1 Capital (to Average Assets) 458,653 12.13 % 151,245 4.0 % 189,056 5.0 %
As of December 31, 2024:
California BanCorp:
Total Capital (to Risk-Weighted Assets) $ 496,912 13.67 % $ 290,897 8.0 % N/A N/A
Tier 1 Capital (to Risk-Weighted Assets) 385,354 10.60 % 218,173 6.0 % N/A N/A
CET1 Capital (to Risk-Weighted Assets) 385,354 10.60 % 163,630 4.5 % N/A N/A
Tier 1 Capital (to Average Assets) 385,354 9.53 % 161,710 4.0 % N/A N/A
California Bank of Commerce, N.A.:
Total Capital (to Risk-Weighted Assets) $ 492,433 13.55 % $ 290,753 8.0 % $ 363,441 10.0 %
Tier 1 Capital (to Risk-Weighted Assets) 450,600 12.40 % 218,065 6.0 % 290,753 8.0 %
CET1 Capital (to Risk-Weighted Assets) 450,600 12.40 % 163,548 4.5 % 236,237 6.5 %
Tier 1 Capital (to Average Assets) 450,600 11.15 % 161,689 4.0 % 202,111 5.0 %
Dividend Restrictions
The primary source of funds for the Company is dividends from the Bank. Under federal law, the Bank may not declare a dividend in excess of its undivided profits and, absent the approval of the OCC, the Bank's primary banking regulator, if the total amount of dividends declared by the Bank in any calendar year exceeds the total of the Bank's retained net income of that current period, year to date, combined with its retained net income for the preceding two years. The Bank also is prohibited from declaring or paying any dividend if, after making the dividend, the Bank would be considered "undercapitalized" (as defined by reference to other OCC regulations). Federal bank regulatory agencies have authority to prohibit banking institutions from paying dividends if those agencies determine that, based on the financial condition of the bank, such payment will constitute an unsafe or unsound practice.
The Bank paid $30.0 million in dividends to the Company during the three and six months ended June 30, 2025. The Bank did not pay dividends to the Company during the three and six months ended June 30, 2024.
The Federal Reserve limits the amount of dividends that bank holding companies may pay on common stock to income available over the past year, and only if prospective earnings retention is consistent with the organization's expected future needs and financial condition. It is also the Federal Reserve's policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of strength to its banking subsidiaries. Additionally, in consideration of the current financial and economic environment, the Federal Reserve has indicated that bank holding companies should carefully review their dividend policies.
During the three and six months ended June 30, 2025 and 2024, there were no dividends declared to shareholders by the Company.
California Bancorp published this content on August 08, 2025, and is solely responsible for the information contained herein. Distributed via SEC EDGAR on August 08, 2025 at 20:18 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]