Nature of Operations

3 Months Ended

Mar. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

1. NATURE OF OPERATIONS

Organization

California BanCorp (the “Company”), a California corporation headquartered in Oakland, California, is the bank holding company for its wholly-owned subsidiary California Bank of Commerce (the “Bank”), which offers a broad range of commercial banking services to closely held businesses and professionals located throughout Northern California. The Bank has a full-service branch located in Contra Costa County and 4 loan production offices located in Alameda County, Contra Costa County, Sacramento County, and Santa Clara County.

Proposed Merger with Southern California Bancorp

On January 30, 2024, the Company entered into a merger agreement with Southern California Bancorp (“SCB”), the bank holding company for Bank of Southern California, N.A. (“BSC”). The merger agreement provides that, subject to the receipt of required regulatory and shareholders approvals and the satisfaction of other conditions, the Company will merge with and into SCB and the Bank will merge with and into BSC. As a result of the merger, each outstanding share of California BanCorp common stock will convert into the right to receive 1.590 shares of SCB common stock. Immediately after the merger, the Company expects that the Company’s shareholders will own approximately 43% of the combined company and SCB’s shareholders will own approximately 57% of the combined company.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form

10-Q

and, therefore, do not include all footnotes as would be necessary for a fair presentation of financial position, results of operations and comprehensive income, changes in shareholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, these interim unaudited consolidated financial statements reflect all adjustments (consisting solely of normal recurring adjustments and accruals) which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and comprehensive income, changes in shareholders’ equity and cash flows for the interim periods presented. These unaudited consolidated financial statements have been prepared on a basis consistent with, and should be read in conjunction with, the audited consolidated financial statements as of and for the year ended December 31, 2023, and the notes thereto, included in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”), under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results of operations that may be expected for any other interim period or for the year ending December 31, 2024.

The Company’s accounting and reporting policies conform to GAAP and to general practices within the banking industry.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods presented. Actual results may differ from those estimates used in the Consolidated Financial Statements and related notes. Material estimates that are particularly susceptible to significant changes in the near term include estimates relating to: the determination of the allowance for credit losses; certain assets and liabilities carried at fair value; and accounting for income taxes.

Reclassifications

Certain prior balances in the unaudited consolidated financial statements may have been reclassified to conform to current year presentation. These reclassifications had no effect on prior year net income or shareholders’ equity.

Subsequent Events

Management has reviewed all events through the date the unaudited consolidated financial statements were filed with the SEC and concluded that no event required any adjustment to the balances presented.

Goodwill

Goodwill impairment exists when a reporting unit’s carrying value exceeds its fair value, which is determined through a qualitative assessment whether it is more likely than not that the fair value of equity of the reporting unit exceeds the carrying value.

The Company completed an interim impairment analysis of goodwill as of March 31, 2024 and determined there was no impairment.

Earnings Per Share (“EPS”)

Basic earnings per common share represents the amount of earnings for the period available to each share of common stock outstanding during the reporting period. Basic EPS is computed based upon net income divided by the weighted average number of common shares outstanding during the period. In determining the weighted average number of shares outstanding, vested restricted stock units are included. Diluted EPS represents the amount of earnings for the period available to each share of common stock outstanding including common stock that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during each reporting period. Diluted EPS is computed based upon net income divided by the weighted average number of common shares outstanding during each period, adjusted for the effect of dilutive potential common shares, such as restricted stock awards and units, calculated using the treasury stock method.


	Three months ended
	March 31,
(Dollars in thousands, except per share data)	2024		2023
Net income available to common shareholders	$	3,817	$	5,451
Weighted average basic common shares outstanding		8,413,735		8,339,080
Add: dilutive potential common shares		152,977		152,987

Weighted average diluted common shares outstanding		8,566,712		8,492,067
Basic earnings per share	$	0.45	$	0.65

Diluted earnings per share	$	0.45	$	0.64

Recent Accounting Pronouncements

In December 2023, the FASB issued

ASU No.

2023-09

Income Taxes (Topic 740): Improvements to Income Tax Disclosures

. The amendments require disaggregated information about the effective tax rate reconciliation and additional disclosures on reconciling items and taxes paid that meet a quantitative threshold. The amendments are effective for annual reporting periods beginning after December 15, 2024, and may be adopted either prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of the amendments on our financial statement disclosures upon adoption.