California BanCorp \ CABCAL
California BanCorp \ CA Fair Value Disclosure
FAIR VALUE
The fair value of a financial instrument is the amount at which the asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no market value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature, involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
ASC Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has
the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar
assets or liabilities; quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a Company’s own assumptions about the
assumptions that market participants would use in pricing an asset or liability.
Fair value of financial instruments
Fair value estimates are based on financial instruments both on and off the balance sheet without attempting to estimate the value of anticipated future business, and the value of assets and liabilities that are not considered financial instruments. Additionally, tax consequences related to the realization of the unrealized gains and losses can have a potential effect on fair value estimates and have not been considered in many of the estimates. The following methods and assumptions were used to estimate the fair value of significant financial instruments:
Cash and Due from Banks: The carrying amounts of cash and short-term instruments approximate fair values because of the liquidity of these instruments.
Federal Funds Sold and Interest-Bearing Balances: The carrying amount is assumed to be the fair value given the short-term nature of these deposits.
Debt Securities Held to Maturity and Available for Sale: The fair values of securities held to maturity and available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.
Loans Held for Sale: The fair value of loans held-for-sale is based on commitments outstanding from investors as well as what secondary market investors are currently offering for portfolios with similar characteristics.
Loans Held for Investment, net: The fair value of loans, which is based on an exit price notion, is generally determined using an income based approach based on discounted cash flow analysis. This approach utilizes the contractual maturity of the loans and market indications of interest rates, prepayment speeds, defaults and credit risk in determining fair value. The fair value for PCD loans incorporated market-based loss rates used to estimated expected life of loan credit losses. The noncredit discount resulting from the acquired PCD loans was allocated to each individual asset. If an individually evaluated loan has had a charge-off or if the fair value of the collateral is less than the recorded investment in the loan, we establish a specific reserve and report the loan as nonrecurring Level 3. Loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. For the fair value of collateral-dependent individually evaluated loans, an asset-based approach is applied to determine the estimated fair values of the underlying collateral based on recent real estate appraisals, less costs to sell. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. New appraisals in certain circumstances, including when there has been significant deterioration in the condition of the collateral, if the foreclosure process has begun, or if the existing valuation is deemed to be outdated. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.
Restricted Stock Investments: Investments in FHLB and Federal Reserve stocks are recorded at cost and measured for impairment. Ownership of FHLB and Federal Reserve stocks are restricted to member banks and the securities do not have a readily determinable market value. Purchases and sales of these securities are at par value with the issuer. The fair value of investments in FHLB and Federal Reserve stock is equal to the carrying amount.
Other Equity Securities: The fair value of equity securities is based on quoted prices in active markets for identical assets to determine the fair value. If quoted prices are not available to determine fair value, the Company estimates the fair values by using independent pricing models, quoted prices of securities with similar characteristics, or discounted cash flows.
Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as OREO are measured at the lower of the carrying amount or fair value, less costs to sell. The fair value of OREO is generally based on recent real estate appraisals or broker opinions, obtained from independent third parties, which are frequently adjusted by management to reflect current conditions and estimated selling costs.
Accrued Interest Receivable: The fair value of accrued interest receivable approximates their carrying amounts.
Deposits: The fair values disclosed for demand deposits, including interest and non-interest demand accounts, savings, and certain types of money market accounts are, by definition based on
carrying value. Fair value for fixed-rate certificates of deposit is estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregate expected monthly maturities on time deposits. Early withdrawal of fixed-rate certificates of deposit is not expected to be significant.
Borrowings: The fair value of fixed-rated term borrowings is estimated using a discounted cash flow through the remaining maturity dates based on the current borrowing rates for similar types of borrowing arrangements. The fair values of subordinated debt and notes are based on rates currently available to the Company for debt with similar terms and remaining maturities.
Accrued Interest Payable: The fair value of accrued interest payable approximates the carrying amounts.
Off-Balance Sheet Financial Instruments: The fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements. The fair value of these financial instruments is not material.
The estimated fair value hierarchy level and estimated fair value of financial instruments at December 31, 2025 and 2024, is summarized as follows:
| 2025 | 2024 | |||||||||||||||||||||||||||||||
| Estimated | Estimated | |||||||||||||||||||||||||||||||
| Fair Value | Carrying | Fair | Carrying | Fair | ||||||||||||||||||||||||||||
| (dollars in thousands) | Hierarchy | Value | Value | Value | Value | |||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Cash and due from banks | Level 1 | $ | 52,013 | $ | 52,013 | $ | 60,471 | $ | 60,471 | |||||||||||||||||||||||
Federal funds and interest-bearing balances | Level 1 | 347,900 | 347,900 | 327,691 | 327,691 | |||||||||||||||||||||||||||
| Debt securities available for sale | Level 1/2 | 234,890 | 234,890 | 142,001 | 142,001 | |||||||||||||||||||||||||||
| Debt securities held to maturity | Level 2 | 52,936 | 49,308 | 53,280 | 47,823 | |||||||||||||||||||||||||||
| Loans held for sale | Level 2 | 25,105 | 25,566 | 17,180 | 17,855 | |||||||||||||||||||||||||||
| Loans held for investment, net | Level 3 | 2,999,539 | 3,000,768 | 3,088,625 | 3,080,175 | |||||||||||||||||||||||||||
| Restricted stock, at cost | Level 2 | 30,932 | 30,932 | 30,829 | 30,829 | |||||||||||||||||||||||||||
| Other equity securities | Level 2 | 14,760 | 14,760 | 13,691 | 13,691 | |||||||||||||||||||||||||||
| Accrued interest receivable | Level 2 | 11,115 | 11,115 | 12,824 | 12,824 | |||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Deposits | Level 2 | 3,370,581 | 3,370,456 | 3,398,760 | 3,398,447 | |||||||||||||||||||||||||||
| Borrowings | Level 2 | 33,832 | 34,149 | 69,725 | 69,876 | |||||||||||||||||||||||||||
| Accrued interest payable | Level 2 | 679 | 679 | 4,342 | 4,342 | |||||||||||||||||||||||||||
Recurring fair value measurements
The following table provides the hierarchy and fair value for each major category of assets and liabilities measured at fair value on a recurring basis at December 31, 2025 and 2024:
| Recurring Fair Value Measurements | ||||||||||||||||||||||||||
| (dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
December 31, 2025 | ||||||||||||||||||||||||||
| Securities available for sale: | ||||||||||||||||||||||||||
| U.S. government and agency and government sponsored enterprise securities: | ||||||||||||||||||||||||||
| Mortgage-backed securities | $ | — | $ | 161,016 | $ | — | $ | 161,016 | ||||||||||||||||||
| SBA securities | — | 3,816 | — | 3,816 | ||||||||||||||||||||||
| U.S. Treasury | 2,472 | — | — | 2,472 | ||||||||||||||||||||||
| U.S. Agency | — | 1,793 | — | 1,793 | ||||||||||||||||||||||
| Collateralized mortgage obligations | — | 64,855 | — | 64,855 | ||||||||||||||||||||||
Taxable municipals | — | 938 | — | 938 | ||||||||||||||||||||||
| $ | 2,472 | $ | 232,418 | $ | — | $ | 234,890 | |||||||||||||||||||
December 31, 2024 | ||||||||||||||||||||||||||
| Securities available for sale: | ||||||||||||||||||||||||||
| U.S. government and agency and government sponsored enterprise securities: | ||||||||||||||||||||||||||
| Mortgage-backed securities | $ | — | $ | 83,274 | $ | — | $ | 83,274 | ||||||||||||||||||
| SBA securities | — | 5,333 | — | 5,333 | ||||||||||||||||||||||
| U.S. Treasury | 12,326 | — | — | 12,326 | ||||||||||||||||||||||
| U.S. Agency | — | 1,670 | — | 1,670 | ||||||||||||||||||||||
| Collateralized mortgage obligations | — | 37,663 | — | 37,663 | ||||||||||||||||||||||
Taxable municipals | — | 909 | — | 909 | ||||||||||||||||||||||
| Tax exempt bank-qualified municipals | — | 826 | — | 826 | ||||||||||||||||||||||
| $ | 12,326 | $ | 129,675 | $ | — | $ | 142,001 | |||||||||||||||||||
Nonrecurring fair value measurements
The Company may also be required, from time to time, to measure certain other assets and liabilities on a nonrecurring basis in accordance with generally accepted accounting principles.
Collateral-dependent loans. For the valuation of the collateral-dependent loans, the Company relies primarily on third-party valuation information from certified appraisers and values are generally based upon recent appraisals of the underlying collateral, brokers’ opinions based upon recent sales of comparable properties, estimated equipment auction or liquidation values, income capitalization, or a combination of income capitalization and comparable sales. Depending on the type of underlying collateral, valuations may be adjusted by management for qualitative factors such as economic factors and estimated liquidation expenses. The range of these possible adjustments may vary.
At December 31, 2025, the Company’s individual evaluated collateral-dependent loans were evaluated based on the estimated fair value of the underlying collateral from the Company’s internal reviews, including reviews of the most recent appraisals and the current sale market condition. There
were $83 thousand partial charge-offs on certain individually evaluated loans based on recent real estate or property appraisals and $373 thousand related reserves were recorded during the year ended December 31, 2025.
At December 31, 2024, the Company took a partial charge-off of $967 thousand on the individually evaluated loans in 2024.
Other real estate owned, net. Subsequent to foreclosure, it may be necessary to record nonrecurring fair value adjustments for declines in fair value of OREO. Fair value, when recorded, is determined based on appraisals by qualified licensed appraisers and adjusted for management’s estimates of costs to sell. Accordingly, values for OREO are classified as Level 3.
The following tables summarize the fair value of assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2025.
| Fair Value Measurement Level | ||||||||||||||||||||||||||
| Quoted Prices in | ||||||||||||||||||||||||||
| Active Markets for | Significant Other | Significant | ||||||||||||||||||||||||
| Fair | Identical Assets | Observable Inputs | Unobservable Inputs | |||||||||||||||||||||||
| (dollars in thousands) | Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||||||||
December 31, 2025 | ||||||||||||||||||||||||||
Collateral dependent loans (1): | ||||||||||||||||||||||||||
| Construction and Land | $ | 13,908 | $ | — | $ | — | $ | 13,908 | ||||||||||||||||||
| 1-4 Family Residential | — | — | — | — | ||||||||||||||||||||||
| Multifamily Residential | — | — | — | — | ||||||||||||||||||||||
| Commercial real estate and other | — | — | — | — | ||||||||||||||||||||||
| Commercial and industrial | — | — | — | — | ||||||||||||||||||||||
Total collateral dependent loans | $ | 13,908 | $ | — | $ | — | $ | 13,908 | ||||||||||||||||||
December 31, 2024 | ||||||||||||||||||||||||||
Collateral dependent loans (1): | ||||||||||||||||||||||||||
| Construction and Land | $ | 9,708 | $ | — | $ | — | $ | 9,708 | ||||||||||||||||||
| 1-4 Family Residential | 4,191 | — | — | 4,191 | ||||||||||||||||||||||
| Commercial real estate and other | 14,316 | — | — | 14,316 | ||||||||||||||||||||||
| Commercial and industrial | 6,476 | — | — | 6,476 | ||||||||||||||||||||||
Total collateral dependent loans | $ | 34,691 | $ | — | $ | — | $ | 34,691 | ||||||||||||||||||
| Foreclosed assets: | ||||||||||||||||||||||||||
| Other real estate owned, net | $ | 4,083 | $ | — | $ | — | $ | 4,083 | ||||||||||||||||||
(1) Collateral-dependent loans whose fair value is based upon appraisals.
Quantitative information about Level 3 fair value measurements measured on a non-recurring basis are summarized below as of December 31, 2025. The balance as of December 31, 2024 included $20.8 million in PCD loans.
| Asset Fair | Valuation | Unobservable | Range % | |||||||||||||||||||||||
| (dollars in thousands) | Value | Technique | Input | (Weighted Average) | ||||||||||||||||||||||
December 31, 2025 | ||||||||||||||||||||||||||
Collateral dependent loans | ||||||||||||||||||||||||||
| Construction and Land | $ | 9,281 | Fair value of property | Cost to sell | 7.19% – 7.19% (7.19%) | |||||||||||||||||||||
| 4,627 | Fair value of land | Cost to sell | 7.64% - 7.64% (7.64%) | |||||||||||||||||||||||
| Total collateral dependent loans | $ | 13,908 | ||||||||||||||||||||||||
December 31, 2024 | ||||||||||||||||||||||||||
Collateral dependent loans | ||||||||||||||||||||||||||
| Construction and Land | $ | 9,708 | Fair value of property | Cost to sell | 7.50%-7.50% (7.50%) | |||||||||||||||||||||
| 1-4 Family Residential | 4,191 | Fair value of property | Cost to sell | 7.50%-7.50% (7.50%) | ||||||||||||||||||||||
| Commercial real estate and other | 14,316 | Fair value of property | Discount to appraised values | 18.13%-30.00% (19.70%) | ||||||||||||||||||||||
| Costs to sell | 7.50%-7.50% (7.50%) | |||||||||||||||||||||||||
| 14,316 | ||||||||||||||||||||||||||
| Commercial and industrial | 5,582 | Fair value of collateral | Discount to appraised values | 20.00%-60.00% (27.37%) | ||||||||||||||||||||||
| Costs to sell | 7.50%-7.50% (7.50%) | |||||||||||||||||||||||||
| 894 | Fair value of property | Costs to sell | 8.00%-10.00% (8.62%) | |||||||||||||||||||||||
| 6,476 | ||||||||||||||||||||||||||
| Total collateral dependent loans | $ | 34,691 | ||||||||||||||||||||||||
| Other real estate owned, net | $ | 4,083 | Market approach | Cost to sell | 7.50%-7.50% (7.50%) | |||||||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 13, 2026 | Showing above |
| 2024 | Apr 1, 2025 | |
| 2023 | Mar 15, 2024 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.