California BanCorp \ CA (BCAL)

ITEM 2. 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 formed 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, including 11 commercial banking offices, serving California. We keep a steady focus on our solution-driven, relationship-based approach to banking, providing clients accessibility to decision makers and enhancing the value of our services through strong client partnerships. Our lending products consist primarily of construction and land development loans, real estate loans, C&I loans and consumer loans, and we are a Preferred SBA Lender. Our deposit products consist primarily of demand deposit, money market, and certificates of deposit. In addition, we are a participant in the Certificate of Deposit Account Registry Service (“CDARS”) and IntraFi Network Insured Cash Sweep (“ICS”) networks. We receive an equal dollar amount of deposits (“reciprocal deposits”) from other participating banks in exchange for the deposits we place into the networks to fully qualify large customer deposits for FDIC insurance. We also provide treasury management services including online banking, cash vault, sweep accounts and lock box services.

Recent Developments

Market and Banking Industry Updates

At its June 17, 2026 meeting, the Federal Open Market Committee (“FOMC”) maintained the federal funds target range at 3.50% to 3.75%, reaffirming its objective of maintaining ample reserves in the banking system. The FOMC noted that economic activity continued to expand at a solid pace despite elevated uncertainty, including uncertainty related to the conflict in the Middle East, while inflation remained above the Federal Reserve’s 2% target, partly reflecting supply shocks affecting certain sectors, including energy.

The Federal Reserve’s July 2026 Monetary Policy Report reflected a more cautious inflation outlook compared with March 2026. The June 2026 Summary of Economic Projections showed median 2026 real GDP growth of 2.2%, unemployment of 4.3%, PCE inflation of 3.6%, and core PCE inflation of 3.3%. The median projected federal funds rate for year-end 2026 increased to 3.8%, compared with the March 2026 projection of 3.4%, indicating that policymakers no longer appear positioned for near-term easing and are instead focused on persistent inflation risk.

Recent economic commentary from the Federal Reserve Bank of San Francisco noted that the U.S. economy continues to expand at a solid pace, supported by strong business investment in technology equipment and software, while consumer spending has moderated. The same report noted that elevated energy prices have pushed inflation further above the Federal Reserve’s 2% goal, although they have had limited impact on overall

50

Table of Contents

economic activity to date. The most recent PCE inflation data cited in that report showed headline PCE inflation at 4.1% in May 2026, with inflation risks remaining mainly to the upside.

In California, the UCLA Anderson Forecast released in March 2026 indicated that the state’s economic output continued to outpace the national economy, supported by high-productivity sectors such as artificial intelligence and aerospace. However, the forecast also noted ongoing employment weakness, with unemployment remaining above 5% and payroll growth lagging output growth, reflecting a bifurcated state economy. The forecast projected California unemployment to average 5.6% in 2026, decline to 4.8% in 2027, and improve further to 4.4% in 2028, while total employment growth was expected to strengthen from 0.9% in 2026 to 1.8% in 2027 and 2.1% in 2028.

Overall, the latest market information supports continued caution in the economic outlook. While economic growth remains resilient and California output has continued to outperform the national economy, inflation and interest-rate uncertainty have increased since the March 2026 forecast, driven primarily by energy-price volatility, tariff and supply-chain developments, and geopolitical risks. Management has not observed a material impact on client operations from these events to date, but continues to monitor evolving conditions, including their potential effects on borrower cash flows, collateral values, interest-rate sensitivity, and broader credit risk.

Moody’s anticipates GDP growth in California to grow to 1.88% in 2026 and to have a slight decrease to 1.64% in 2027. The state has moved back up to the position of the world’s fourth-largest economy, following a decline from its previous fifth-place ranking. California’s economy is cooling off, with slower payroll growth and downward revisions widening the gap with national trends. Challenges in the tech sector are expected to persist amid ongoing uncertainty. Ongoing trade‑related uncertainty and heightened geopolitical tensions have contributed to a more cautious business and investment environment. We have observed that some clients are delaying or reassessing the timing of certain projects amid continued economic uncertainty.

Inflation has had a material impact on the growth of total assets within the banking industry, prompting the need for some institutions to raise equity capital at accelerated rates to preserve a healthy equity-to-assets ratio. It also drives increases in other operating expenses. Management views interest rate risk as the key challenge in mitigating inflation's impact. We undertake substantial efforts to maintain a strategic balance between our rate-sensitive assets and liabilities across economic cycles to reduce volatility in net interest income.

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.

Per the regulatory definition of commercial real estate, at June 30, 2026, our concentration of such loans represented 449% of our total risk-based capital. In addition, at June 30, 2026, total loans secured by commercial real estate under construction and land development represented 25% 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, 2026 were $5.1 million and there were $122 thousand net charge-offs during the six months ended June 30, 2026. At June 30, 2026, there was $8.6 million of OREO.

Given the nature of our commercial banking business, approximately 50% of our total deposits exceeded the FDIC deposit insurance limits at June 30, 2026.

We strategically manage an investment portfolio focused on high-quality, resilient securities. At June 30, 2026, the amortized cost of our held-to-maturity debt securities was $52.8 million, or approximately 1.3% of total assets. The fair value of our available-for-sale debt securities was $308.8 million, or approximately 7.7% of total assets. The 10-Year Treasury Bond was approximately 4.4% at June 30, 2026, compared to 4.2% at December 31, 2025. The increase in the 10-Year Treasury Bond in 2026, resulted in higher net unrealized losses on our debt securities at June 30, 2026. At June 30, 2026, our accumulated other comprehensive loss, net of taxes, increased to $5.3 million, compared to $1.6 million at December 31, 2025. If we realized all of our unrealized losses on both held-to-maturity and available-for-sale debt securities, our losses, net of taxes would be $7.9 million at

51

Table of Contents

June 30, 2026. The results of our stress testing on our debt security portfolio at June 30, 2026, illustrated that our losses, net of taxes on both held-to-maturity and available-for-sale debt securities would increase to $51.1 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.

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. There have been no significant changes to our accounting policies since December 31, 2025. The Significant Accounting Policies are summarized in Note 1 - Basis of Presentation and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Part I - Financial Information - Item 1. Financial Statements included in the 2025 Annual Report on Form 10-K.

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 Statements of this filing.

[Excerpt truncated for page length; source filing is linked above.]

Item 7. 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 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 and 11 commercial banking offices serving California. We keep a steady focus on our solution-driven, relationship-based approach to banking, providing clients accessibility to decision makers and enhancing the value of our services through strong client partnerships. Our lending products consist primarily of construction and land development loans, real estate loans, C&I loans and consumer loans, and we are a Preferred SBA Lender. Our deposit products consist primarily of demand deposit, money market, and certificates of deposit. In addition, we are a participant in the Certificate of Deposit Account Registry Service (“CDARS”) and IntraFi Network Insured Cash Sweep (“ICS”) networks. We receive an equal dollar amount of deposits (“reciprocal deposits”) from other participating banks in exchange for the deposits we place into the networks to fully qualify large customer deposits for FDIC insurance. We also provide treasury management services including online banking, cash vault, sweep accounts and lock box services.

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 expanded 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.

45

Table of Contents

Under the terms of the Agreement and Plan of Merger and Reorganization, each outstanding share of CALB common stock was exchanged for the right to receive 1.590 shares of the Company’s common stock, resulting in the net issuance of approximately 13,579,454 shares, with cash (without interest) paid in lieu of fractional shares and repurchase of shares for settlement of accelerated restricted stock units. Refer to Note 2 - Business Combinations of the Notes to Consolidated Financial Statements included in Item 8 of this annual report for more information regarding business combinations and related activity.

Market and Banking Industry Updates

The One Big Beautiful Bill Act passed in 2025 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 did not have a material impact on our estimated income tax expense, deferred taxes, or other comprehensive income.

At its December 10, 2025, meeting, the Federal Open Market Committee lowered the target range for the Fed funds rate to a range of 3.50% to 3.75%, This marked the third consecutive rate cut following the September 2025 reduction. After the meeting, Chairman Powell observed that while important federal government data for the past couple months have yet to be released, available public and private-sector data suggest that the outlook for employment and inflation has not changed much since the FOMC October 2025 meeting, noting conditions in the labor market appear to be cooling, and inflation remains somewhat elevated. He stated available indicators suggest that economic activity has been expanding at a moderate pace and both layoffs and hiring remain low. Following three consecutive rate cuts in late 2025, at their January 2026 meeting, Fed policymakers paused to assess the economy, noting solid expansion, stabilizing unemployment, and somewhat elevated inflation, maintaining the target range for the Fed funds rate at 3.5% to 3.75%, marking a pause in its recent rate-cutting trend. Chairman Powell described the economy as being on “firm footing,” with the meeting Statement noting recent indicators suggest that economic activity has been expanding at a solid pace.

The Fed also announced it will increase the System Open Market Account holdings of securities through purchases of Treasury bills and, if needed, other Treasury securities with remaining maturities of three years or less to maintain an ample level of reserves. This follows the announcement at the October FOMC meeting that the Fed would end quantitative tightening on December 1, 2025, halting the reduction of its balance sheet and injecting additional liquidity into financial markets. In the Fed’s Summary of Economic Projections, the median participant projected that GDP will rise 1.7% in 2025 and 2.3% in 2026.

In response to the tariff policies enacted by the administration in mid-2025, markets experienced some volatility and given the fluid dynamics of the situation we continue to monitor the effect of tariffs and trade negotiations on our clients and we do not currently 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, overall consumer prices are predicted to peak around 3.5% to 3.6% in early 2026 with annual average unemployment of 5.5%, according to the UCLA Anderson School of Management. Moody’s anticipates GDP growth in California to grow to 2.2% in 2025 and to have a slight decrease to 1.9% in 2026. The state has shifted to the position of the world’s fifth-largest economy, following a decline from its previous fourth-place ranking. California’s economy is cooling off, with slower payroll growth and downward revisions widening the gap with national trends. Challenges in the tech sector are expected to persist amid ongoing uncertainty. Building permits declined in 2024 and have yet to show signs of recovery. With the trade war still ongoing, growing uncertainty is prompting businesses and

46

Table of Contents

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 for some institutions to raise equity capital at accelerated rates to preserve a healthy equity-to-assets ratio. It also drives increases in other operating expenses. Management views interest rate risk as the key challenge in mitigating inflation's impact. We undertake substantial efforts to maintain a strategic balance between our rate-sensitive assets and liabilities across economic cycles to reduce volatility in net interest income.

We have a strong consolidated balance sheet with diversified deposit and loan portfolios, with very little sector or individual customer concentration, other than our CRE concentration. Our relationship-based business banking model is founded on strong, ongoing relationships with our commercial clients, which represent a broad variety of industries. We have no meaningful exposure to cryptocurrency or venture capital business models, our accumulated other comprehensive loss on our available-for-sale debt securities is manageable, and our capital position is strong. In 2025 we made significant progress in derisking our consolidated balance sheets, reducing our exposure in the Sponsor Finance portfolio, eliminating our reliance on brokered deposits and improving overall credit quality. The reduction in credit risk in our total loan portfolio is reflected in the reversal of provision for loan losses, from the fourth quarter of 2024 through the second quarter of 2025 and the fourth quarter of 2025. Additionally, our non-performing assets to total assets ratio of 0.40% at December 31, 2025, declined from 0.76% at December 31, 2024, along with a decrease in substandard loans since year-end 2024.

Per the regulatory definition of commercial real estate, at December 31, 2025, our concentration of such loans represented 469% of our total risk-based capital. In addition, at December 31, 2025, total loans secured by commercial real estate under construction and land development represented 28% of our total risk-based capital. The non-performing loans for these segments per the regulatory definition of commercial real estate loans at December 31, 2025 were $13.9 million and there were $1.7 million net charge-offs during the year ended December 31, 2025. At December 31, 2025, there was no OREO.

Given the nature of our commercial banking business, approximately 49% of our total deposits exceeded the FDIC deposit insurance limits at December 31, 2025.

We strategically manage an investment portfolio focused on high-quality, resilient securities. At December 31, 2025, the amortized cost of our held-to-maturity debt securities was $52.9 million, or approximately 1.3% of total assets. The fair value of our available-for-sale debt securities was $234.9 million, or approximately 5.8% of total assets. The 10-Year Treasury Bond was approximately 4.2% at December 31, 2025, compared to 4.6% at December 31, 2024. The decrease in the 10-Year Treasury Bond in 2025, resulted in lower net unrealized losses on our debt securities at December 31, 2025. At December 31, 2025, our accumulated other comprehensive loss, net of taxes, decreased to $1.6 million, compared to $6.6 million at December 31, 2024.

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]