California BanCorp \ CABCAL
California BanCorp \ CA Income Taxes Disclosure
INCOME TAXES
The Company does not have pretax income from continuing foreign operations or foreign tax expense during the years ended December 31, 2025 and 2024. The income tax expense for the years ended December 31, is comprised of the following:
| (dollars in thousands) | 2025 | 2024 | ||||||||||||
| Current tax expense: | ||||||||||||||
| Federal | $ | 8,648 | $ | 1,290 | ||||||||||
| State | 4,769 | 1,966 | ||||||||||||
| Total current tax expense | 13,417 | 3,256 | ||||||||||||
| Deferred tax expense (benefit): | ||||||||||||||
| Federal | 6,997 | 497 | ||||||||||||
| State | 4,485 | (923) | ||||||||||||
| Total deferred tax expense (benefit) | 11,482 | (426) | ||||||||||||
| Total income tax expense | $ | 24,899 | $ | 2,830 | ||||||||||
The following table presents cash payments for income taxes, net of refunds received, buy jurisdiction for the years ended December 31:
| (dollars in thousands) | 2025 | 2024 | ||||||||||||
| Federal | $ | 4,253 | $ | 2,720 | ||||||||||
State: | ||||||||||||||
California | 5,480 | 166 | ||||||||||||
Other states(1) | 46 | — | ||||||||||||
| $ | 9,779 | $ | 2,886 | |||||||||||
(1)Represents states that individually accounted for less than 5% of the total taxes paid, net of refunds received.
A comparison of the federal statutory income tax rates to the Company’s effective income tax rates at December 31 follows:
| 2025 | 2024 | ||||||||||||||||||||||
| (dollars in thousands) | Amount | Rate | Amount | Rate | |||||||||||||||||||
| Statutory federal income tax provision | $ | 18,471 | 21.0 | % | $ | 1,735 | 21.0 | % | |||||||||||||||
State taxes(1) | 7,310 | 8.3 | % | 824 | 10.0 | % | |||||||||||||||||
| Tax credits: | |||||||||||||||||||||||
| Net expense (benefit) related to tax credit equity investment | (516) | (0.6) | % | 21 | 0.3 | % | |||||||||||||||||
| Nontaxable or nondeductible items: | |||||||||||||||||||||||
| Bank owned life insurance | (490) | (0.6) | % | (367) | (4.4) | % | |||||||||||||||||
| Tax exempt interest income | (94) | (0.1) | % | (218) | (2.6) | % | |||||||||||||||||
| Excess executive compensation | 378 | 0.4 | % | 533 | 6.4 | % | |||||||||||||||||
| Merger expenses | — | — | % | 374 | 4.5 | % | |||||||||||||||||
| Other | 152 | 0.2 | % | 100 | 1.1 | % | |||||||||||||||||
| Other adjustments: | |||||||||||||||||||||||
| Employee stock-based compensation | (307) | (0.3) | % | (103) | (1.3) | % | |||||||||||||||||
| Other | (5) | — | % | (69) | (0.8) | % | |||||||||||||||||
| $ | 24,899 | 28.3 | % | $ | 2,830 | 34.2 | % | ||||||||||||||||
(1)State taxes in California made up the majority (greater than 50%) of the tax effect in this category.
The Company is subject to federal income and California franchise tax, as well as various immaterial states taxes. Income tax returns for the years ended after December 31, 2021 are open to audit by federal authorities and income tax returns for the years ending after December 31, 2020 are open to audit by California authorities. Other states vary, but generally income tax returns for the years ending after December 31, 2020 are subject to examination by those state authorities. There were no interest and penalties related to unrecognized tax benefits in income tax expense at December 31, 2025 and 2024. The total amount of unrecognized tax benefits was zero at December 31, 2025 and 2024.
Deferred taxes are a result of differences between income tax accounting and generally accepted accounting principles with respect to income and expense recognition. At December 31, 2025 and 2024, after considering all available positive and negative evidence, management concluded that a valuation allowance against deferred tax assets was not necessary because it is more likely than not that these tax benefits will be fully realized in future periods. The following is a summary of the components of the net deferred tax asset accounts recognized in the accompanying consolidated balance sheets at December 31:
| (dollars in thousands) | 2025 | 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Allowance for loan losses | $ | 9,895 | $ | 14,860 | ||||||||||
| Organizational expenses | 89 | 102 | ||||||||||||
| Stock-based compensation | 1,383 | 1,626 | ||||||||||||
| Fair value adjustment on acquired loans | 8,894 | 16,833 | ||||||||||||
| Net operating loss carryforward | 8,050 | 8,939 | ||||||||||||
| Accrued expenses | 1,882 | 1,253 | ||||||||||||
| Deferred compensation | 2,165 | 1,997 | ||||||||||||
| California franchise tax | 1,004 | 412 | ||||||||||||
| (dollars in thousands) | 2025 | 2024 | ||||||||||||
Depreciation differences | 47 | 297 | ||||||||||||
| Operating Lease liabilities | 5,455 | 5,384 | ||||||||||||
| Unrealized loss on securities available for sale | 680 | 2,787 | ||||||||||||
| Other | 1,045 | 1,535 | ||||||||||||
| Total deferred tax assets | 40,589 | 56,025 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Deferred loan costs | (1,236) | (1,169) | ||||||||||||
| Core deposit intangibles | (5,589) | (6,790) | ||||||||||||
| Right of use asset | (4,348) | (4,219) | ||||||||||||
| Other | (375) | (720) | ||||||||||||
| Total deferred tax liabilities | (11,548) | (12,898) | ||||||||||||
| Net deferred tax assets | $ | 29,041 | $ | 43,127 | ||||||||||
Section 382 of the Internal Revenue Code imposes an annual limitation on a corporation’s ability to use any net unrealized built-in losses and other tax attributes, such as net operating loss and tax credit carryforwards, when it undergoes a greater than 50% ownership change over a designated testing period not to exceed three years. Deferred tax assets are recognized for net operating losses because the benefit is more likely than not to be realized.
On June 29, 2020, California Assembly Bill 85 (A.B. 85) was signed into law. A.B. 85 suspends the use of the net operating loss (“NOL”) for the 2020, 2021, and 2022 tax years. For NOL incurred in tax years before 2020 for which a deduction is denied, the carryover period is extended by three years. On February 9, 2022, Senate Bill 113 (“S.B. 113”) S.B. 113 was signed into law, and among other changes, S.B. 113 reinstates the California NOL deductions for tax years beginning in 2022, in effect shortening the suspension period for NOL deductions from A.B. 85 by one year. On June 27, 2024, Senate Bill 167 (“S.B. 167”) was signed into law. S.B. 167 suspends the use of the net operating loss (“NOL”) for the 2024, 2025, and 2026 tax years. S.B. 167 includes an extended carryover period for the suspended NOLs with an additional year carryforward for each year of suspension.
As a result of the acquisition of CalWest in 2020, the Company has federal and California Section 382 limited net operating loss carryforwards of approximately $3.9 million and $5.4 million at December 31, 2025, which are scheduled to begin expiring in 2030 for federal and 2034 for California. The federal and California net operating loss carryforwards are subject to annual limitations of $381 thousand each year.
As a result of the merger with CALB completed in 2024, the Company has federal and California Section 382 limited net operating loss carryforwards of approximately $20.8 million and $28.1 million at December 31, 2025. The federal and California net operating loss carryforwards are subject to annual limitations of $7.8 million each year. Other state acquired net operating losses are immaterial to the consolidated financial statements at December 31, 2025. The Company expects to fully utilize the recorded federal, California, and other state net operating loss carryforwards before they expire.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 13, 2026 | Showing above |
| 2024 | Apr 1, 2025 | |
| 2023 | Mar 15, 2024 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.