California BanCorp Raises Credit-Loss Provision

The Tip Desk · November 10, 2026 · 4 min read

Net income was $14.0 million, or $0.43 a share, as the credit-loss provision rose to $3.2 million and the net interest margin compressed 10 bps.

California BanCorp (BCAL), the San Diego holding company for California Bank of Commerce, N.A., reported third-quarter net income of $14.0 million, or $0.43 a share, down from $14.3 million, or $0.44 a share, in the second quarter.

The decline was largely driven by a higher provision for credit losses and noninterest expense, partially offset by higher net interest income and noninterest income, the company said. Pre-tax, pre-provision income rose to $21.6 million from $20.5 million.

The provision for credit losses was $3.2 million, compared with $714 thousand in the second quarter and a $381 thousand reversal in the first quarter. The third-quarter charge included $4.6 million of net charge-offs, primarily the full write-off of two commercial and industrial loans from one online-advertising client whose revenue collapsed after unauthorized third-party use of its proprietary software. The company also cited updated California economic forecasts, revised scenario weighting, continued loan growth and portfolio mix.

Nonperforming loans were $9.3 million, or 0.30% of loans held for investment, up $407 thousand from $8.9 million at June 30, after a $21.7 million drop in the second quarter. The third-quarter increase reflected downgrades of a C&I loan and a commercial real estate loan, both classified as individually evaluated, collateral-dependent, with full repayment anticipated and no allowance recorded. Special mention loans fell $8.4 million to $40.3 million; substandard loans fell $5.5 million to $58.7 million after the charge-offs.

The allowance for credit losses was 1.13% of loans held for investment at September 30, down from 1.18% at June 30. The allowance for loan losses was 1.07% of LHFI, down from 1.13%, as the $4.6 million of net charge-offs more than offset the $3.2 million loan provision.

Net interest income was $44.1 million, up from $43.4 million, as a $1.4 million increase in interest income, including $1.2 million more loan interest income, more than offset a $581 thousand increase in interest expense. The net interest margin compressed 10 bps to 4.61% from 4.71%, reversing the prior quarter’s 24 bps expansion. The company attributed the margin decline to a 9 bps drop in the yield on average interest-earning assets, to 5.88% from 5.97%, and a 1 bps rise in the cost of funds.

The yield on average total loans fell 5 bps to 6.29%, including a 5 bps drag from $366 thousand of nonaccrual interest reversals. Accretion on acquired-loan discounts still added 42 bps to the loan yield. Cost of funds was 1.39%. The company said the 1 bps rise in cost of funds reflected a higher cost of average interest-bearing deposits, driven by deposit mix and competition lifting market deposit rates.

Total loans, including loans held for sale, increased $53.3 million, or 1.7%, to $3.16 billion at September 30, after a $113.7 million, or 3.8%, increase in the second quarter. Total deposits increased $117.4 million, or 3.5%, to $3.48 billion, led by a $115.5 million rise in interest-bearing non-maturity deposits. Noninterest-bearing deposits were 36.3% of the total, down from 37.4% at June 30.

The company redeemed all $35.0 million of 3.50% fixed-to-floating subordinated debt due 2031 at par on September 1, before the rate was scheduled to reset to 90-day SOFR plus 2.86%. Average borrowings fell $10.9 million to $23.5 million.

Share repurchases accelerated to 209,348 shares for $4.6 million from 102,594 shares for $2.0 million in the second quarter. The quarterly dividend was $0.12 a share. Tangible book value per common share was $14.22, down $0.07, as net income was more than offset by $0.37 of after-tax unrealized available-for-sale losses, $0.14 of buybacks and $0.12 of dividends. Tangible common equity to tangible assets fell to 11.42% from 11.77%. Preliminary capital ratios exceeded well-capitalized minimums.