10-Q 1 d545543d10q.htm 10-Q 10-Q
falseQ3--12-310001752036YesYesCA 0001752036 2022-12-31 0001752036 2023-09-30 0001752036 2023-01-01 2023-03-31 0001752036 2023-04-01 2023-06-30 0001752036 2023-07-01 2023-09-30 0001752036 2022-07-01 2022-09-30 0001752036 2022-04-01 2022-06-30 0001752036 2022-01-01 2022-03-31 0001752036 2023-01-01 2023-09-30 0001752036 2022-01-01 2022-09-30 0001752036 2023-11-01 0001752036 2022-09-30 0001752036 2023-01-01 2023-01-01 0001752036 2021-12-31 0001752036 2023-06-30 0001752036 2022-06-30 0001752036 2023-03-31 0001752036 2022-03-31 0001752036 calb:SmallBusinessAdministrationLoansMember 2023-09-30 0001752036 calb:OtherLoansMember 2023-09-30 0001752036 calb:OtherRealEstateLoanMember 2023-09-30 0001752036 calb:RealEstateConstructionAndLandMember 2023-09-30 0001752036 calb:CommercialAndIndustrialMember 2023-09-30 0001752036 us-gaap:MortgageBackedSecuritiesMember 2023-09-30 0001752036 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2023-09-30 0001752036 us-gaap:AllOtherCorporateBondsMember 2023-09-30 0001752036 us-gaap:SecuritiesInvestmentMember 2023-09-30 0001752036 us-gaap:LoansReceivableMember calb:SmallBusinessAdministrationLoansMember 2023-09-30 0001752036 us-gaap:LoansReceivableMember 2023-09-30 0001752036 calb:CommercialAndIndustrialMember us-gaap:LoansReceivableMember 2023-09-30 0001752036 us-gaap:LoansReceivableMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2023-09-30 0001752036 us-gaap:LoansReceivableMember calb:OtherLoansMember 2023-09-30 0001752036 calb:FinancingReceivables30DaysPastDueMember calb:SmallBusinessAdministrationLoansMember us-gaap:LoansReceivableMember 2023-09-30 0001752036 calb:RealEstateConstructionAndLandMember us-gaap:LoansReceivableMember 2023-09-30 0001752036 us-gaap:RealEstateOtherMember us-gaap:LoansReceivableMember 2023-09-30 0001752036 calb:FinancingReceivables30DaysPastDueMember us-gaap:RealEstateOtherMember us-gaap:LoansReceivableMember 2023-09-30 0001752036 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember calb:CommercialAndIndustrialMember us-gaap:LoansReceivableMember 2023-09-30 0001752036 us-gaap:LoansReceivableMember calb:FinancingReceivables60DaysPastDueMember 2023-09-30 0001752036 calb:FinancingReceivables60DaysPastDueMember calb:CommercialAndIndustrialMember us-gaap:LoansReceivableMember 2023-09-30 0001752036 us-gaap:LoansReceivableMember us-gaap:CommercialAndIndustrialSectorMember 2023-09-30 0001752036 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2023-09-30 0001752036 us-gaap:FairValueInputsLevel1Member 2023-09-30 0001752036 us-gaap:FairValueInputsLevel3Member 2023-09-30 0001752036 us-gaap:FairValueInputsLevel2Member 2023-09-30 0001752036 us-gaap:AssetBackedSecuritiesMember 2023-09-30 0001752036 us-gaap:FairValueInputsLevel2Member us-gaap:AssetBackedSecuritiesMember 2023-09-30 0001752036 us-gaap:FairValueInputsLevel2Member us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2023-09-30 0001752036 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2023-09-30 0001752036 us-gaap:CarryingReportedAmountFairValueDisclosureMember calb:SmallBusinessAdministrationLoansMember 2023-09-30 0001752036 us-gaap:FairValueInputsLevel3Member calb:SmallBusinessAdministrationLoansMember 2023-09-30 0001752036 calb:CommercialMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2023-09-30 0001752036 calb:CommercialMember us-gaap:FairValueInputsLevel3Member 2023-09-30 0001752036 us-gaap:MortgageBackedSecuritiesMember 2023-09-30 0001752036 calb:FederalReserveBankOfSanFranciscoMember us-gaap:SecuredDebtMember 2023-09-30 0001752036 us-gaap:RevolvingCreditFacilityMember 2023-09-30 0001752036 calb:CorrespondentBanksMember 2023-09-30 0001752036 us-gaap:JuniorSubordinatedDebtMember calb:SofrMember 2023-09-30 0001752036 calb:AdditionalJuniorSubordinatedDebtMember calb:SofrMember 2023-09-30 0001752036 calb:InterestRateGreaterThanOrEqualToFivePercentMember 2023-09-30 0001752036 calb:InterestRateGreaterThanFourPercentAndLessThanFivePercentMember 2023-09-30 0001752036 calb:InterestRateLessThanOrEqualToFourPercentMember 2023-09-30 0001752036 calb:InterestRateGreaterThanFourPercentAndLessThanFivePercentMember srt:MinimumMember 2023-09-30 0001752036 calb:InterestRateGreaterThanFourPercentAndLessThanFivePercentMember srt:MaximumMember 2023-09-30 0001752036 us-gaap:CorporateBondSecuritiesMember 2023-09-30 0001752036 us-gaap:SpecialMentionMember calb:CommercialAndIndustrialMember 2023-09-30 0001752036 us-gaap:PassMember us-gaap:RealEstateOtherMember 2023-09-30 0001752036 us-gaap:PassMember calb:RealEstateConstructionAndLandMember 2023-09-30 0001752036 us-gaap:PassMember 2023-09-30 0001752036 us-gaap:PassMember calb:CommercialAndIndustrialMember 2023-09-30 0001752036 us-gaap:RealEstateOtherMember 2023-09-30 0001752036 us-gaap:PassMember calb:OtherLoansMember 2023-09-30 0001752036 us-gaap:SpecialMentionMember 2023-09-30 0001752036 calb:SmallBusinessAdministrationLoanMember 2023-09-30 0001752036 us-gaap:SpecialMentionMember us-gaap:RealEstateOtherMember 2023-09-30 0001752036 us-gaap:PassMember calb:SmallBusinessAdministrationLoanMember 2023-09-30 0001752036 us-gaap:SpecialMentionMember calb:OtherLoansMember 2023-09-30 0001752036 calb:CurrentPeriodGrossChargeoffsMember calb:CommercialAndIndustrialMember 2023-09-30 0001752036 us-gaap:SubstandardMember calb:CommercialAndIndustrialMember 2023-09-30 0001752036 calb:CurrentPeriodGrossChargeoffsMember 2023-09-30 0001752036 us-gaap:SubstandardMember 2023-09-30 0001752036 us-gaap:SpecialMentionMember calb:SmallBusinessAdministrationLoanMember 2023-09-30 0001752036 us-gaap:SubstandardMember calb:SmallBusinessAdministrationLoanMember 2023-09-30 0001752036 calb:RealEstateConstructionAndLandMember us-gaap:SpecialMentionMember 2023-09-30 0001752036 us-gaap:SubstandardMember calb:RealEstateConstructionAndLandMember 2023-09-30 0001752036 us-gaap:SubstandardMember us-gaap:RealEstateOtherMember 2023-09-30 0001752036 calb:AaaMember 2023-09-30 0001752036 calb:NotRatedMember 2023-09-30 0001752036 calb:Aa1aa2aa3Member 2023-09-30 0001752036 calb:A1a2Member 2023-09-30 0001752036 calb:BbbMember 2023-09-30 0001752036 us-gaap:ResidentialRealEstateMember calb:SmallBusinessAdministrationLoansMember us-gaap:LoansReceivableMember 2023-09-30 0001752036 calb:BusinessAssetsMember calb:SmallBusinessAdministrationLoansMember us-gaap:LoansReceivableMember 2023-09-30 0001752036 us-gaap:ResidentialRealEstateMember us-gaap:LoansReceivableMember 2023-09-30 0001752036 calb:BusinessAssetsMember us-gaap:LoansReceivableMember 2023-09-30 0001752036 us-gaap:LoansReceivableMember calb:CommercialAndIndustrialMember calb:BusinessAssetsMember 2023-09-30 0001752036 us-gaap:LoansReceivableMember calb:CommercialAndIndustrialMember us-gaap:ResidentialRealEstateMember 2023-09-30 0001752036 calb:RealEstateConstructionAndLandMember 2022-12-31 0001752036 calb:SmallBusinessAdministrationLoansMember 2022-12-31 0001752036 calb:OtherLoansMember 2022-12-31 0001752036 calb:OtherRealEstateLoanMember 2022-12-31 0001752036 calb:CommercialAndIndustrialMember 2022-12-31 0001752036 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2022-12-31 0001752036 us-gaap:MortgageBackedSecuritiesMember 2022-12-31 0001752036 us-gaap:AllOtherCorporateBondsMember 2022-12-31 0001752036 us-gaap:SecuritiesInvestmentMember 2022-12-31 0001752036 us-gaap:LoansReceivableMember 2022-12-31 0001752036 calb:SmallBusinessAdministrationLoansMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 calb:CommercialAndIndustrialMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 us-gaap:RealEstateOtherMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 calb:RealEstateConstructionAndLandMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 calb:OtherLoansMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 calb:SmallBusinessAdministrationLoansMember us-gaap:SubstandardMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 us-gaap:SubstandardMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 us-gaap:LoansReceivableMember us-gaap:SubstandardMember calb:RealEstateConstructionAndLandMember 2022-12-31 0001752036 calb:CommercialAndIndustrialMember us-gaap:SpecialMentionMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 us-gaap:PassMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 us-gaap:LoansReceivableMember us-gaap:SpecialMentionMember us-gaap:RealEstateOtherMember 2022-12-31 0001752036 calb:SmallBusinessAdministrationLoansMember us-gaap:SpecialMentionMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 us-gaap:LoansReceivableMember us-gaap:SpecialMentionMember 2022-12-31 0001752036 calb:CommercialAndIndustrialMember us-gaap:SubstandardMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 us-gaap:RealEstateOtherMember us-gaap:SubstandardMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 us-gaap:LoansReceivableMember us-gaap:PassMember calb:RealEstateConstructionAndLandMember 2022-12-31 0001752036 calb:SmallBusinessAdministrationLoansMember us-gaap:PassMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 us-gaap:LoansReceivableMember us-gaap:PassMember calb:OtherLoansMember 2022-12-31 0001752036 us-gaap:LoansReceivableMember us-gaap:PassMember us-gaap:RealEstateOtherMember 2022-12-31 0001752036 calb:CommercialAndIndustrialMember us-gaap:PassMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 calb:FinancingReceivables30DaysPastDueMember us-gaap:RealEstateOtherMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 calb:FinancingReceivables30DaysPastDueMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 us-gaap:LoansReceivableMember us-gaap:CommercialAndIndustrialSectorMember 2022-12-31 0001752036 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2022-12-31 0001752036 us-gaap:FairValueInputsLevel1Member 2022-12-31 0001752036 us-gaap:FairValueInputsLevel3Member 2022-12-31 0001752036 us-gaap:FairValueInputsLevel2Member 2022-12-31 0001752036 us-gaap:AllOtherCorporateBondsMember 2022-12-31 0001752036 us-gaap:FairValueInputsLevel2Member us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2022-12-31 0001752036 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2022-12-31 0001752036 us-gaap:FairValueInputsLevel2Member us-gaap:AssetBackedSecuritiesMember 2022-12-31 0001752036 us-gaap:AssetBackedSecuritiesMember 2022-12-31 0001752036 us-gaap:FairValueInputsLevel2Member us-gaap:AllOtherCorporateBondsMember 2022-12-31 0001752036 us-gaap:AllOtherCorporateBondsMember us-gaap:FairValueInputsLevel3Member 2022-12-31 0001752036 calb:CommercialMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2022-12-31 0001752036 calb:SmallBusinessAdministrationLoansMember us-gaap:FairValueInputsLevel3Member 2022-12-31 0001752036 calb:CommercialMember us-gaap:FairValueInputsLevel3Member 2022-12-31 0001752036 calb:SmallBusinessAdministrationLoansMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2022-12-31 0001752036 us-gaap:MortgageBackedSecuritiesMember 2022-12-31 0001752036 us-gaap:CorporateBondSecuritiesMember 2022-12-31 0001752036 calb:FederalReserveBankOfSanFranciscoMember us-gaap:SecuredDebtMember 2022-12-31 0001752036 us-gaap:RevolvingCreditFacilityMember 2022-12-31 0001752036 calb:CorrespondentBanksMember 2022-12-31 0001752036 calb:AdditionalJuniorSubordinatedDebtMember calb:SofrMember 2022-12-31 0001752036 us-gaap:JuniorSubordinatedDebtMember calb:SofrMember 2022-12-31 0001752036 calb:BusinessAssetsMember calb:CommercialAndIndustrialMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 us-gaap:ResidentialRealEstateMember calb:SmallBusinessAdministrationLoansMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 calb:BusinessAssetsMember calb:SmallBusinessAdministrationLoansMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 us-gaap:ResidentialRealEstateMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 calb:BusinessAssetsMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 us-gaap:ResidentialRealEstateMember calb:CommercialAndIndustrialMember us-gaap:LoansReceivableMember 2022-12-31 0001752036 calb:CommercialAndIndustrialMember 2022-01-01 2022-09-30 0001752036 us-gaap:RealEstateOtherMember 2022-01-01 2022-09-30 0001752036 calb:RealEstateConstructionAndLandMember 2022-01-01 2022-09-30 0001752036 calb:SmallBusinessAdministrationLoansMember 2022-01-01 2022-09-30 0001752036 calb:OtherLoansMember 2022-01-01 2022-09-30 0001752036 us-gaap:CommonStockMember 2022-07-01 2022-09-30 0001752036 us-gaap:RetainedEarningsMember 2022-07-01 2022-09-30 0001752036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-07-01 2022-09-30 0001752036 calb:OtherLoansMember 2022-07-01 2022-09-30 0001752036 calb:SmallBusinessAdministrationLoansMember 2022-07-01 2022-09-30 0001752036 calb:RealEstateConstructionAndLandMember 2022-07-01 2022-09-30 0001752036 us-gaap:RealEstateOtherMember 2022-07-01 2022-09-30 0001752036 calb:CommercialAndIndustrialMember 2022-07-01 2022-09-30 0001752036 calb:OtherLoansMember 2023-01-01 2023-09-30 0001752036 calb:SmallBusinessAdministrationLoansMember 2023-01-01 2023-09-30 0001752036 calb:RealEstateConstructionAndLandMember 2023-01-01 2023-09-30 0001752036 us-gaap:RealEstateOtherMember 2023-01-01 2023-09-30 0001752036 calb:CommercialAndIndustrialMember 2023-01-01 2023-09-30 0001752036 us-gaap:LoansReceivableMember us-gaap:CommercialAndIndustrialSectorMember 2023-01-01 2023-09-30 0001752036 us-gaap:LoansReceivableMember 2023-01-01 2023-09-30 0001752036 us-gaap:LoansReceivableMember calb:SmallBusinessAdministrationLoansMember 2023-01-01 2023-09-30 0001752036 us-gaap:RevolvingCreditFacilityMember calb:OneYearPrimeRateMember 2023-01-01 2023-09-30 0001752036 calb:AdditionalJuniorSubordinatedDebtMember calb:SofrMember 2023-01-01 2023-09-30 0001752036 calb:SofrMember us-gaap:JuniorSubordinatedDebtMember 2023-01-01 2023-09-30 0001752036 us-gaap:JuniorSubordinatedDebtMember 2023-01-01 2023-09-30 0001752036 calb:InterestRateGreaterThanOrEqualToFivePercentMember 2023-01-01 2023-09-30 0001752036 calb:InterestRateLessThanOrEqualToFourPercentMember 2023-01-01 2023-09-30 0001752036 calb:InterestRateGreaterThanFourPercentAndLessThanFivePercentMember 2023-01-01 2023-09-30 0001752036 srt:MaximumMember calb:SmallBusinessAdministrationLoansMember 2023-01-01 2023-09-30 0001752036 calb:SmallBusinessAdministrationLoansMember srt:MinimumMember 2023-01-01 2023-09-30 0001752036 us-gaap:CommonStockMember 2023-07-01 2023-09-30 0001752036 us-gaap:RetainedEarningsMember 2023-07-01 2023-09-30 0001752036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-07-01 2023-09-30 0001752036 us-gaap:RealEstateOtherMember 2023-07-01 2023-09-30 0001752036 calb:RealEstateConstructionAndLandMember 2023-07-01 2023-09-30 0001752036 calb:SmallBusinessAdministrationLoansMember 2023-07-01 2023-09-30 0001752036 calb:OtherLoansMember 2023-07-01 2023-09-30 0001752036 calb:CommercialAndIndustrialMember 2023-07-01 2023-09-30 0001752036 us-gaap:RetainedEarningsMember 2023-04-01 2023-06-30 0001752036 us-gaap:CommonStockMember 2023-04-01 2023-06-30 0001752036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-04-01 2023-06-30 0001752036 us-gaap:RetainedEarningsMember 2023-01-01 2023-03-31 0001752036 us-gaap:CommonStockMember 2023-01-01 2023-03-31 0001752036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-01-01 2023-03-31 0001752036 us-gaap:CommonStockMember 2022-04-01 2022-06-30 0001752036 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30 0001752036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-04-01 2022-06-30 0001752036 us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001752036 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001752036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-01-01 2022-03-31 0001752036 us-gaap:UnfundedLoanCommitmentMember 2023-01-01 2023-01-01 0001752036 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2023-01-01 0001752036 us-gaap:LoansReceivableMember calb:SmallBusinessAdministrationLoansMember 2022-01-01 2022-12-31 0001752036 us-gaap:LoansReceivableMember 2022-01-01 2022-12-31 0001752036 us-gaap:LoansReceivableMember us-gaap:CommercialAndIndustrialSectorMember 2022-01-01 2022-12-31 0001752036 us-gaap:JuniorSubordinatedDebtMember calb:SofrMember 2020-09-30 0001752036 calb:AdditionalJuniorSubordinatedDebtMember calb:SofrMember 2021-04-17 0001752036 us-gaap:JuniorSubordinatedDebtMember us-gaap:PrimeRateMember 2016-04-15 2016-04-15 0001752036 calb:OtherLoansMember 2021-12-31 0001752036 calb:CommercialAndIndustrialMember 2021-12-31 0001752036 us-gaap:RealEstateOtherMember 2021-12-31 0001752036 calb:RealEstateConstructionAndLandMember 2021-12-31 0001752036 calb:SmallBusinessAdministrationLoansMember 2021-12-31 0001752036 calb:OtherLoansMember 2022-09-30 0001752036 calb:CommercialAndIndustrialMember 2022-09-30 0001752036 us-gaap:RealEstateOtherMember 2022-09-30 0001752036 calb:RealEstateConstructionAndLandMember 2022-09-30 0001752036 calb:SmallBusinessAdministrationLoansMember 2022-09-30 0001752036 calb:OtherLoansMember 2022-06-30 0001752036 calb:SmallBusinessAdministrationLoansMember 2022-06-30 0001752036 calb:RealEstateConstructionAndLandMember 2022-06-30 0001752036 us-gaap:RealEstateOtherMember 2022-06-30 0001752036 calb:CommercialAndIndustrialMember 2022-06-30 0001752036 us-gaap:CommonStockMember 2022-09-30 0001752036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-09-30 0001752036 us-gaap:RetainedEarningsMember 2022-09-30 0001752036 us-gaap:RealEstateOtherMember 2022-12-31 0001752036 calb:RealEstateConstructionAndLandMember 2023-06-30 0001752036 calb:SmallBusinessAdministrationLoansMember 2023-06-30 0001752036 calb:OtherLoansMember 2023-06-30 0001752036 us-gaap:RealEstateOtherMember 2023-06-30 0001752036 calb:CommercialAndIndustrialMember 2023-06-30 0001752036 us-gaap:CommonStockMember 2023-09-30 0001752036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-09-30 0001752036 us-gaap:RetainedEarningsMember 2023-09-30 0001752036 us-gaap:CommonStockMember 2023-06-30 0001752036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-06-30 0001752036 us-gaap:RetainedEarningsMember 2023-06-30 0001752036 us-gaap:CommonStockMember 2022-12-31 0001752036 us-gaap:RetainedEarningsMember 2022-12-31 0001752036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-12-31 0001752036 us-gaap:CommonStockMember 2023-03-31 0001752036 us-gaap:RetainedEarningsMember 2023-03-31 0001752036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-03-31 0001752036 us-gaap:CommonStockMember 2022-06-30 0001752036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-06-30 0001752036 us-gaap:RetainedEarningsMember 2022-06-30 0001752036 us-gaap:CommonStockMember 2021-12-31 0001752036 us-gaap:RetainedEarningsMember 2021-12-31 0001752036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0001752036 us-gaap:CommonStockMember 2022-03-31 0001752036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-03-31 0001752036 us-gaap:RetainedEarningsMember 2022-03-31 iso4217:USD xbrli:shares xbrli:pure utr:Year utr:Month iso4217:USD xbrli:shares calb:Securities
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OR THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number
001-39242
 
 
CALIFORNIA BANCORP
(Exact name of registrant as specified in its charter)
 
 
 
California
 
82-1751097
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
1300 Clay Street, Suite 500
Oakland, California 94612
(Address of principal executive offices)
(510)
457-3737
(Registrant’s telephone number, including area code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Common Stock, No Par Value
 
CALB
 
NASDAQ Global Select Market
(Title of class)
 
(Trading Symbol)
 
(Name of exchange on which registered)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES  ☒            NO  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YES  ☒            NO  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Act).
YES  ☐            NO  
Number of shares outstanding of the registrant’s common stock as of November 1, 2023: 8,394,962
 
 
 


CALIFORNIA BANCORP

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2023

 

          Page  

Part I - Financial Information

  

Item 1.

   Financial Statements      3  

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      29  

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk      45  

Item 4.

   Controls and Procedures      45  

Part II - Other Information

  

Item 1.

   Legal Proceedings      46  

Item 1A.

   Risk Factors      46  

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds      46  

Item 3.

   Defaults Upon Senior Securities      46  

Item 4.

   Mine Safety Disclosures      46  

Item 5.

   Other Information      47  

Item 6.

   Exhibits      47  

Signatures

     48  

 

2


http://fasb.org/us-gaap/2023#InterestReceivableAndOtherAssetshttp://fasb.org/us-gaap/2023#OperatingLeaseLiabilityP0MP0M
PART 1 – FINANCIAL INFORMATION
Item 1. Financial Statements
CALIFORNIA BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
(Dollar amounts in thousands)
 
    
September 30,
   
December 31,
 
    
2023
   
2022
 
ASSETS:
    
Cash and due from banks
   $ 17,128     $ 16,686  
Federal funds sold
     181,854       215,696  
  
 
 
   
 
 
 
Total cash and cash equivalents
     198,982       232,382  
Investment securities:
    
Available for sale, at fair value
     44,227       47,012  
Held to maturity, at amortized cost, net of allowance for credit losses of $81 and $0 at September 30, 2023 and December 31, 2022, respectively
     105,017       108,866  
  
 
 
   
 
 
 
Total investment securities
     149,244       155,878  
Loans, net of allowance for credit losses of $15,921 and $17,005 at September 30, 2023 and December 31, 2022, respectively
     1,558,506       1,578,456  
Premises and equipment, net
     2,432       3,072  
Bank owned life insurance (BOLI)
     25,697       25,127  
Goodwill and other intangible assets
     7,442       7,472  
Accrued interest receivable and other assets
     41,614       39,828  
  
 
 
   
 
 
 
Total assets
   $  1,983,917     $  2,042,215  
  
 
 
   
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY:
    
Deposits
    
Non-interest
bearing
   $ 686,723     $ 811,671  
Interest bearing
     1,020,358       980,069  
  
 
 
   
 
 
 
Total deposits
     1,707,081       1,791,740  
Junior subordinated debt securities
     54,256       54,152  
Accrued interest payable and other liabilities
     32,465       24,069  
  
 
 
   
 
 
 
Total liabilities
     1,793,802       1,869,961  
Commitments and Contingencies (Note 5)
    
Shareholders’ equity
    
Common stock, no par value; 40,000,000 shares authorized; 8,395,483 and 8,332,479 issued and outstanding at September 30, 2023 and December 31, 2022, respectively
     112,656       111,257  
Retained earnings
     78,824       62,297  
Accumulated other comprehensive loss, net of taxes
     (1,365     (1,300
  
 
 
   
 
 
 
Total shareholders’ equity
     190,115       172,254  
  
 
 
   
 
 
 
Total liabilities and shareholders’ equity
   $ 1,983,917     $ 2,042,215  
  
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
3

CALIFORNIA BANCORP
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollar amounts in thousands, except per share data)
 
    
Three Months Ended
    
Nine Months Ended
 
    
September 30,
    
September 30,
 
    
2023
    
2022
    
2023
    
2022
 
Interest income
           
Loans
   $ 23,804      $ 19,084      $ 69,752      $ 50,268  
Federal funds sold
     2,814        867        6,811        1,283  
Investment securities
     1,476        1,217        4,241        3,247  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total interest income
     28,094        21,168        80,804        54,798  
Interest expense
           
Deposits
     8,961        1,672        22,476        3,274  
Borrowings and subordinated debt
     555        1,133        2,348        2,412  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total interest expense
     9,516        2,805        24,824        5,686  
Net interest income
     18,578        18,363        55,980        49,112  
Provision for credit losses
     314        800        1,116        2,675  
  
 
 
    
 
 
    
 
 
    
 
 
 
Net interest income after provision for credit losses
     18,264        17,563        54,864        46,437  
Non-interest
income
           
Service charges and other fees
     1,003        1,237        2,733        3,260  
Gain on the sale of loans
                                   1,393  
Other
     291        247        803        759  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total
non-interest
income
     1,294        1,484        3,536        5,412  
Non-interest
expense
           
Salaries and benefits
     8,238        7,415        23,945        21,654  
Premises and equipment
     1,155        1,275        3,503        3,844  
Professional fees
     411        524        1,332        1,662  
Data processing
     633        744        1,942        1,951  
Other
     1,414        1,259        4,575        3,841  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total
non-interest
expense
     11,851        11,217        35,297        32,952  
Income before provision for income taxes
     7,707        7,830        23,103        18,897  
Provision for income taxes
     2,306        2,308        6,812        5,458  
  
 
 
    
 
 
    
 
 
    
 
 
 
Net income
   $ 5,401      $ 5,522      $ 16,291      $ 13,439  
  
 
 
    
 
 
    
 
 
    
 
 
 
Earnings per common share
           
Basic
   $ 0.64      $ 0.66      $ 1.95      $ 1.62  
  
 
 
    
 
 
    
 
 
    
 
 
 
Diluted
   $ 0.64      $ 0.66      $ 1.93      $ 1.60  
  
 
 
    
 
 
    
 
 
    
 
 
 
Average common shares outstanding
     8,390,138        8,322,529        8,366,584        8,298,269  
  
 
 
    
 
 
    
 
 
    
 
 
 
Average common and equivalent shares outstanding
     8,455,917        8,405,669        8,438,444        8,394,439  
  
 
 
    
 
 
    
 
 
    
 
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
4

CALIFORNIA BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Dollar amounts in thousands)
 
    
Three Months Ended
   
Nine Months Ended
 
    
September 30,
   
September 30,
 
    
2023
   
2022
   
2023
   
2022
 
Net Income
   $  5,401     $  5,522     $  16,291     $  13,439  
Other comprehensive income (loss)
        
Unrealized gains (losses) on securities available for sale, net
     (10     (1,006     2       (1,788
Unrealized losses on securities transferred from available for sale to held to maturity, net
                                (281
Reclassification adjustment for securities transferred from available for sale to held to maturity in prior year, net
                       (61         
Amortization of unrealized losses on securities transferred from available for sale to held to maturity, net
     (3     2       (4     6  
Tax effect
     3       299       (2     615  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total other comprehensive loss
     (10     (705     (65     (1,448
  
 
 
   
 
 
   
 
 
   
 
 
 
Total comprehensive income
   $ 5,391     $ 4,817     $ 16,226     $ 11,991  
  
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
5
CALIFORNIA BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED) - PART I
(Dollars in thousands)
 
     Common Stock     Retained     Accumulated
Other
Comprehensive
Income
    Total
Shareholders’
 
     Shares     Amount     Earnings     (Loss)     Equity  
Balance at December 31, 2022
     8,332,479     $ 111,257     $ 62,297     $ (1,300   $ 172,254  
Adoption of new accounting standard
     —           —         334       —         334  
Stock awards issued and related compensation expense
     34,560       631                         631  
Shares withheld to pay taxes on stock based compensation
     (12,139     (285                       (285
Stock options exercised
     478       6                         6  
Net income
     —         —         5,451                5,451  
Other comprehensive income
     —                           170       170  
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at March 31, 2023
     8,355,378     $ 111,609     $ 68,082     $ (1,130   $ 178,561  
Adoption of new accounting standard
     —         —         (99     —         (99
Stock awards issued and related compensation expense
     32,558       611                         611  
Shares withheld to pay taxes on stock based compensation
     (4,164     (53                       (53
Net income
     —         —         5,440                5,440  
Other comprehensive loss
     —                           (225     (225
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at June 30, 2023
     8,383,772     $ 112,167     $ 73,423     $ (1,355   $ 184,235  
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Stock awards issued and related compensation expense
     14,201       538                         538  
Shares withheld to pay taxes on stock based compensation
     (3,015     (56                       (56
Stock options exercised
     525       7       —         —         7  
Net income
     —         —         5,401                5,401  
Other comprehensive loss
     —                           (10     (10
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2023
     8,395,483     $ 112,656     $ 78,824     $ (1,365   $ 190,115  
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
6

CALIFORNIA BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED) - PART II
(Dollars in thousands)
 
     Common Stock     Retained      Accumulated
Other
Comprehensive
Income
    Total
Shareholders’
 
     Shares     Amount     Earnings      (Loss)     Equity  
Balance at December 31, 2021
     8,264,300     $ 109,473     $ 41,189      $ 92     $ 150,754  
Stock awards issued and related compensation expense
     11,513       494                          494  
Shares withheld to pay taxes on stock based compensation
     (7,459     (173                        (173
Stock options exercised
     4,200       55                          55  
Shares withheld to pay exercise price on stock options
     (1,653     (34     —          —         (34
Net income
     —         —         3,673                 3,673  
Other comprehensive loss
     —                            (198     (198
  
 
 
   
 
 
   
 
 
    
 
 
   
 
 
 
Balance at March 31, 2022
     8,270,901     $ 109,815     $ 44,862      $ (106   $ 154,571  
Stock awards issued and related compensation expense
     43,855       539                          539  
Shares withheld to pay taxes on stock based compensation
     (3,153     (65                        (65
Stock options exercised
     7,350       42                          42  
Shares withheld to pay exercise price on stock options
     (1,792     (42     —          —         (42
Net income
     —         —         4,244                 4,244  
Other comprehensive loss
     —                            (545     (545
  
 
 
   
 
 
   
 
 
    
 
 
   
 
 
 
Balance at June 30, 2022
     8,317,161     $ 110,289     $ 49,106      $ (651   $ 158,744  
Stock awards issued and related compensation expense
     14,314       586                          586  
Shares withheld to pay taxes on stock based compensation
     (3,694     (89                        (89
Net income
     —         —         5,522                 5,522  
Other comprehensive loss
     —                            (705     (705
  
 
 
   
 
 
   
 
 
    
 
 
   
 
 
 
Balance at September 30, 2022
     8,327,781     $ 110,786     $ 54,628      $ (1,356   $ 164,058  
  
 
 
   
 
 
   
 
 
    
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
7

CALIFORNIA BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollar amounts in thousands)
 
    
Nine Months Ended September 30,
 
    
2023
   
2022
 
Cash flows from operating activities:
    
Net income
   $ 16,291     $ 13,439  
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
    
Provision for credit losses
     1,116       2,675  
Provision for deferred taxes
     (206     (1,383
Depreciation
     718       1,168  
Deferred loan fees (costs), net
     728       (182
Stock based compensation, net
     1,386       1,292  
Increase in cash surrender value of life insurance
     (528     (497
Discount on retained portion of sold loans, net
     (27     (27
Gain on sale of loans
              (1,393
Net changes in accrued interest receivable and other assets
     (1,938     1,954  
Net changes in accrued interest payable and other liabilities
     8,450       (1,894
  
 
 
   
 
 
 
Net cash provided by operating activities
     25,990       15,152  
  
 
 
   
 
 
 
Cash flows from investing activities:
    
Purchase of investment securities
              (78,780
Proceeds from principal payments on investment securities
     6,156       21,859  
Proceeds from sale of loans
              37,271  
Net decrease (increase) in loans
     20,164       (247,304
Capital calls on low income tax credit investments
     (273     (438
(Purchase) redemption of Federal Home Loan Bank stock
     (675     455  
Purchase of premises and equipment
     (74     (145
Purchase of bank-owned life insurance policies
     (42     (46
  
 
 
   
 
 
 
Net cash provided by (used for) investing activities
     25,256       (267,128
  
 
 
   
 
 
 
Cash flows from financing activities:
    
Net (decrease) increase in customer deposits
     (84,659     28,940  
Paydown of long term borrowing, net
              (56,387
Proceeds from short term and overnight borrowings, net
              50,000  
Proceeds from exercised stock options, net
     13       21  
  
 
 
   
 
 
 
Net cash (used for) provided by financing activities
     (84,646     22,574  
  
 
 
   
 
 
 
Decrease in cash and cash equivalents
     (33,400     (229,402
Cash and cash equivalents, beginning of period
     232,382       470,456  
  
 
 
   
 
 
 
Cash and cash equivalents, end of period
   $ 198,982     $ 241,054  
  
 
 
   
 
 
 
Supplemental disclosure of cash flow information:
    
Securities transferred from available for sale to the held to maturity classification
   $          $ 49,889  
Recording of right to use assets and operating lease liabilities
   $ 6,127     $       
Cash paid during the year for:
    
Interest
   $ 22,502     $ 6,089  
Income taxes
   $          $ 5,303  
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
8
CALIFORNIA BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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.
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, 2022, and the notes thereto, included in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2022 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 and nine months ended September 30, 2023 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, 2023.
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.
 
9

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 (“Step Zero”).
The Company completed an interim impairment analysis of goodwill as of September 30, 2023 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      Nine months ended  
     September 30,      September 30,  
(Dollars in thousands, except per share data)
   2023      2022      2023      2022  
Net income available to common shareholders
   $ 5,401      $ 5,522      $ 16,291      $ 13,439  
Weighted average basic common shares outstanding
     8,390,138        8,322,529        8,366,584        8,298,269  
Add: dilutive potential common shares
     65,779        83,140        71,860        96,170  
  
 
 
    
 
 
    
 
 
    
 
 
 
Weighted average diluted common shares outstanding
     8,455,917        8,405,669        8,438,444        8,394,439  
Basic earnings per share
   $ 0.64      $ 0.66      $ 1.95      $ 1.62  
  
 
 
    
 
 
    
 
 
    
 
 
 
Diluted earnings per share
   $ 0.64      $ 0.66      $ 1.93      $ 1.60  
  
 
 
    
 
 
    
 
 
    
 
 
 
Adoption of New Accounting Standards and Related Accounting Policies
On January 1, 2023, the Company adopted
ASU
2022-02,
 Financial Instruments—Credit Losses (Topic 326)
. The amendments in this update eliminate the accounting guidance and related disclosures for Troubled Debt Restructurings (TDRs) by creditors in Subtopic
310-40, Receivables—Troubled
Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty and requiring an entity to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic
326-20, Financial
Instruments—Credit Losses—Measured at Amortized Cost. The adoption of this accounting guidance did not have a material impact on the Company’s Consolidated Financial Statements.
On January 1, 2023, the Company adopted
ASU
2016-13
Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326)
. This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and
held-to-maturity
debt securities, and some
off-balance
sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses (“ACL”).
 
10

The Company adopted ASC 326, and all related subsequent amendments thereto, using the modified retrospective approach for all financial assets measured at amortized cost and
off-balance
sheet credit exposures. The transition adjustment of the adoption of CECL included a decrease in the allowance for credit losses on loans of $1.8 million, which is presented as a reduction to net loans outstanding, and an increase in the allowance for credit losses on unfunded loan commitments of $1.4 million, which is recorded within other liabilities. Additionally, the Company recorded an allowance for credit losses for held to maturity securities of $110,000, which is presented as a reduction to held to maturity securities outstanding. The Company recorded a net increase to retained earnings of $334,000 as of January 1, 2023 for the cumulative effect of adopting CECL, which reflects the transition adjustments noted above. Results for reporting periods beginning after January 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards (“Incurred Loss”).
The following accounting policies have been updated/implemented in connection with the adoption of CECL and should be read in conjunction with the significant accounting policies contained in our 2022 Form
10-K
filed on March 24, 2023.
 
   
Allowance for Credit Losses on Loans
The ACL on loans represents the Company’s estimate of expected lifetime credit losses for its loans 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 as of the date of the consolidated statements of financial condition. The ACL on loans is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. Amortized cost does not include accrued interest, which management elected to exclude for the estimate of expected credit losses. The ACL on loans is increased by the provision for credit losses on loans, which is charged against current period operating results, and decreased by reversals of credit loss provisions as well as loan charge-offs, net of recoveries.
Management’s determination of the ACL on loans is based on an evaluation of the composition of the loan portfolio, current economic conditions, historical loan loss experience, reasonable and supportable forecasts, and other risk factors. Loans with similar risk characteristics are collectively assessed within pools (or segments).
The discounted cash flow (“DCF”) method is the primary credit loss estimation methodology used by the Company and involves estimating future cash flows for each individual loan and discounting them back to their present value using the loan’s contractual interest rate, which is adjusted for any net deferred fees, costs, premiums, or discounts existing at the loan’s origination or acquisition date (also referred to as the effective interest rate). The DCF method also considers factors such as loan term, prepayment or curtailment assumptions, and other relevant economic factors that could affect future cash flows. By discounting the cash flows, the method incorporates the time value of money and reflects the credit risk inherent in the loan.
The Company utilizes a forecast period of one year and then reverts to the mean of historical loss rates on a straight-line basis over the following
one-year
period. The Company considers economic forecasts of national gross domestic product, unemployment rates from the Federal Open Market Committee, and the House Price Index to inform the model for loss estimation. Historical loss rates used in the quantitative model were derived using both the Bank’s and peer bank data obtained from publicly-available sources.
Additionally, management considers qualitative and environmental factors that are likely to cause estimated credit losses within the Company’s existing portfolio to differ from historical loss (or peer) experience. Qualitative and environmental factors may include: consideration in trends of delinquencies, nonaccrual loans, and
charged-off
loans; trends in underlying collateral; effects in changes of lending policy and underwriting; regional and local economic trends; and conditions and concentrations of credit.
 
   
Allowance for Credit Losses on
Off-Balance
Sheet Credit Exposures
The Company maintains an ACL on unfunded loan commitments and other
off-balance
sheet credit exposures, if applicable, as part of other liabilities and accrued expenses in the consolidated statements of financial condition. Adjustments to the ACL on
off-balance
sheet credit exposures are made through a charge to provision for credit losses in the Company’s consolidated statements of income. The ACL on unfunded loan commitments is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as any third-party guarantees.
 
11

   
Allowance for Credit Losses on Available for Sale Securities
For available for sale securities in an unrealized loss position, the Company initially assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost is written down to fair value through income. For available for sale securities that do not meet this criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. If a credit loss exists an allowance for credit losses is recorded, through a charge to the provision to credit losses, to the extent that the fair value is less than the amortized cost basis. Accrued interest receivable on available for sale securities is excluded from the estimate of credit losses. The Company did not have any available for sale securities that required an ACL at September 30, 2023.
 
   
Allowance for Credit Losses on Held to Maturity Securities
The Company measures expected credit losses on held to maturity investment securities on a collective basis by major security type. Accrued interest receivable on held to maturity investment securities is excluded from the estimate of credit losses. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Changes in the ACL for held to maturity securities are recorded through the provision for credit losses in the consolidated statements of income.
2. INVESTMENT SECURITIES
The following table summarizes the amortized cost and estimated fair value of securities available for sale and held to maturity at September 30, 2023 and December 31, 2022.
 
            Gross      Gross         
            Unrealized /      Unrealized /      Estimated  
     Amortized      Unrecognized      Unrecognized      Fair  
(Dollars in thousands)
   Cost      Gains      Losses      Value  
At September 30, 2023:
           
Mortgage backed securities
   $ 16,193      $ 7      $ (1,025    $ 15,175  
Government agencies
     29,888                  (836      29,052  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total available for sale securities
   $ 46,081      $ 7      $ (1,861    $ 44,227  
  
 
 
    
 
 
    
 
 
    
 
 
 
Mortgage backed securities
   $ 57,873      $         $ (8,663    $ 49,210  
Government agencies
     3,075                  (672      2,403  
Corporate bonds
     44,069                  (4,810      39,259  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total held to maturity securities, net
   $ 105,017      $         $ (14,145    $ 90,872  
  
 
 
    
 
 
    
 
 
    
 
 
 
At December 31, 2022:
           
Mortgage backed securities
   $ 18,629      $ 26      $ (897    $ 17,758  
Government agencies
     29,809                  (1,043      28,766  
Corporate bonds
     430        58                  488  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total available for sale securities
   $ 48,868      $ 84      $ (1,940    $ 47,012  
  
 
 
    
 
 
    
 
 
    
 
 
 
Mortgage backed securities
   $ 61,363      $         $ (7,647    $ 53,716  
Government agencies
     3,083                  (627      2,456  
Corporate bonds
     44,420        30        (3,739      40,711  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total held to maturity securities
   $ 108,866      $ 30      $ (12,013    $ 96,883  
  
 
 
    
 
 
    
 
 
    
 
 
 
The Company did not purchase any investment securities during the nine months ended September 30, 2023. The Company purchased 8 available for sale securities for $36.0 million and 11 held to maturity securities for $42.8 million during the nine months ended September 30, 2022. The Company did not sell any investment securities during the nine months ended September 30, 2023 and 2022.
 
12

The following table summarizes the scheduled maturities of our available for sale and held to maturity investment securities as of September 30, 2023.
 
     Available for Sale      Held to Maturity  
     Amortized      Fair      Amortized      Fair  
(Dollars in thousands)
   Cost      Value      Cost      Value  
                             
Less that one year
   $  21,693      $  21,345      $ 15,562      $  15,322  
One to five years
     14,919        14,351        19,971        19,554  
Five to ten years
                         19,647        16,279  
Beyond ten years
     1,533        1,407        20,444        15,378  
Securities not due at a single maturity date
     7,936        7,124        29,393        24,339  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total investment securities
   $ 46,081      $ 44,227      $  105,017      $ 90,872  
  
 
 
    
 
 
    
 
 
    
 
 
 
The amortized cost and fair value of debt securities are shown by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. As such, certain securities are not included in the specific maturity categories above and instead are shown separately as securities not due at a single maturity date.
Management monitors the credit quality of the investment portfolio through the use of credit ratings by major credit agencies and analysis of issuer financial information, if available. Additionally, securities issued by government-sponsored agencies, such as FNMA, FHLMC and SBA, have explicit credit guarantees by the United States Federal Government which protect us from credit losses on the contractual cash flows of the securities. The following table reflects the amortized cost and fair value of available for sale and held to maturity securities as of September 30, 2023, aggregated by credit quality indicators.
 
     Available for Sale      Held to Maturity  
     Amortized      Fair      Amortized      Fair  
(Dollars in thousands)
   Cost      Value      Cost      Value  
                             
Aaa
   $  29,888      $  29,052      $ 11,519      $ 8,861  
Aa1/Aa2/Aa3
     —          —          3,075        2,403  
A1/A2
     —          —          7,971        6,429  
BBB
     —          —          1,588        1,209  
Not rated
     16,193        15,175        80,864        71,970  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total investment securities
   $ 46,081      $ 44,227      $  105,017      $  90,872  
  
 
 
    
 
 
    
 
 
    
 
 
 
 
13

At September 30, 2023 and December 31, 2022, the Company had 54 securities in an unrealize
d
 
loss
 p
osition. The following table summarizes the unrealized losses for those investment securities, at the respective reporting dates, aggregated by major security type and length of time in a continuous unrealized loss position.
 
     Less Than 12 Months     More Than 12 Months     Total  
            Unrealized            Unrealized            Unrealized  
(Dollars in thousands)
   Fair Value      Losses     Fair Value      Losses     Fair Value      Losses  
                                         
At September 30, 2023:
               
Mortgage backed securities
   $         $        $  13,320      $ (1,025   $  13,320      $ (1,025
Government agencies
                        29,052        (836     29,052        (836
  
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
Total available for sale securities
   $         $        $ 42,372      $ (1,861   $ 42,372      $ (1,861
  
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
Mortgage backed securities
   $         $        $ 49,210      $ (8,663   $ 49,210      $ (8,663
Government agencies
                        2,403        (672     2,403        (672
Corporate bonds
     7,661        (19     31,598        (4,791     39,259        (4,810
  
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
Total held to maturity securities
   $ 7,661      $ (19   $ 83,211      $ (14,126   $ 90,872      $ (14,145
  
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
At December 31, 2022:
               
Mortgage backed securities
   $ 10,920      $ (537   $ 4,347      $ (360   $ 15,267      $ (897
Government agencies
     28,765        (1,043     —          —         28,765        (1,043
  
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
Total available for sale securities
   $ 39,685      $ (1,580   $ 4,347      $ (360   $ 44,032      $ (1,940
  
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
Mortgage backed securities
   $ 32,271      $ (5,244   $ 21,445      $ (2,403   $ 53,716      $ (7,647
Government agencies
                        2,456        (627     2,456        (627
Corporate bonds
     14,607        (1,143     22,880        (2,596     37,487        (3,739
  
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
Total held to maturity securities
   $ 46,878      $ (6,387   $ 46,781      $ (5,626   $ 93,659      $ (12,013
  
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
At September 30, 2023, management determined that it did not intend to sell any available for sale investment securities with unrealized losses, and it is unlikely that the Company will be required to sell any of those securities with unrealized losses before recovery of their amortized cost. No allowances for credit losses have been recognized, individually or collectively, on available for sale securities in an unrealized loss position, as management does not believe any of the securities are impaired due to reasons of credit quality at September 30, 2023.
The Company measures expected credit losses on held to maturity securities collectively by major security type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions along with reasonable and supportable forecasts. As of September 30, 2023, the Company determined that an allowance for credit losses of $81,000 was required for held to maturity securities. The allowance for credit losses pertained to corporate bonds and was presented as a reduction to the amortized cost of held to maturity securities outstanding.
The following table presents the balance and activity in the allowance for credit losses on held to maturity securities for the three and nine months ended September 30, 2023.
 
     September 30, 2023  
     Three      Nine  
(Dollars in thousands)
   Months Ended      Months Ended  
               
Beginning balance
   $ 58      $     
Adoption of new accounting standard
               110  
Provision for credit losses
     23        (29
Net charge-offs
                   
  
 
 
    
 
 
 
Balance at September 30, 2023
   $ 81      $ 81  
  
 
 
    
 
 
 
 
14

On a quarterly basis, the Company utilizes a comprehensive risk assessment which includes an external rating methodology to identify, measure, and monitor risks associated with our held to maturity loan portfolio. The provision for credit losses in the third quarter of 2023 was primarily driven by an increase in the risk of default pertaining to certain securities in the held to maturity portfolio, and was identified as part of the comprehensive quarterly analysis.
3. LOANS AND ALLOWANCE FOR CREDIT LOSSES
Outstanding loans as of September 30, 2023 and December 31, 2022 are summarized below. Certain loans have been pledged to secure borrowing arrangements (see Note 4).
 
     September 30,      December 31,  
(Dollars in thousands)
   2023      2022  
               
Commercial and industrial
   $ 633,902      $ 634,535  
Real estate - other
     858,611        848,241  
Real estate - construction and land
     40,003        63,730  
SBA
     4,415        7,220  
Other
     36,184        39,695  
  
 
 
    
 
 
 
Total loans, gross
     1,573,115        1,593,421  
Deferred loan origination costs, net
     1,312        2,040  
Allowance for credit losses
     (15,921      (17,005
  
 
 
    
 
 
 
Total loans, net
   $ 1,558,506      $ 1,578,456  
  
 
 
    
 
 
 
The Company categorizes its loan portfolio into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually to classify the loans as to credit risk. The Company uses the following definitions for risk ratings:
Special Mention: A Special Mention credit has potential weaknesses that require management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Special Mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.
Substandard: Substandard credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful: A Doubtful credit has all the weaknesses inherent in Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.
Loans not meeting the criteria above that are analyzed individually, as part of the above described process, are considered to be pass-rated loans.
 
15

The following table reflects the Company’s recorded investment in loans by credit quality indicators and by year of origination as of September 30, 2023.
 
     Term Loans by Year of Origination                
(Dollars in thousands)
   2023      2022      2021      Prior      Revolving      Total  
Commercial and industrial
                 
Pass
   $ 60,791      $ 124,822      $ 65,445      $ 84,021      $ 221,977      $ 557,056  
Special mention
     880        31,209        2,723        5,868        27,516        68,196  
Substandard
     —          1,883        780        567        5,420        8,650  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 61,671      $ 157,914      $ 68,948      $ 90,456      $ 254,913      $ 633,902  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Current period gross charge-offs
   $ —        $ 136      $ —        $ 20      $ 247      $ 403  
Real estate - other
                 
Pass
   $ 22,188      $ 186,251      $ 209,378      $ 310,626      $ 94,336      $ 822,779  
Special mention
     —          14,924        10,210        6,948        —          32,082  
Substandard
     —          —          —          3,750        —          3,750  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 22,188      $ 201,175      $ 219,588      $ 321,324      $ 94,336      $ 858,611  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Current period gross charge-offs
   $ —        $ —        $ —        $ —        $ —        $ —    
Real estate - construction and land
                 
Pass
   $ 2,949      $ 10,949      $ 24,439      $         $ —        $ 38,337  
Special mention
     —          —          —          1,666        —          1,666  
Substandard
     —          —          —                    —              
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 2,949      $ 10,949      $ 24,439      $ 1,666      $         $ 40,003  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Current period gross charge-offs
   $ —        $ —        $ —        $ —        $ —        $ —    
SBA
                 
Pass
   $ —        $ 758      $ 60      $ 2,677      $ 127      $ 3,622  
Special mention
     —          —          —          141        —          141  
Substandard
     —          —          —          652        —          652  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ —        $ 758      $ 60      $ 3,470      $ 127      $ 4,415  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Current period gross charge-offs
   $ —        $ —        $ —        $ —        $ —        $ —    
Other
                 
Pass
   $ 10      $ 1,612      $ —        $ 34,017      $ 545      $ 36,184  
Special mention
     —                    —          —          —              
Substandard
     —          —          —          —          —          —    
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 10      $ 1,612      $         $ 34,017      $ 545      $ 36,184  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Current period gross charge-offs
   $ —        $ —        $ —        $ —        $ —        $ —    
Total
                 
Pass
   $ 85,938      $ 324,392      $ 299,322      $ 431,341      $ 316,985      $ 1,457,978  
Special mention
     880        46,133        12,933        14,623        27,516        102,085  
Substandard
     —          1,883        780        4,969        5,420        13,052  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 86,818      $ 372,408      $ 313,035      $ 450,933      $ 349,921      $ 1,573,115  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Current period gross charge-offs
   $ —        $ 136      $ —        $ 20      $ 247      $ 403  
 
16
The following table reflects the loan portfolio allocated by the Company’s credit quality indicators as of December 31, 2022.
 
(Dollars in thousands)
   Commercial
and
Industrial
     Real Estate
Other
     Real Estate
Construction
and Land
     SBA      Other      Total  
As of December 31, 2022:
                 
Grade:
                 
Pass
   $ 613,395      $ 840,993      $ 62,031      $ 6,132      $ 39,695      $ 1,562,246  
Special Mention
     18,157        2,602        —          490        —          21,249  
Substandard
     2,983        4,646        1,699        598        —          9,926  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 634,535      $ 848,241      $ 63,730      $ 7,220      $ 39,695      $ 1,593,421  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
The increase in loans classified as special mention at September 30, 2023 compared to December 31, 2022 was primarily the result of the Company’s heightened monitoring in response to current economic and operating trends.
The following table reflects an aging analysis of the loan portfolio by the time past due at September 30, 2023 and December 31, 2022.
 
(Dollars in thousands)
   30 Days      60 Days      90+ Days      Nonaccrual      Current      Total  
As of September 30, 2023:
                 
Commercial and industrial
   $ —        $         $         $ 1,183      $ 632,719      $ 633,902  
Real estate - other
               —          —          —          858,611        858,611  
Real estate - construction and land
     —          —          —          —          40,003        40,003  
SBA
               —          —          53        4,362        4,415  
Other
     —          —                 —          36,184        36,184  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total loans, gross
   $ —        $         $         $ 1,236      $ 1,571,879      $ 1,573,115  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
As of December 31, 2022:
                 
Commercial and industrial
   $ —        $  —        $  —        $  1,028      $ 633,507      $ 634,535  
Real estate - other
     3,160        —          —          —          845,081        848,241  
Real estate - construction and land
     —          —          —          —          63,730        63,730  
SBA
     —          —          —          222        6,998        7,220  
Other
     —          —          —          —          39,695        39,695  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total loans, gross
   $ 3,160      $ —        $ —        $ 1,250      $ 1,589,011      $ 1,593,421  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
The Company measures expected credit losses on a pooled basis when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting dated and adjusted for selling costs as appropriate.
At September 30, 2023 and December 31, 2022, the Company determined that certain loans did not share risk characteristics with other loans in the portfolio and therefore evaluated these loans for expected credit losses/impairment on an individual basis. The loans individually evaluated were classified as nonaccrual and were all collateral dependent. For collateral dependent loans, the Company has adopted the practical expedient under ASC 326 to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. None of the individually evaluated loans required an allowance for credit losses as of the respective reporting dates.
 
17

The following table reflects the recorded investment and unpaid principal balance for loans individually evaluated for expected credit losses/impairment as of September 30, 2023 and December 31, 2022 under ASC 326 and the previous accounting standard, respectively.
 
<
            Unpaid      Average  
     Recorded      Principal      Recorded  
(Dollars in thousands)
   Investment