California BanCorp (Form: 10-Q, Received: 08/11/2022 16:34:04)

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

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Table of Contents

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 June 30, 2022

☐	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.

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 August 1, 2022: 8,321,545

Table of Contents

CALIFORNIA BANCORP

INDEX TO QUARTERLY REPORT ON FORM

10-Q

FOR THE QUARTER ENDED JUNE 30, 2022


		Page
Part I - Financial Information

Item 1.	Financial Statements		3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		46
Item 4.	Controls and Procedures		46

Part II - Other Information

Item 1.	Legal Proceedings		47
Item 1A.	Risk Factors		47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		47
Item 3.	Defaults Upon Senior Securities		47
Item 4.	Mine Safety Disclosures		47
Item 5.	Other Information		47
Item 6.	Exhibits		49

Signatures			50

Table of Contents

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

CALIFORNIA BANCORP

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)

(Dollar amounts in thousands)


	June 30, 2022			December 31, 2021
ASSETS:
Cash and due from banks	$	20,378		$	4,539
Federal funds sold		138,057			465,917

Total cash and cash equivalents		158,435			470,456
Investment securities:
Available for sale, at fair value		53,613			74,892
Held to maturity, at amortized cost		111,696			28,386

Total investment securities		165,309			103,278
Loans, net of allowance for losses of $15,957 and $14,081 at June 30, 2022 and December 31, 2021, respectively		1,486,992			1,364,256
Premises and equipment, net		3,736			4,405
Bank owned life insurance (BOLI)		24,788			24,412
Goodwill and other intangible assets		7,493			7,513
Accrued interest receivable and other assets		38,599			40,676

Total assets	$	1,885,352		$	2,014,996

LIABILITIES AND SHAREHOLDERS’ EQUITY:
Deposits
Non-interest bearing	$	715,432		$	771,205
Interest bearing		836,707			908,933

Total deposits		1,552,139			1,680,138
Other borrowings		100,000			106,387
Junior subordinated debt securities		54,097			54,028
Accrued interest payable and other liabilities		20,372			23,689

Total liabilities		1,726,608			1,864,242
Commitments and Contingencies (Note 5)
Shareholders’ equity
Common stock, no par value; 40,000,000 shares authorized; 8,317,161 and 8,264,300 issued and outstanding at June 30, 2022 and December 31, 2021, respectively		110,289			109,473
Retained earnings		49,106			41,189
Accumulated other comprehensive income, net of taxes		(651	)		92

Total shareholders’ equity		158,744			150,754

Total liabilities and shareholders’ equity	$	1,885,352		$	2,014,996

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

CALIFORNIA BANCORP

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollar amounts in thousands, except per share data)


	Three Months Ended June 30,					Six Months Ended June 30,
	2022		2021			2022		2021
Interest income
Loans	$	16,298	$	14,703		$	31,184	$	29,287
Federal funds sold		280		84			416		172
Investment securities		1,128		392			2,030		752

Total interest income		17,706		15,179			33,630		30,211
Interest expense
Deposits		796		1,138			1,602		2,329
Borrowings and subordinated debt		687		455			1,279		960

Total interest expense		1,483		1,593			2,881		3,289
Net interest income		16,223		13,586			30,749		26,922
Provision for credit losses		925		(1,100	)		1,875		(800	)

Net interest income after provision for credit losses		15,298		14,686			28,874		27,722
Non-interest income
Service charges and other fees		1,134		638			2,023		1,279
Gain on the sale of loans		—		—			1,393		—
Other		260		318			512		598

Total non-interest income		1,394		956			3,928		1,877
Non-interest expense
Salaries and benefits		7,146		6,374			14,239		12,741
Premises and equipment		1,267		1,209			2,569		2,406
Professional fees		547		527			1,139		1,116
Data processing		599		484			1,207		1,064
Other		1,260		1,241			2,581		2,588

Total non-interest expense		10,819		9,835			21,735		19,915
Income before provision for income taxes		5,873		5,807			11,067		9,684
Provision for income taxes		1,629		1,645			3,150		2,713

Net income	$	4,244	$	4,162		$	7,917	$	6,971

Earnings per common share
Basic	$	0.51	$	0.51		$	0.96	$	0.85

Diluted	$	0.51	$	0.50		$	0.94	$	0.84

Average common shares outstanding		8,295,014		8,209,678			8,285,950		8,195,380

Average common and equivalent shares outstanding		8,395,701		8,295,278			8,393,776		8,275,510

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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CALIFORNIA BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollar amounts in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net Income	$	4,244		$	4,162		$	7,917		$	6,971
Other comprehensive income
Unrealized (losses) gains on securities available for sale, net		(777	)		588			(782	)		(155	)
Unrealized losses on securities transferred from available for sale to held to maturity, net		—			—			(281	)		—
Amortization of unrealized losses on securities transferred from available for sale to held to maturity, net		2			—			4			—
Tax effect		230			(174	)		316			46

Total other comprehensive (loss) income		(545	)		414			(743	)		(109	)

Total comprehensive income	$	3,699		$	4,576		$	7,174		$	6,862

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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CALIFORNIA BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED) - PART I

(Dollars in thousands)


									Accumulated Other Comprehensive Income (Loss)

												Total Shareholders’ Equity
	Common Stock						Retained Earnings
	Shares			Amount			Retained Earnings
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

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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CALIFORNIA BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED) - PART II

(Dollars in thousands)


									Accumulated Other Comprehensive Income (Loss)

												Total Shareholders’ Equity
	Common Stock						Retained Earnings
	Shares			Amount			Retained Earnings
Balance at December 31, 2020		8,171,734		$	107,948		$	27,821	$	641		$	136,410
Stock awards issued and related compensation expense		3,369			383			—		—			383
Stock options exercised		14,495			99			—		—			99
Net income		—			—			2,809		—			2,809
Other comprehensive loss		—			—			—		(523	)		(523	)

Balance at March 31, 2021		8,189,598		$	108,430		$	30,630	$	118		$	139,178
Stock awards issued and related compensation expense		28,562			234			—		—			234
Shares withheld to pay taxes on stock based compensation		(2,740	)		(150	)							(150	)
Stock options exercised		21,770			48			—		—			48
Shares withheld to pay exercise price on stock options		(8,074	)		(145	)		—		—			(145	)
Net income		—			—			4,162		—			4,162
Other comprehensive income		—			—			—		414			414

Balance at June 30, 2021		8,229,116		$	108,417		$	34,792	$	532		$	143,741

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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CALIFORNIA BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollar amounts in thousands)


	Six Months Ended June 30,
	2022			2021
Cash flows from operating activities:
Net income	$	7,917		$	6,971
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		1,875			(800	)
Provision for deferred taxes		218			238
Depreciation		778			1,490
Deferred loan (costs) fees, net		(859	)		1,215
Accretion on discount of purchased loans, net		(22	)		(62	)
Stock based compensation, net		795			467
Increase in cash surrender value of life insurance		(330	)		(327	)
Discount on retained portion of sold loans, net		(18	)		(18	)
Gain on sale of loans, net		(1,393	)		—
(Increase) decrease in accrued interest receivable and other assets		2,226			(1,924	)
Decrease in accrued interest payable and other liabilities		(2,880	)		(684	)

Net cash provided by operating activities		8,307			6,566

Cash flows from investing activities:
Purchase of investment securities		(78,780	)		(12,245	)
Proceeds from principal payments on investment securities		15,271			6,155
Proceeds from sale of loans		37,271			—
Net (decrease) increase in loans		(159,589	)		16,378
Capital calls on low income tax credit investments		(437	)		(549	)
Redemption of Federal Home Loan Bank stock		455			—
Purchase of premises and equipment		(108	)		(801	)
Purchase of bank-owned life insurance policies		(46	)		(40	)

Net cash used for investing activities		(185,963	)		8,898

Cash flows from financing activities:
Net (decrease) increase in customer deposits		(127,999	)		147,566
Paydown of long term borrowing, net		(56,387	)		(189,043	)
Paydown of short term and overnight borrowings, net		50,000			—
Proceeds from exercised stock options, net		21			2

Net cash provided by financing activities		(134,365	)		(41,475	)

Decrease in cash and cash equivalents		(312,021	)		(26,011	)
Cash and cash equivalents, beginning of period		470,456			418,517

Cash and cash equivalents, end of period	$	158,435		$	392,506

Supplemental disclosure of cash flow information:
Securities transferred from available for sale to the held to maturity classification	$	49,889		$	—
Cash paid during the year for:
Interest	$	3,007		$	3,739
Income taxes	$	2,003		$	1,521

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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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 in California located in Contra Costa County California and 4 loan production offices in California 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, 2021, and the notes thereto, included in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2021 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 six months ended June 30, 2022 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, 2022.

The Company’s accounting and reporting policies conform to GAAP and to general practices within the banking industry.

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.

Use of Estimates

Management is required 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 unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions affect the amounts reported in the unaudited consolidated financial statements and the disclosures provided, and actual results could differ. The estimates utilized to determine the appropriate allowance for loan losses at June 30, 2022 may be materially different from actual results due to the ongoing

COVID-19

pandemic and other qualitative factors.

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.

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Business Impact of

COVID-19

The

COVID-19

pandemic caused a substantial disruption to the global economy, U.S. economy, and the economies in which the Company operates. While the spread of the

COVID-19

virus has minimally impacted the Company’s operations as of June 30, 2022, we continue to closely monitor ongoing developments and remain focused on our ability to navigate these challenging conditions and on maintaining the underlying strength and stability of our Company.

Although the impact of

COVID-19

on the general economic environment and financial markets, including the Company’s market capitalization, has recently improved and stabilized, the continued uncertainty about the scope and longevity of its impact may adversely impact several industries within our geographic footprint and impair the ability of our customers to fulfill their contractual obligations to the Company. This could result in a material adverse effect on our business operations, asset valuations, financial condition, and results of operations. Material adverse impacts may include all or a combination of valuation impairments for investments, loans, and intangible assets.

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 impairment analysis of goodwill as of June 30, 2022 and determined there was no impairment. As part of the Company’s qualitative assessment of goodwill impairment, management considered

COVID-19

and determined that it was no longer a triggering event given that its impact on the general economic environment and financial markets, including the Company’s market capitalization, has improved and stabilized and, as such, does not currently represent an indicator of 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				Six months ended
	June 30,				June 30,
(Dollars in thousands, except per share data)	2022		2021		2022		2021
Net income available to common shareholders	$	4,244	$	4,162	$	7,917	$	6,971
Weighted average basic common shares outstanding		8,295,014		8,209,678		8,285,950		8,195,380
Add: dilutive potential common shares		100,687		85,600		107,826		80,130

Weighted average diluted common shares outstanding		8,395,701		8,295,278		8,393,776		8,275,510
Basic earnings per share	$	0.51	$	0.51	$	0.96	$	0.85

Diluted earnings per share	$	0.51	$	0.50	$	0.94	$	0.84

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New Financial Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued “Simplifying the Accounting for Income Taxes (Topic 740)” (“ASU

2019-12”)

removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) 740 and clarifying and amending existing guidance to provide for more consistent application. ASU

2019-12

became effective for fiscal years beginning after December 15, 2021 and early adoption was permitted. The adoption of this standard did not have a material effect on the Company’s operating results or financial condition.

In June 2016, the FASB issued ASU

2016-13,

Financial Instruments—Credit Losses (Topic 326). The guidance replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (CECL) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables,

held-to

maturity debt securities, and reinsurance receivables. It also applies to

off-balance

sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor. In October of 2019, the FASB approved a proposal to defer implementation of the CECL model by smaller reporting companies to January 1, 2023. The Company qualifies for this deferral and has elected to defer adoption but has also taken steps to effect implementation of the guidance including: (1) forming a CECL Committee; (2) engaging a third party vendor to develop models and model assumptions; (3) established initial framework for portfolio segmentation for application of the models; and (4) received preliminary results for consideration and evaluation. The Company will continue to calibrate and validate its approach during the period of deferral.

2. INVESTMENT SECURITIES

The following table summarizes the amortized cost and estimated fair value of securities available for sale at June 30, 2022 and December 31, 2021.


			Gross		Gross
			Unrealized /		Unrealized /			Estimated
	Amortized		Unrecognized		Unrecognized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value
At June 30, 2022:
Mortgage backed securities	$	24,358	$	48	$	(654	)	$	23,752
Government agencies		29,755		—		(381	)		29,374
Corporate bonds		428		59		—			487

Total available for sale securities	$	54,541	$	107	$	(1,035	)	$	53,613

Mortgage backed securities	$	63,912	$	—	$	(5,465	)	$	58,447
Government agencies		3,088		—		(482	)		2,606
Corporate bonds		44,696		29		(1,997	)		42,728

Total held to maturity securities	$	111,696	$	29	$	(7,944	)	$	103,781

At December 31, 2021:
Mortgage backed securities	$	29,943	$	325	$	(320	)	$	29,948
Government agencies		3,093		—		(100	)		2,993
Corporate bonds		41,725		694		(468	)		41,951

Total available for sale securities	$	74,761	$	1,019	$	(888	)	$	74,892

Mortgage backed securities	$	22,772	$	—	$	(140	)	$	22,632
Government agencies		—		—		—			—
Corporate bonds		5,614		—		(30	)		5,584

Total held to maturity securities	$	28,386	$	—	$	(170	)	$	28,216

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The Company purchased 8 available for sale securities for $36.0 million and 11 held to maturity securities for $42.8 million during the six months ended June 30, 2022. The Company purchased 3 available for sale securities for $12.2 million and no held to maturity securities during the six months ended June 30, 2021. The Company did not sell any securities during the six months ended June 30, 2022 and June 30, 2021.

Net unrealized losses on available for sale investment securities totaling $928,000 were recorded, net of deferred tax assets, as accumulated other comprehensive income within shareholders’ equity at June 30, 2022. Net unrealized gains on available for sale investment securities totaling $131,000 were recorded, net of deferred tax assets, as accumulated other comprehensive income within shareholders’ equity at December 31, 2021, respectively.

During the first quarter of 2022, the Company

re-designated

certain securities previously classified as available for sale to the held to maturity classification. The securities

re-designated

consisted of mortgage backed securities and government agencies with a total carrying value of $49.9 million at December 31, 2021. At the time of re-designation the securities included $281,000 of pretax unrealized losses in other comprehensive income which is being amortized over the remaining life of the securities in a manner consistent with the amortization of a premium or discount.

The following table summarizes securities with unrealized losses at June 30, 2022 and December 31, 2021 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 June 30, 2022:
Mortgage backed securities	$	20,887	$	(654	)	$	—	$	—		$	20,887	$	(654	)
Government agencies		29,374		(381	)		—		—			29,374		(381	)
Corporate bonds		—		—			—		—			—		—

Total available for sale securities	$	50,261	$	(1,035	)	$	—	$	—		$	50,261	$	(1,035	)

Mortgage backed securities	$	58,447	$	(5,465	)	$	—	$	—		$	58,447	$	(5,465	)
Government agencies		2,606		(482	)		—		—			2,606		(482	)
Corporate bonds		35,425		(1,090	)		4,092		(907	)		39,517		(1,997	)

Total held to maturity securities	$	96,478	$	(7,037	)	$	4,092	$	(907	)	$	100,570	$	(7,944	)

At December 31, 2021:
Mortgage backed securities	$	14,302	$	(320	)	$	—	$	—		$	14,302	$	(320	)
Government agencies		2,993		(100	)		—		—			2,993		(100	)
Corporate bonds		15,233		(200	)		4,732		(268	)		19,965		(468	)

Total available for sale securities	$	32,528	$	(620	)	$	4,732	$	(268	)	$	37,260	$	(888	)

Mortgage backed securities	$	22,632	$	(140	)	$	—	$	—		$	22,632	$	(140	)
Government agencies		5,584		(30	)		—		—			5,584		(30	)
Corporate bonds		—		—			—		—			—		—

Total held to maturity securities	$	28,216	$	(170	)	$	—	$	—		$	28,216	$	(170	)

At June 30, 2022 the Company’s investment security portfolio consisted of 61 securities, 56 of which were in an unrealized loss position at quarter end. At December 31, 2021 the Company’s investment security portfolio consisted of 44 securities, 16 of which were in an unrealized loss position at year end. Management believes that changes in the market value since purchase are primarily attributable to changes in interest rates and relative illiquidity. Because the Company does not intend to sell and is unlikely to be required to sell until a recovery of fair value, which may be at maturity, the Company did not consider those investments to be other-than-temporarily impaired at June 30, 2022 and December 31, 2021, respectively. As part of the Company’s assessment of other-than-temporary-impairment (OTTI), management considered the current impact of the

COVID-19

pandemic and determined that its impact on the general economic environment and financial markets has improved and stabilized and, as such, does not currently represent an indicator of impairment.

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The following table summarizes the scheduled maturities of the Company’s investment securities as of June 30, 2022.


	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
(Dollars in thousands)	Cost		Value		Cost		Value
Less that one year	$	—	$	—	$	—	$	—
One to five years		41,822		41,195		23,651		23,016
Five to ten years		—		—		32,245		31,010
Beyond ten years		2,175		2,199		21,933		19,007
Securities not due at a single maturity date		10,544		10,219		33,867		30,748

Total investment securities	$	54,541	$	53,613	$	111,696	$	103,781

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, mortgage backed securities and government agencies are not included in the maturity categories above and instead are shown separately as securities not due at a single maturity date.

3. LOANS AND ALLOWANCE FOR CREDIT LOSSES

Outstanding loans as of June 30, 2022 and December 31, 2021 are summarized below. Certain loans have been pledged to secure borrowing arrangements (see Note 4).


	June 30,			December 31,
(Dollars in thousands)	2022			2021
Commercial and industrial	$	589,562			474,281
Real estate - other		794,504			697,212
Real estate - construction and land		63,189			43,194
SBA		13,310			81,403
Other		39,814			80,559

Total loans, gross		1,500,379			1,376,649
Deferred loan origination costs, net		2,570			1,688
Allowance for credit losses		(15,957	)		(14,081	)

Total loans, net	$	1,486,992			1,364,256

SBA loans include Paycheck Protection Program (“PPP”) loans funded under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was enacted as a result of the

COVID-19.

Of the $491.2 million in PPP loans funded by the Company as a result of the initial launch of the program in April 2020 and the

re-launch

of the program in January 2021, approximately $483.4 million of those balances have been granted forgiveness by the SBA as of June 30, 2022. Outstanding PPP loans were $7.8 million and $72.5 million as of June 30, 2022 and December 31, 2021, respectively.

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The following table reflects the loan portfolio allocated by management’s internal risk ratings at June 30, 2022 and December 31, 2021.


	Commercial				Real Estate
	and		Real Estate		Construction
(Dollars in thousands)	Industrial		Other		and Land		SBA		Other		Total
As of June 30, 2022
Grade:
Pass	$	572,866	$	788,970	$	60,282	$	11,726	$	39,814	$	1,473,658
Special Mention		12,739		854		—		865		—		14,458
Substandard		3,957		4,680		2,907		719		—		12,263

Total	$	589,562	$	794,504	$	63,189	$	13,310	$	39,814	$	1,500,379

As of December 31, 2021
Grade:
Pass	$	450,913	$	690,916	$	39,074	$	79,379	$	80,559	$	1,340,841
Special Mention		20,904		1,583		1,278		1,111		—		24,876
Substandard		2,464		4,713		2,842		913		—		10,932

Total	$	474,281	$	697,212	$	43,194	$	81,403	$	80,559	$	1,376,649

The following table reflects an aging analysis of the loan portfolio by the time past due at June 30, 2022 and December 31, 2021.


(Dollars in thousands)	30 Days		60 Days		90+ Days		Non-Accrual		Current		Total
As of June 30, 2022
Commercial and industrial	$	161	$	—	$	—	$	—	$	589,401	$	589,562
Real estate - other		—		—		—		—		794,504		794,504
Real estate - construction and land		—		—		—		—		63,189		63,189
SBA		—		—		—		549		12,761		13,310
Other		—		—		—		—		39,814		39,814

Total loans, gross	$	161	$	—	$	—	$	549	$	1,499,669	$	1,500,379

As of December 31, 2021
Commercial and industrial	$	—	$	2,597	$	—	$	—	$	471,684	$	474,281
Real estate - other		—		—		—		—		697,212		697,212
Real estate - construction and land		—		—		—		—		43,194		43,194
SBA		—		—		—		232		81,171		81,403
Other		—		—		—		—		80,559		80,559

Total loans, gross	$	—	$	2,597	$	—	$	232	$	1,373,820	$	1,376,649

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The following table reflects the impairment methodology applied to gross loans by portfolio segment and the related allowance for credit losses as of June 30, 2022 and December 31, 2021.


	Commercial				Real Estate
	and		Real Estate		Construction
(Dollars in thousands)	Industrial		Other		and Land		SBA		Other		Total
As of June 30, 2022
Gross loans:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	549	$	—	$	549
Loans collectively evaluated for impairment		589,562		794,504		63,189		12,761		39,814		1,499,830

Total gross loans	$	589,562	$	794,504	$	63,189	$	13,310	$	39,814	$	1,500,379

Allowance for loan losses:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	159	$	—	$	159
Loans collectively evaluated for impairment		9,526		5,243		907		114		8		15,798

Total allowance for loan losses	$	9,526	$	5,243	$	907	$	273	$	8	$	15,957

As of December 31, 2021
Gross loans:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	731	$	—	$	731
Loans collectively evaluated for impairment		474,281		697,212		43,194		80,672		80,559		1,375,918

Total gross loans	$	474,281	$	697,212	$	43,194	$	81,403	$	80,559	$	1,376,649

Allowance for loan losses:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	142	$	—	$	142
Loans collectively evaluated for impairment		8,552		4,524		681		167		15		13,939

Total allowance for loan losses	$	8,552	$	4,524	$	681	$	309	$	15	$	14,081

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The following table reflects information related to impaired loans as of June 30, 2022 and December 31, 2021.


(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
As of June 30, 2022
With no related allowance recorded:
SBA	$	57	$	334	$	—	$	145	$	—
With an allowance recorded:
SBA	$	492	$	492	$	159	$	495	$	7
Total:
SBA	$	549	$	826	$	159	$	640	$	7
As of December 31, 2021
With no related allowance recorded:
SBA	$	232	$	705	$	—	$	233	$	14
With an allowance recorded:
SBA	$	499	$	499	$	142	$	477	$	59
Total:
SBA	$	731	$	1,204	$	142	$	710	$	73

The recorded investment in impaired loans in the table above excludes interest receivable and net deferred origination costs due to their immateriality.

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The following tables reflect the changes in, and allocation of, the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2022 and 2021.


(Dollars in thousands)	Commercial and Industrial			Real Estate Other			Real Estate Construction and Land			SBA			Other			Total
Three months ended June 30, 2022
Beginning balance	$	8,876		$	5,080		$	783		$	283		$	10		$	15,032
Provision for loan losses		650			163			124			(10	)		(2	)		925
Charge-offs		—			—			—			—			—			—
Recoveries		—			—			—			—			—			—

Ending balance	$	9,526		$	5,243		$	907		$	273		$	8		$	15,957

Net recoveries (charge-offs) / gross loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Three months ended June 30, 2021
Beginning balance	$	9,231		$	3,957		$	798		$	575		$	16		$	14,577
Provision for loan losses		(1,139	)		112			(101	)		20			8			(1,100	)
Charge-offs		—			—			—			(278	)		—			(278	)
Recoveries		41			—			—			—			—			41

Ending balance	$	8,133		$	4,069		$	697		$	317		$	24		$	13,240

Net recoveries (charge-offs) / gross loans		0.01	%		0.00	%		0.00	%		-0.14	%		0.00	%		-0.02	%
Six months ended June 30, 2022
Beginning balance	$	8,552		$	4,524		$	681		$	309		$	15		$	14,081
Provision for loan losses		973			719			226			(36	)		(7	)		1,875
Charge-offs		—			—			—			—			—			—
Recoveries		1			—			—			—			—			1

Ending balance	$	9,526		$	5,243		$	907		$	273		$	8		$	15,957

Net recoveries (charge-offs) / gross loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Six months ended June 30, 2021
Beginning balance	$	8,923		$	3,877		$	681		$	604		$	26		$	14,111
Provision for loan losses		(997	)		192			16			(9	)		(2	)		(800	)
Charge-offs		—			—			—			(278	)		—			(278	)
Recoveries		207			—			—			—			—			207

Ending balance	$	8,133		$	4,069		$	697		$	317		$	24		$	13,240

Net recoveries (charge-offs) / gross loans		0.05	%		0.00	%		0.00	%		-0.14	%		0.00	%		-0.01	%

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Interest forgone on nonaccrual loans totaled $18,000 and $53,000 for the three months ended June 30, 2022 and 2021, respectively. Interest forgone on nonaccrual loans totaled $35,000 and $61,000 for the six months ended June 30, 2022 and 2021, respectively. There was no interest recognized on a cash-basis on impaired loans for the three months ended June 30, 2022 and 2021.

Troubled Debt Restructurings

At June 30, 2022 and December 31, 2021, the Company had no recorded investments or allocated specific reserves related to loans with terms that had been modified in troubled debt restructurings.

The Company had no commitments as of June 30, 2022 and December 31, 2021 to customers with outstanding loans that were classified as troubled debt restructurings. There were no new troubled debt restructurings during the three and six months ended June 30, 2022.

The Company had no troubled debt restructurings with a subsequent payment default within twelve months following the modification during the three and six months ended June 30, 2022.

4. BORROWING ARRANGEMENTS

The Company has a borrowing arrangement with the Federal Reserve Bank of San Francisco (FRB) under which advances are secured by portions of the Bank’s loan and investment securities portfolios. The Company’s credit limit varies according to the amount and composition of the assets pledged as collateral. At June 30, 2022, amounts pledged and available borrowing capacity under such limits were approximately $412.9 million and $330.0 million, respectively. At December 31, 2021, amounts pledged and available borrowing capacity under such limits were approximately $317.8 million and $218.9 million, respectively. In April 2020, the Company secured an additional arrangement with the FRB for a $332.7 million Paycheck Protection Liquidity Facility (PPPLF) two year term borrowing maturing in April 2022 at a fixed rate of 0.35%. The Company repaid the PPPLF borrowing in full during the second quarter of 2022 and therefore had no balance outstanding as of June 30, 2022. At December 31, 2021, the PPPLF borrowing arrangement had an outstanding balance of $56.4 million.

The Company has a borrowing arrangement with the Federal Home Loan Bank (FHLB) under which advances are secured by portions of the Bank’s loan portfolio. The Company’s credit limit varies according to its total assets and the amount and composition of the loan portfolio pledged as collateral. At June 30, 2022, amounts pledged and available borrowing capacity under such limits were approximately $355.9 million and $209.9 million, respectively. At December 31, 2021, amounts pledged and available borrowing capacity under such limits were approximately $184.1 million and $88.1 million, respectively. In May 2022, the Company secured a FHLB short term borrowing for $50.0 million maturing on July 25, 2022 at a fixed rate of 1.17%. This FHLB short term borrowing had an outstanding balance of $50.0 million at June 30, 2022. In June 2022, the Company secured an additional FHLB short term borrowing for $50.0 million maturing on August 17, 2022 at a fixed rate of 1.98%. This FHLB short term borrowing had an outstanding balance of $50.0 million at June 30, 2022.

Under Federal Funds line of credit agreements with several correspondent banks, the Company can borrow up to $113.0 million. There were no borrowings outstanding under these arrangements at June 30, 2022 and December 31, 2021.

The Company maintains a revolving line of credit with a commitment of $3.0 million for a six month term at a rate of Prime plus 0.40%. At June 30, 2022 and December 31, 2021, no borrowings were outstanding under this line of credit.

The Company entered into a three year borrowing arrangement with a correspondent bank on March 20, 2020 for $12.0 million. The note is secured by the Company’s investment in the Bank and has a fixed rate of 3.95%. There were no borrowings outstanding under this arrangement at June 30, 2022 and December 31, 2021.

The Company issued $20.0 million in subordinated debt on September 30, 2020. The subordinated debt has a fixed interest rate of 5.00% for the first 5 years and a stated maturity of September 30, 2030. After the fifth year, the interest rate changes to a quarterly variable rate equal to then current three-month term SOFR plus 0.488%. The subordinated debt was recorded net of related issuance costs of $300,000. At June 30, 2022 and December 31, 2021, the balance remained at $20.0 million, net of the remaining unamortized issuance cost.

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The Company issued an additional $35.0 million in subordinated debt on August 17, 2021. The subordinated debt has a fixed interest rate of 3.50% for the first 5 years and a stated maturity of September 1, 2031. After the fifth year, the interest rate changes to a quarterly variable rate equal to then current three-month term SOFR plus 0.286%. The subordinated debt was recorded net of related issuance costs of $760,000. At June 30, 2022 and December 31, 2021, the balance remained at $35.0 million, net of the remaining unamortized issuance cost.

5. COMMITMENTS AND CONTINGENT LIABILITIES

Financial Instruments with

Off-Balance

Sheet Risk

The Company is a party to financial instruments with

off-balance-sheet

risk in the normal course of business in order to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. The Company’s exposure to credit loss in the event of nonperformance by the other party for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for loans included on the balance sheet.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a

case-by-case

basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but may include accounts receivable, inventory, and deeds of trust on residential real estate and income-producing commercial properties.

At June 30, 2022 and December 31, 2021, the Company had outstanding unfunded commitments for loans of approximately $618.7 million and $620.0 million, respectively. Unfunded loan commitment reserves, included in the allowance for loan losses, totaled $430,000 and $380,000 at June 30, 2022 and December 31, 2021, respectively.

The outstanding unfunded commitments for loans at June 30, 2022 was comprised of fixed rate commitments of approximately $39.9 million and variable rate commitments of approximately $578.8 million. The following table reflects the interest rate and maturity ranges for the unfunded fixed rate loan commitments as of June 30, 2022.


(Dollars in thousands)	Due in One Year Or Less		Over One Year But Less Than Five Years		Over Five Years		Total
Unfunded fixed rate loan commitments:
Interest rate less than or equal to 4.00%	$	18,620	$	3,810	$	6,246	$	28,676
Interest rate between 4.00% and 5.00%		1,472		2,705		6,019		10,196
Interest rate greater than or equal to 5.00%		—		1,053		—		1,053

Total unfunded fixed rate loan commitments	$	20,092	$	7,568	$	12,265	$	39,925

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Operating Leases

The Company leases various office premises under long-term operating lease agreements. These leases expire between 2022 and 2027, with certain leases containing either three, five, or seven year renewal options.

The following table reflects the quantitative information for the Company’s leases for the six months ended, and as of, June 30, 2022.


(Dollars in thousands)	June 30, 2022
Operating lease cost (cost resulting from lease payments)	$	983
Operating lease - operating cash flows (fixed payments)	$	1,246
Operating lease - ROU assets	$	5,476
Operating lease - liabilities	$	7,059
Weighted average lease term - operating leases		2.6 years
Weighted average discount rate - operating leases		2.95	%

The following table reflects the minimum commitments under these

non-cancellable

leases, before considering renewal options, as of June 30, 2022.


(Dollars in thousands)	June 30, 2022
2022	$	1,195
2023		1,497
2024		1,456
2025		1,500
2026		1,435
Thereafter		357

Total undiscounted cash flows		7,440
Discount on cash flows		(381	)

Total lease liability	$	7,059

Rent expense included in premises and equipment expense totaled $486,000 and $526,000 for the three months ended June 30, 2022 and 2021, respectively. Rent expense included in premises and equipment expense totaled $983,000 and $1.1 million for the six months ended June 30, 2022 and 2021, respectively.

Contingencies

The Company is involved in legal proceedings arising from normal business activities. Management, based upon the advice of legal counsel, believes the ultimate resolution of all pending legal actions will not have a material effect on the Company’s financial position or results of operations.

Correspondent Banking Agreements

The Company maintains funds on deposit with other federally insured financial institutions under correspondent banking agreements. Insured financial institution deposits up to $250,000 are fully insured by the FDIC under the FDIC’s general deposit insurance rules.

At June 30, 2022, uninsured deposits at financial institutions were approximately $3.6 million. At December 31, 2021, uninsured deposits at financial institutions were approximately $11.0 million.

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6. FAIR VALUE MEASUREMENTS

Fair Value Hierarchy

The Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Valuations within these levels are based upon:

Level 1 - Quoted market prices for identical instruments traded in active exchange markets.

Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable or can be corroborated by observable market data.

Level 3 - Model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect the Company’s estimates of assumptions that market participants would use on pricing the asset or liability. Valuation techniques include management judgment and estimation which may be significant.

Management monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period.

Management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities or total earnings.

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The carrying amounts and estimated fair values of financial instruments at June 30, 2022 and December 31, 2021 are as follows:


	Carrying Amount		Fair Value Measurements
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total
As of June 30, 2022
Financial assets:
Cash and cash equivalents	$	158,435	$	158,435	$	—	$	—	$	158,435
Investment securities:
Available for sale		53,613		—		53,613		—		53,613
Held to Maturity		111,696				94,915		8,866		103,781
Loans, net		1,486,992		—		—		1,449,817		1,449,817
Accrued interest receivable		5,805		—		885		4,920		5,805
Financial liabilities:
Deposits	$	1,552,139	$	1,387,098	$	164,969	$	—	$	1,552,067
Other borrowings		100,000		—		—		100,000		100,000
Subordinated debt		54,097		—		—		53,104		53,104
Accrued interest payable		734		—		66		668		734
As of December 31, 2021
Financial assets:
Cash and cash equivalents	$	470,456	$	470,456	$	—	$	—	$	470,456
Investment securities:
Available for sale		74,892		—		67,981		6,911		74,892
Held to Maturity		28,386				22,632		5,584		28,216
Loans, net		1,364,256				—		1,353,888		1,353,888
Accrued interest receivable		5,713		—		633		5,080		5,713
Financial liabilities:
Deposits	$	1,680,138	$	1,525,935	$	154,146	$	—	$	1,680,081
Other borrowings		106,387		—		—		106,387		106,387
Subordinated debt		54,028		—		—		56,092		56,092
Accrued interest payable		859		—		42		817		859

These estimates do not reflect any premium or discount that could result from offering the Company’s entire holdings of a particular financial instrument for sale at one time, nor do they attempt to estimate the value of anticipated future business related to the instruments. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates.

The methods and assumptions used to estimate fair values are described as follows:

Cash and Due from banks - The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.

Investment Securities - Since quoted prices are generally not available for identical securities, fair values are calculated based on market prices of similar securities on similar dates, resulting in Level 2 classification. For securities where market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators, resulting in Level 3 classification.

FHLB, IBFC, PCBB Stock - It is not practical to determine the fair value of these correspondent bank stocks due to restrictions placed on their transferability.

Loans—Fair values of loans for June 30, 2022 and December 31, 2021 are estimated on an exit price basis with contractual cash flow, prepayments, discount spreads, credit loss and liquidity premium assumptions. Loans with similar characteristics such as prepayment rates, terms and rate indexed are aggregated for purposes of the calculations.

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Impaired loans - Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. The fair value of impaired loans with specific allocations of the allowance for loan losses that are secured by real property is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent 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. The methods utilized to estimate the fair value of impaired loans do not necessarily represent an exit price.

Deposits - The fair values disclosed for demand deposits (e.g., interest and

non-interest

checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in Level 1 classification. The carrying amounts of variable rate and fixed-term money market accounts approximate their fair values at the reporting date resulting in Level 1 classification. For time certificates of deposit, the estimated remaining cash flows were discounted, based on current rates for similar instruments in market, to determine the fair value (premium)/discount and accordingly are classified as Level 2.

FHLB Advances - FHLB Advances are included in Other Borrowings. Fair values for FHLB Advances are estimated using discounted cash flow analyses using interest rates offered at each reporting date by correspondent banks for advances with similar maturities resulting in Level 3 classification.

Paycheck Protection Program Liquidity Facility (PPPLF) - The fair value of PPPLF is estimated using a discounted cash flow based on the remaining contractual term and current rates at which similar advances would be obtained resulting in Level 3 classification.

Senior Notes - Fair values for senior notes are estimated using a discounted cash flow calculation based on current rates for similar types of debt which may be unobservable, and considering recent trading activity of similar instruments in market which can be inactive and accordingly are classified within in the Level 3 classification.

Junior Subordinated Debt Securities - Fair values for subordinated debt are calculated based on its terms and were discounted to the date of the valuation to calculate the fair value on the debt. A market rate based on recent debt offering by peer bank was used to discount cash flow until reprice date and subsequently cash flow were discounted at Prime plus 2% for its security. These assumptions which may be unobservable, and considering recent trading activity of similar instruments in market which can be inactive and accordingly are classified within the Level 3 classification.

Accrued Interest Receivable - The carrying amounts of accrued interest receivable approximate fair value resulting in a Level 2 classification for accrued interest receivable on investment securities and a Level 3 classification for accrued interest receivable on loans since investment securities are generally classified using Level 2 inputs and loans are generally classified using Level 3 inputs.

Accrued Interest Payable - The carrying amounts of accrued interest payable approximate fair value resulting in a Level 2 classification, since accrued interest payable is from deposits that are generally classified using Level 2 inputs.

Off Balance Sheet Instruments - Fair values for

off-balance

sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.

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Assets Recorded at Fair Value on a Recurring Basis

The Company is required or permitted to record the following assets at fair value on a recurring basis as of June 30, 2022 and December 31, 2021.


(Dollars in thousands)	Fair Value		Level 1		Level 2		Level 3
As of June 30, 2022
Investments available for sale:
Mortgage backed securities	$	23,752	$	—	$	23,752	$	—
Government agencies		29,374		—		29,374		—
Corporate bonds		487		—		487		—

Total assets measured at fair value on a recurring basis	$	53,613	$	—	$	53,613	$	—

As of December 31, 2021
Investments available for sale:
Mortgage backed securities	$	29,948	$	—	$	29,948	$	—
Government agencies		2,993		—		2,993		—
Corporate bonds		41,951		—		35,040		6,911

Total assets measured at fair value on a recurring basis	$	74,892	$	—	$	67,981	$	6,911

The following table reflects the changes in all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2022.


(Dollars in thousands)	Corporate Securities
Balance at December 31, 2021	$	6,911
Purchases		—
Transfers into Level 3		—
Transfers out of Level 3		(6,911	)

Balance at June 30, 2022	$	—

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Assets Recorded at Fair Value on a

Non-Recurring

Basis

The Company may be required, from time to time, to measure certain assets at fair value on a

non-recurring

basis. These include assets that are measured at the lower of cost or market value that were recognized at fair value which was below cost at the reporting date. The following table summarizes impaired loans measured at fair value on a

non-recurring

basis as of June 30, 2022 and December 31, 2021.


	Carrying Amount		Fair Value Measurements
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3
As of June 30, 2022
Impaired loans - SBA	$	549	$	—	$	—	$	549

Total assets measured at fair value on a non-recurring basis	$	549	$	—	$	—	$	549

As of December 31, 2021
Impaired loans - SBA	$	731	$	—	$	—	$	731

Total assets measured at fair value on a non-recurring basis	$	731	$	—	$	—	$	731

The fair value of impaired loans is based upon independent market prices, estimated liquidation values of loan collateral or appraised value of the collateral as determined by third-party independent appraisers, less selling costs, generally. Level 3 fair value measurement includes other real estate owned that has been measured at fair value upon transfer to foreclosed assets and impaired loans collateralized by real property and other business asset collateral where a specific reserve has been established or a

charge-off

has been recorded. The unobservable inputs and qualitative information about the unobservable inputs are based on management’s best estimates of appropriate discounts in arriving at fair market value. Increases or decreases in any of those inputs could result in a significantly lower or higher fair value measurement. For example, a change in either direction of actual loss rates would have a directionally opposite change in the calculation of the fair value of impaired loans.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our financial condition at June 30, 2022 and December 31, 2021 and our results of operations for the three and six months ended June 30, 2022 and 2021, and should be read in conjunction with our audited consolidated financial statements set forth in our Annual Report on Form

10-K

for the year ended December 31, 2021 that was filed with the Securities and Exchange Commission (the “SEC”) on March 23, 2022 (our “Annual Report”) and with the accompanying unaudited notes to consolidated financial statements set forth in this Quarterly Report on Form

10-Q

for the quarterly period ended June 30, 2022 (this “Report”). Because we conduct all of our material business operations through our bank subsidiary, California Bank of Commerce, the discussion and analysis relates to activities primarily conducted by the Bank.

Forward Looking Statements

Statements contained in this Report that are not historical facts or that discuss our expectations, beliefs or views regarding our future operations or future financial performance, or financial or other trends in our business or in the markets in which we operate, and our future plans constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “forecast,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” The information contained in such forward-looking statements is based on current information available to us and on assumptions that we make about future economic and market conditions and other events over which we do not have control. In addition, our business and the markets in which we operate are subject to a number of risks and uncertainties. Such risks and uncertainties, and the occurrence of events in the future or changes in circumstances that had not been anticipated, could cause our financial condition or actual operating results in the future to differ materially from our expected financial condition or operating results that are set forth in the forward-looking statements contained in this Report and could, therefore, also affect the price performance of our shares.

In addition to the risk of incurring loan losses and provision for loan losses, which is an inherent risk of the banking business, these risks and uncertainties include, but are not limited to, the following: deteriorating economic conditions and macroeconomic factors such as unemployment rates and the volume of bankruptcies, as well as changes in monetary, fiscal or tax policy to address the impact of

COVID-19,

any of which could cause us to incur additional loan losses and adversely affect our results of operations in the future; the risk that the credit quality of our borrowers declines; potential declines in the value of the collateral for secured loans; the risk of a recession in the United States economy, and domestic or international economic conditions, which could cause us to incur additional loan losses and adversely affect our results of operations in the future; the risk that our interest margins and, therefore, our net interest income will be adversely affected by changes in prevailing interest rates; the risk that we will not be able to manage our interest rate risks effectively, in which event our operating results could be harmed; risks associated with seeking new client relationships and maintaining existing client relationships; and the prospect of changes in government regulation of banking and other financial services organizations, which could impact our costs of doing business and restrict our ability to take advantage of business and growth opportunities. Many of the foregoing risks and uncertainties are, and will be, exacerbated by the

COVID-19

pandemic and any worsening of the global business and economic environment as a result. Readers of this Report are encouraged to review the additional information regarding these and other risks and uncertainties to which our business is subject that is contained in Part I, Item 1A of our Annual Report and in Part II, Item 1A of this Report, as such information may be updated from time to time in subsequent filings we may make with the SEC. We urge you to read those risk factors in conjunction with your review of the following discussion and analysis of our results of operations for the three and six months ended, and our financial condition at, June 30, 2022.

Due to the risks and uncertainties we face, readers are cautioned not to place undue reliance on the forward-looking statements contained in this Report, which speak only as of the date of this Report, or to make predictions about future performance based solely on historical financial performance. We also disclaim any obligation to update forward-looking statements contained in this Report as a result of new information, future events or otherwise, except as may otherwise be required by law.

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Overview

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”). The Company has a full service branch in California located in Contra Costa County and 4 loan production offices in California located in Alameda County, Contra Costa County, Sacramento County, and Santa Clara County.

Selected Financial Data

The following tables set forth the Company’s selected historical consolidated financial data for the periods and as of the dates indicated. You should read this information together with the Company’s audited consolidated financial statements included in our Annual Report and the unaudited consolidated financial statements and related notes included elsewhere in this Report. The selected historical consolidated financial data as of and for the three and six months ended June 30, 2022 and 2021 are derived from our unaudited consolidated financial statements, which are included elsewhere in this Quarterly Report on Form

10-Q.

The Company’s historical results for any prior period are not necessarily indicative of future performance.


	Three months ended
	June 30,
(Dollars in thousands, except per share data)	2022			2021
Income Statement Data:
Interest income	$	17,706		$	15,179
Interest expense		1,483			1,593

Net interest income		16,223			13,586
Provision for credit losses		925			(1,100	)

Net interest income after provision for credit losses		15,298			14,686
Other income		1,394			956
Other expenses		10,819			9,835

Income before taxes		5,873			5,807
Income taxes		1,629			1,645

Net income	$	4,244		$	4,162

Per Share Data:
Basic earnings per share	$	0.51		$	0.51
Diluted earnings per share	$	0.51		$	0.50
Performance Measures:
Return on average assets		0.91	%		0.87	%
Return on average tangible equity (1)		11.34	%		12.42	%
Net interest margin		3.65	%		2.98	%
Efficiency ratio		61.41	%		67.63	%

(1)	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations Non-GAAP Financial Measures”

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	Six months ended
	June 30,
(Dollars in thousands, except per share data)	2022			2021
Income Statement Data:
Interest income	$	33,630		$	30,211
Interest expense		2,881			3,289

Net interest income		30,749			26,922
Provision for credit losses		1,875			(800	)

Net interest income after provision for credit losses		28,874			27,722
Other income		3,928			1,877
Other expenses		21,735			19,915

Income before taxes		11,067			9,684
Income taxes		3,150			2,713

Net income	$	7,917		$	6,971

Per Share Data:
Basic earnings per share	$	0.96		$	0.85
Diluted earnings per share	$	0.94		$	0.84
Performance Measures:
Return on average assets		0.84	%		0.73	%
Return on average tangible equity (1)		10.78	%		10.59	%
Net interest margin		3.42	%		2.96	%
Efficiency ratio		62.68	%		69.15	%

(1)	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations Non-GAAP Financial Measures”


	June 30,			December 31,
(Dollars in thousands)	2022			2021
Balance Sheet Data:
Assets	$	1,885,352		$	2,014,996
Loans, net	$	1,486,992		$	1,364,256
Deposits	$	1,552,139		$	1,680,138
Shareholders’ equity	$	158,744		$	150,754
Asset Quality Data:
Allowance for loan losses / gross loans		1.06	%		1.02	%
Allowance for loan losses / nonperforming loans		2906.56	%		6069.40	%
Nonperforming assets / total assets		0.03	%		0.01	%
Nonperforming loans / gross loans		0.04	%		0.02	%
Capital Adequacy Measures:
Tier I leverage ratio		8.27	%		7.23	%
Tier I risk-based capital ratio		8.09	%		8.62	%
Total risk-based capital ratio		11.84	%		12.75	%

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Critical Accounting Policies

Our unaudited consolidated financial statements are prepared in accordance with GAAP and with general practices within the financial services industry. Application of these principles requires management to make complex and subjective estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under current circumstances. These assumptions form the basis for our judgments about the carrying values of assets and liabilities that are not readily available from independent, objective sources. We evaluate our estimates on an ongoing basis. Use of alternative assumptions may have resulted in significantly different estimates. Actual results may differ from these estimates.

Our most significant accounting policies are described in Note 1 to our audited financial statements for the year ended December 31, 2021, included in our Annual Report on Form

10-K

and in Note 1 to our unaudited financial statements, which are included elsewhere in this Quarterly Report on Form

10-Q.

Non-GAAP

Financial Measures

Some of the financial measures discussed in this Quarterly Report on Form

10-Q

are considered

non-GAAP

financial measures. In accordance with SEC rules, we classify a financial measure as being a

non-GAAP

financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, from the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles.

The following tables reflect the details of the

non-GAAP

financial measures the Company included in this Quarterly Report on Form

10-Q.

We believe that these

non-GAAP

financial measures provide useful information to management and investors that is supplementary to our statements of financial condition, results of income and cash flows computed in accordance with GAAP. However, we acknowledge that our

non-GAAP

financial measures have limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to

non-GAAP

financial measures that other banking companies use. Other banking companies may use names similar to those we use for the

non-GAAP

financial measures we disclose, but may calculate them differently. You should understand how we and other companies each calculate their

non-GAAP

financial measures when making comparisons.


	Three months ended						Six months ended
	June 30,						June 30,
(Dollars in thousands)	2022			2021			2022			2021
Return on average tangible common equity:
Net income	$	4,244		$	4,162		$	7,917		$	6,971
Tangible equity:
Average equity	$	157,675		$	141,919		$	155,619		$	140,251
Average goodwill / core deposit intangible		7,499			7,540			7,504			7,545

Tangible equity	$	150,176		$	134,379		$	148,115		$	132,706

Return on average tangible common equity		11.34	%		12.42	%		10.78	%		10.59	%

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	June 30,			December 31,
(Dollars in thousands)	2022			2021
Allowance for credit losses as a percentage of outstanding loans, excluding PPP loans:
Allowance for credit losses	$	15,957		$	14,081
Gross loans		1,500,379			1,376,649
Less: PPP loans		7,843			72,527

Gross loans, net of PPP loans		1,492,536			1,304,122

Allowance for credit losses as a percentage of outstanding loans, excluding PPP loans		1.07	%		1.08	%

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Results of Operations – Three Months Ended June 30, 2022 and 2021:

Overview

For both the three months ended June 30, 2022 and June 30, 2021, net income was $4.2 million. Compared to the same period last year, net interest income increased by $2.6 million which was primarily offset by an increase in the provision for credit losses of $2.0 million. Additionally,

non-interest

income increased by $438,000 and

non-interest

expense increased by $984,000.

Net Interest Income and Margin

Net interest income, the difference between interest earned on loans and investments and interest paid on deposits and borrowings is the principal component of the Company’s earnings. Net interest income is affected by changes in the nature and volume of earning assets and interest-bearing liabilities held during the quarter, the rates earned on such assets and the rates paid on interest bearing liabilities.

Net interest income for the three months ended June 30, 2022, was $16.2 million, an increase of $2.6 million, or 19% from $13.6 million for the same period in 2021. The increase in net interest income was primarily attributable to a more favorable mix of higher yielding earning assets combined with a reduction in the cost of total deposits offset, in part, by a reduction in the amortization of net fees received on PPP loans. Amortization of net fees received on PPP loans was $667,000 and $1.7 million for the second quarter of 2022 and 2021, respectively.

Average total interest-earning assets were $1.78 billion in the second quarter of 2022 compared to $1.83 billion for the same period during 2021. For the quarter ended June 30, 2022, the yield on average earning assets increased 65 basis points to 3.98% from 3.33% for the quarter ended June 30, 2021. The yield on total average gross loans in the three months ended June 30, 2022 was 4.46%, representing an increase of 29 basis points compared to 4.17% in the same period one year earlier. For the three months ended June 30, 2022 and 2021, the yield on average investment securities decreased 5 basis points to 2.62% from 2.67%.

For the three months ended June 30, 2022, average loans increased $49.2 million, or 3%, from the quarter ended June 30, 2021 while average deposit balances decreased $40.4 million, or 3%, for the same period. As a result, the average loan to deposit ratio for the second quarter of 2022 was 93.46% compared to 88.05% for the second quarter of 2021.

Of the $49.2 million increase in average loan balances year over year, average commercial and real estate other loans increased by $150.6 million and $189.0 million, respectively, as a result of organic growth. These increases were partially offset by a decrease in average SBA loans of $291.3 million primarily due to PPP loan forgiveness.

Of the $40.4 million decrease in average total deposit balances year over year, $36.8 million was attributable to money market and savings accounts and $18.5 million was attributable to time deposits. These decreases were offset by an increase in total demand deposits of $14.9 million. The cost of interest-bearing deposits was 0.38% during the quarter ended June 30, 2022 compared to 0.52% in the same quarter one year earlier. In addition, the overall cost of average total deposit balances decreased by 8 basis points to 0.20% in the second quarter of 2022 compared to 0.28% in the second quarter of 2021.

As a result, the net interest margin increased by 67 basis points to 3.65% for the three months ended June 30, 2022, compared to 2.98% for the three months ended June 30, 2021.

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The following table shows the composition of average earning assets and average funding sources, average yields and rates, and the net interest margin for the quarters ended June 30, 2022 and 2021.


	Three months ended June 30,
	2022							2021
			Yields			Interest				Yields			Interest
	Average		or			Income/		Average		or			Income/
	Balance		Rates			Expense		Balance		Rates			Expense
ASSETS
Interest earning assets:
Loans (1)	$	1,464,922		4.46	%	$	16,298	$	1,415,729		4.17	%	$	14,703
Federal funds sold		145,329		0.77	%		280		355,457		0.09	%		84
Investment securities		172,766		2.62	%		1,128		58,794		2.67	%		392

Total interest earning assets		1,783,017		3.98	%		17,706		1,829,980		3.33	%		15,179

Noninterest-earning assets:
Cash and due from banks		19,735							19,147
All other assets (2)		61,444							60,431

TOTAL	$	1,864,196						$	1,909,558

LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Deposits:
Demand	$	42,380		0.08	%	$	8	$	33,861		0.12	%	$	10
Money market and savings		636,692		0.37	%		582		673,460		0.55	%		925
Time		153,859		0.54	%		206		172,452		0.47	%		203
Other		119,970		2.30	%		687		139,458		1.31	%		455

Total interest-bearing liabilities		952,901		0.62	%		1,483		1,019,231		0.63	%		1,593

Noninterest-bearing liabilities:
Demand deposits		734,481							728,074
Accrued expenses and other liabilities		19,139							20,334
Shareholders’ equity		157,675							141,919

TOTAL	$	1,864,196						$	1,909,558

Net interest income and margin (3)				3.65	%	$	16,223				2.98	%	$	13,586

(1)	Nonperforming loans are included in average loan balances. No adjustment has been made for these loans in the calculation of yields. Interest income on loans includes amortization of net deferred loan fees of $83,000 and $1.2 million, respectively.

(2)	Other noninterest-earning assets includes the allowance for loan losses of $15.0 million and $14.6 million, respectively.

(3)	Net interest margin is net interest income divided by total interest-earning assets.

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The following table shows the effect of the interest differential of volume and rate changes for the quarters ended June 30, 2022 and 2021. The change in interest due to both rate and volume has been allocated in proportion to the relationship of absolute dollar amounts of change in each.


	Three Months Ended June 30, 2022 vs. 2021
	Increase (Decrease) Due to Change in:
(Dollars in thousands)	Average Volume			Average Rate			Net Change
Interest income:
Loans	$	547		$	1,048		$	1,595
Federal funds sold		(405	)		601			196
Investment securities		744			(8	)		736
Interest expense:
Deposits
Demand		2			(4	)		(2	)
Money market and savings		(34	)		(309	)		(343	)
Time		(25	)		28			3
Other borrowings		(112	)		344			232

Net interest income	$	1,055		$	1,582		$	2,637

Interest Income

Interest income increased by $2.5 million in the second quarter of 2022 compared to the same period of 2021, primarily due to an increase in the prime rate which generated higher yields on our loan portfolio combined with PPP loans that were forgiven by the SBA being replaced with higher yielding commercial and real estate other loans, partially offset by a decrease in amortization of net fees collected on PPP loans. The prime rate at June 30, 2022 and June 30, 2021 was 4.75% and 3.25%, respectively. Interest earned on our loan portfolio of $16.3 million in the second quarter of 2022 represented an increase of $1.6 million, or 11%, compared to $14.7 million for the second quarter of 2021.

Additionally, the Company benefited from a more favorable mix of other earning assets. Interest earned on our investment securities portfolio of $1.1 million for the three months ended June 30, 2022 increased $736,000, or 188%, over $392,000 for the same period in the prior year.

Interest Expense

Interest expense decreased by $110,000 in the second quarter of 2022 compared to the same period of 2021, primarily due to the effect of decreased rates paid on interest-bearing deposits and a decrease in outstanding borrowings due to a lower PPPLF term borrowing, partially offset by increased interest pertaining to junior subordinated debt securities. The average rate paid on interest-bearing liabilities in the second quarter of 2022 compared to the same period one year earlier decreased 1 basis point to 0.62% from 0.63%.

Provision for Credit Losses

The provision for credit losses increased to $925,000 for the second quarter of 2022 compared to a release of reserves of $1.1 million for the second quarter of 2021. The Company had no loan charge-offs or recoveries during the second quarter of 2022 compared to net loan charge-offs of $237,000, or 0.02% of gross loans, in the same period of 2021. The allowance for credit losses as a percent of outstanding loans was 1.06% at June 30, 2022 and 1.02% at December 31, 2021. The reserve percentage excluding PPP loans, which are guaranteed by the SBA, was 1.07% at June 30,

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2021 compared to 1.08% at December 31, 2021 (See “Management’s Discussion and Analysis of Financial Condition and Results of Operations

Non-GAAP

Financial Measures”). See further discussion of the Provision for Credit Losses and Allowance for Credit losses in “Financial Condition – Allowance for Credit Losses”.

Noninterest Income

The following table reflects the major components of the Company’s noninterest income for the three months ended June 30, 2022 and 2021.


	Three Months Ended June 30,				Increase (Decrease)
(Dollars in thousands)	2022		2021		Amount			Percent
Service charges and other fees	$	1,134	$	638	$	496			78	%
Earnings on BOLI		165		163		2			1	%
Other		95		155		(60	)		-39	%

Total noninterest income	$	1,394	$	956	$	438			46	%

Noninterest income increased by $438,000, or 46% in the second quarter of 2022, compared to the second quarter of 2021. The increase was primarily the result of an increase in service charges and other fee income.

Noninterest Expense

The following table reflects the major components of the Company’s noninterest expense for the three months ended June 30, 2022 and 2021.


	Three Months Ended June 30,				Increase (Decrease)
(Dollars in thousands)	2022		2021		Amount		Percent
Salaries and benefits	$	7,146	$	6,374	$	772		12	%
Premises and equipment		1,267		1,209		58		5	%
Professional fees		547		527		20		4	%
Data processing		599		484		115		24	%
Other		1,260		1,241		19		2	%

Total non-interest expense	$	10,819	$	9,835	$	984		10	%

Non-interest

expense was $10.8 million and $9.8 million for the three months ended June 30, 2022 and 2021, respectively. Excluding capitalized loan origination costs,

non-interest

expense for the second quarter of 2022 was $11.9 million compared to $11.1 million for the second quarter of 2021, representing an increase of $840,000, or 8%.

Salaries and benefits for the second quarter of 2022 were $7.1 million, representing an increase of $772,000, or 12%, compared to $6.4 million for the second quarter of 2021. The increase in salaries and benefits expense was primarily due to an increase in salaries and benefits related to investments to support the continued growth of the business combined with a reduction in capitalized loan origination costs.

For the three months ended June 30, 2022 and 2021, the Company’s efficiency ratio, the ratio of

non-interest

expense to revenues, was 61.41% and 67.63%, respectively.

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Provision for Income Taxes

Income tax expense was $1.6 million for both the second quarter of 2022 and the same period in prior year. The effective tax rates for those time periods were 27.7% and 28.3%, respectively.

Results of Operations – Six Months Ended June 30, 2022 and 2021:

Overview

For the six months ended June 30, 2022 and June 30, 2021, net income was $7.9 million and $7.0 million, respectively. The increase of $946,000, or 14%, was primarily attributable to an increase in net interest income increased by $3.8 million and an increase in

non-interest

income of $2.1 million, partially offset by an increase in the provision for credit losses of $2.7 million, an increase in

non-interest

expense of $1.8 million and an increase in income tax expense of $437,000.

Net Interest Income and Margin

Net interest income for the six months ended June 30, 2022, was $30.7 million, an increase of $3.8 million, or 14% from $26.9 million for the same period in 2021. The increase in net interest income was primarily attributable to a more favorable mix of higher yielding earning assets combined with a reduction in the cost of total deposits offset, in part, by a reduction in the amortization of net fees received on PPP loans. Amortization of net fees received on PPP loans was $1.5 million and $3.3 million for the six months ended June 30, 2022 and 2021, respectively.

Average total interest-earning assets were $1.81 billion in the six months ended of 2022 compared to $1.84 billion for the same period during 2021. For the six months ended June 30, 2022, the yield on average earning assets increased 42 basis points to 3.74% from 3.32% for the six months ended June 30, 2021. The yield on total average gross loans in the six months ended June 30, 2022 was 4.43%, representing an increase of 26 basis points compared to 4.17% in the same period one year earlier. For the six months ended June 30, 2022 and 2021, the yield on average investment securities increased 5 basis points to 2.71% from 2.66%.

For the six months ended June 30, 2022, average loans increased $2.7 million from the six months ended June 30, 2021 while average deposit balances increased $21.1 million for the same period. As a result, the average loan to deposit ratio for the six months ended of 2022 was 88.12% compared to 89.12% for the six months ended of 2021.

Of the $2.7 million increase in average loan balances year over year, average commercial, real estate other and construction and land loans increased by $104.8 million, $167.5 million and $8.2 million, respectively, as a result of organic growth. Additionally, average purchased solar loans increased by $10.0 million. These increases were primarily offset by a decrease in lower yielding average SBA loans of $287.0 million as a result of PPP loan forgiveness.

Of the $21.1 million increase in average total deposit balances year over year, $28.9 million was attributable to an increase in noninterest-bearing demand deposits, a $20.5 million increase in money market and savings accounts and a $6.1 million increase in interest-bearing demand deposit accounts. These increases were partially offset by a decrease in time deposits of $34.4 million. The cost of interest-bearing deposits was 0.37% during the six months ended June 30, 2022 compared to 0.53% in the same period one year earlier. In addition, the overall cost of average total deposit balances decreased by 10 basis points to 0.20% in the six months ended of 2022 compared to 0.30% in the six months ended of 2021.

As a result of the more favorable mix of higher yielding earning assets combined with a lower cost of deposits, the net interest margin increased by 46 basis points to 3.42% for the six months ended June 30, 2022, compared to 2.96% for the six months ended June 30, 2021.

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The following table shows the composition of average earning assets and average funding sources, average yields and rates, and the net interest margin for the six months ended June 30, 2022 and 2021.


	Six months ended June 30,
	2022							2021
	Average Balance		Yields or Rates			Interest Income/ Expense		Average Balance		Yields or Rates			Interest Income/ Expense
ASSETS
Interest earning assets:
Loans (1)	$	1,418,314		4.43	%	$	31,184	$	1,415,618		4.17	%	$	29,287
Federal funds sold		244,809		0.34	%		416		362,301		0.10	%		172
Investment securities		151,324		2.71	%		2,030		57,109		2.66	%		752

Total interest earning assets		1,814,447		3.74	%		33,630		1,835,028		3.32	%		30,211

Noninterest-earning assets:
Cash and due from banks		19,244							20,978
All other assets (2)		62,500							60,719

TOTAL	$	1,896,191						$	1,916,725

LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Deposits:
Demand	$	40,300		0.09	%		17	$	34,185		0.12	%	$	21
Money market and savings		679,662		0.37	%		1,247		659,180		0.58	%		1,897
Time		151,588		0.45	%		338		186,021		0.45	%		411
Other		110,370		2.34	%		1,279		165,957		1.17	%		960

Total interest-bearing liabilities		981,920		0.59	%		2,881		1,045,343		0.63	%		3,289

Noninterest-bearing liabilities:
Demand deposits		737,928							709,022
Accrued expenses and other liabilities		20,724							22,109
Shareholders’ equity		155,619							140,251

TOTAL	$	1,896,191						$	1,916,725


Net interest income and margin (3)				3.42	%	$	30,749				2.96	%	$	26,922

(1)	Nonperforming loans are included in average loan balances. No adjustment has been made for these loans in the calculation of yields. Interest income on loans includes amortization of net deferred loan fees of $402,000 and $2.3 million, respectively.

(2)	Other noninterest-earning assets includes the allowance for loan losses of $14.6 million and $14.4 million, respectively.

(3)	Net interest margin is net interest income divided by total interest-earning assets.

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The following table shows the effect of the interest differential of volume and rate changes for the six months ended June 30, 2022 and 2021. The change in interest due to both rate and volume has been allocated in proportion to the relationship of absolute dollar amounts of change in each.


	Six Months Ended June 30, 2022 vs. 2021
	Increase (Decrease) Due to Change in:
(Dollars in thousands)	Average Volume			Average Rate			Net Change
Interest income:
Loans	$	59		$	1,838		$	1,897
Federal funds sold		(200	)		444			244
Investment securities		1,264			14			1,278
Interest expense:
Deposits
Demand		3			(7	)		(4	)
Money market and savings		38			(688	)		(650	)
Time		(77	)		4			(73	)
Other borrowings		(644	)		963			319

Net interest income	$	1,803		$	2,024		$	3,827

Interest Income

Interest income increased by $3.4 million in the six months ended June 30, 2022 compared to the same period of 2021, primarily due to an increase in the prime rate which generated higher yields on our loan portfolio combined with PPP loans that were forgiven by the SBA being replaced with higher yielding commercial and real estate other loans, partially offset by a decrease in amortization of net fees collected on PPP loans. The prime rate at June 30, 2022 and June 30, 2021 was 4.75% and 3.25%, respectively. Interest earned on our loan portfolio of $31.2 million in the six months ended June 30, 2022 represented an increase of $1.9 million, or 6%, compared to $29.3 million for the same period in 2021.

Additionally, the Company benefited from a more favorable mix of other earning assets. Interest earned on our investment securities portfolio of $2.0 million for the six months ended June 30, 2022 increased $1.3 million, or 170%, over $752,000 for the same period in the prior year.

Interest Expense

Interest expense decreased by $408,000 in the six months ended June 30, 2022 compared to the same period of 2021, primarily due to the effect of decreased rates paid on interest-bearing deposits and a decrease in outstanding borrowings due to a lower PPPLF term borrowing, partially offset by increased interest pertaining to junior subordinated debt securities. The average rate paid on interest-bearing liabilities in the six months ended of 2022 compared to the same period one year earlier decreased 4 basis points to 0.59% from 0.63%.

Provision for Credit Losses

The provision for credit losses increased to $1.9 million for the six months ended of 2022 compared to a release of reserves of $800,000 for the six months ended of 2021. The Company had net recoveries of $1,000 during the six months ended of 2022 compared to net loan charge-offs of $71,000, or 0.02% of gross loans, in the same period of 2021. The allowance for credit losses as a percent of outstanding loans was 1.06% at June 30, 2022 and 1.02% at December 31, 2021. The reserve percentage excluding PPP loans, which are guaranteed by the SBA, was 1.07% at June 30, 2022 compared to 1.08% at December 31, 2021 (See “Management’s Discussion and Analysis of Financial Condition and Results of Operations

Non-GAAP

Financial Measures”). See further discussion of the Provision for Credit Losses and Allowance for Credit losses in “Financial Condition – Allowance for Credit Losses”.

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Noninterest Income

The following table reflects the major components of the Company’s noninterest income for the six months ended June 30, 2022 and 2021.


	Six Months Ended June 30,				Increase (Decrease)
(Dollars in thousands)	2022		2021		Amount			Percent
Service charges and other fees	$	2,023	$	1,279	$	744			58	%
Gain on sale of SBA loans		1,393		—		1,393			100	%
Earnings on BOLI		330		325		5			2	%
Other		182		273		(91	)		-33	%

Total noninterest income	$	3,928	$	1,877	$	2,051			109	%

Noninterest income increased by $2.1 million, or 109%, in the six months ended June 30, 2022, compared to the six months ended of 2021. The increase was primarily attributable to a gain of $1.4 million recognized on the sale of a portion of our solar loan portfolio and an increase of $744,000 pertaining to service charges and other fees.

Noninterest Expense

The following table reflects the major components of the Company’s noninterest expense for the six months ended June 30, 2022 and 2021.


	Six Months Ended June 30,				Increase (Decrease)
(Dollars in thousands)	2022		2021		Amount			Percent
Salaries and benefits	$	14,239	$	12,741	$	1,498			12	%
Premises and equipment		2,569		2,406		163			7	%
Professional fees		1,139		1,116		23			2	%
Data processing		1,207		1,064		143			13	%
Other		2,581		2,588		(7	)		0	%

Total non-interest expense	$	21,735	$	19,915	$	1,820			9	%

Non-interest

expense was $21.7 million and $19.9 million for the six months ended June 30, 2022 and 2021, respectively. Excluding capitalized loan origination costs,

non-interest

expense for the six months ended June 30, 2022 was $23.8 million compared to $22.6 million for the six months ended June 30, 2021, representing an increase of $1.1 million, or 5%.

Salaries and benefits for the six months ended June 30, 2022 were $14.2 million, representing an increase of $1.5 million, or 12%, compared to $12.7 million for the six months ended June 30, 2021. The increase in salaries and benefits expense was primarily due to an increase in salaries and benefits related to investments to support the continued growth of the business combined with a reduction in capitalized loan origination costs.

For the six months ended June 30, 2022 and 2021, the Company’s efficiency ratio, the ratio of

non-interest

expense to revenues, was 62.68% and 69.15%, respectively.

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Provision for Income Taxes

Income tax expense was $3.2 million and $2.7 million for the six months ended June 30, 2022 and 2021. The effective tax rates for those time periods were 28.5% and 28.0%, respectively.

Financial Condition:

Overview

Total assets of the Company were $1.89 billion as of June 30, 2022 compared to $2.01 billion as of December 31, 2021. The decrease in total assets from

year-end

was primarily due to decreased liquidity resulting from deposit outflows related to forgiveness of PPP loans combined with an increase in outstanding loan balances.

Loan Portfolio

Our loan portfolio consists almost entirely of loans to customers who have a full banking relationship with us. Gross loan balances increased by $123.7 million, or 9%, from December 31, 2021 to June 30, 2022 primarily due to organic growth in the commercial and industrial and real estate other loan portfolios, partially offset by a reduction in SBA loans due to PPP loan forgiveness and a reduction in the other loan portfolio as a result of the Company selling a portion of its residential solar loan portfolio.

The loan portfolio at June 30, 2022 was comprised of approximately 39% of commercial and industrial loans compared to 34% at December 31, 2021. In addition, commercial real estate loans comprised 57% of our loans at June 30, 2022 compared to 54% at December 31, 2021. A substantial percentage of the commercial real estate loans are considered owner-occupied loans. Our loans are generated by our relationship managers and executives. Our senior management is actively involved in the lending, underwriting, and collateral valuation processes. Higher dollar loans or loan commitments are also approved through a bank loan committee comprised of executives and outside board members.

The following table reflects the composition of the Company’s loan portfolio and the percentage distribution at June 30, 2022 and December 31, 2021.


(Dollars in thousands)	June 30, 2022			December 31, 2021
Commercial and industrial	$	589,562			474,281
Real estate - other		794,504			697,212
Real estate - construction and land		63,189			43,194
SBA		13,310			81,403
Other		39,814			80,559

Total loans, gross		1,500,379			1,376,649
Deferred loan origination costs, net		2,570			1,688
Allowance for credit losses		(15,957	)		(14,081	)

Total loans, net	$	1,486,992			1,364,256

Commercial and industrial		39	%		34	%
Real estate - other		53	%		51	%
Real estate - construction and land		4	%		3	%
SBA		1	%		6	%
Other		3	%		6	%

Total loans, gross		100	%		100	%

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The following table shows the maturity distribution for total loans outstanding as of June 30, 2022. The maturity distribution is grouped by remaining scheduled principal payments that are due within one year, after one but within five years, after five years but within fifteen years, or after fifteen years. The principal balances of loans are indicated by both fixed and variable rate categories.


			Over One		Over Five
	Due in		Year But		Years But
	One Year		Less Than		Less Than		Over
(Dollars in thousands)	Or Less		Five Years		Fifteen Years		Fifteen Years		Total
Commercial and industrial	$	224,160	$	203,563	$	161,839	$	—	$	589,562
Real estate - other		24,351		322,308		438,455		9,390		794,504
Real estate - construction and land		45,942		12,843		4,404		—		63,189
SBA		73		8,950		2,956		1,331		13,310
Other		1,074		354		38,386		—		39,814

Total loans, gross	$	295,600	$	548,018	$	646,040	$	10,721	$	1,500,379


	Loans With
	Fixed		Variable
(Dollars in thousands)	Rates (1)		Rates		Total
Commercial and industrial	$	211,935	$	377,627	$	589,562
Real estate - other		511,585		282,919		794,504
Real estate - construction and land		5,658		57,531		63,189
SBA		7,843		5,467		13,310
Other		38,693		1,121		39,814

Total loans, gross	$	775,714	$	724,665	$	1,500,379

(1) Excludes variable rate loans on floors

Nonperforming Assets

Nonperforming assets are comprised of loans on nonaccrual status, loans 90 days or more past due and still accruing interest, and other real estate owned. We had no loans 90 days or more past due and still accruing interest and no other real estate owned at June 30, 2022. A loan is placed on nonaccrual status if there is concern that principal and interest may not be fully collected or if the loan has been past due for a period of 90 days or more, unless the obligation is both well secured and in process of legal collection. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on nonaccrual loans is subsequently recognized only to the extent that cash is received and the loan’s principal balance is deemed collectible. Loans are returned to accrual status when they are brought current with respect to principal and interest payments and future payments are reasonably assured. Loans in which the borrower is encountering financial difficulties and we have modified the terms of the original loan are evaluated for impairment and classified as TDR loans.

The CARES Act and the revised interagency guidance issued in April 2020, “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (Revised)”, provided banks the option to temporarily suspend certain requirements under GAAP related to Troubled Debt Restructurings (“TDRs”) for a limited time to account for the effects of

COVID-19.

As a result, the Company did not recognize eligible

COVID-19

loan modifications as TDRs. Additionally, loans qualifying for these modifications were not required to be reported as delinquent, nonaccrual, impaired or criticized solely as a result of a

COVID-19

loan modification. As of June 30, 2022, the Company had no loans remaining on a deferred status or that had a structure modification under the Cares Act guidelines. As of December 31, 2021, two loans totaling $3.5 million were on a deferred status or that had a structure modification under the Cares Act guidelines.

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The following table presents information regarding the Company’s nonperforming and restructured loans as of June 30, 2022 and December 31, 2021.


	June 30,			December 31,
(Dollars in thousands)	2022			2021
Nonaccrual loans	$	549		$	232
Loans over 90 days past due and still accruing		—			—

Total nonperforming loans		549			232
Foreclosed assets		—			—

Total nonperforming assets	$	549		$	232

Performing TDR’s	$	—		$	—

Nonperforming loans / gross loans		0.04	%		0.02	%
Allowance for loan losses / nonperforming loans		2906.56	%		6069.40	%

Allowance for Credit Losses

Our allowance for credit losses is maintained at a level management believes is adequate to account for probable incurred credit losses in the loan portfolio as of the reporting date. We determine the allowance based on a quarterly evaluation of risk. That evaluation gives consideration to the nature of the loan portfolio, historical loss experience, known and inherent risks in the portfolio, the estimated value of any underlying collateral, adverse situations that may affect a borrower’s ability to repay, current economic and environmental conditions and risk assessments assigned to each loan as a result of our ongoing reviews of the loan portfolio. This process involves a considerable degree of judgment and subjectivity. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance. Such agencies may require the Bank to recognize additions to the allowance based on judgments different from those of management.

Our allowance is established through charges to the provision for loan losses. Loans, or portions of loans, deemed to be uncollectible are charged against the allowance. Recoveries of previously

charged-off

amounts are credited to our allowance for loan losses. The allowance is decreased by the reversal of prior provisions when the total allowance balance is deemed excessive for the risks inherent in the portfolio. The allowance for loan losses balance is neither indicative of the specific amounts of future charge-offs that may occur, nor is it an indicator of any future loss trends.

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The following table provides information on the activity within the allowance for credit losses as of and for the periods indicated.


	Commercial						Real Estate
	and			Real Estate			Construction
(Dollars in thousands)	Industrial			Other			and Land			SBA			Other			Total
Three months ended June 30, 2022
Beginning balance	$	8,876		$	5,080		$	783		$	283		$	10		$	15,032
Provision for loan losses		650			163			124			(10	)		(2	)		925
Charge-offs		—			—			—			—			—			—
Recoveries		—			—			—			—			—			—

Ending balance	$	9,526		$	5,243		$	907		$	273		$	8		$	15,957

Net recoveries (charge-offs) / gross loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Three months ended June 30, 2021
Beginning balance	$	9,231		$	3,957		$	798		$	575		$	16		$	14,577
Provision for loan losses		(1,139	)		112			(101	)		20			8			(1,100	)
Charge-offs		—			—			—			(278	)		—			(278	)
Recoveries		41			—			—			—			—			41

Ending balance	$	8,133		$	4,069		$	697		$	317		$	24		$	13,240

Net recoveries (charge-offs) / gross loans		0.01	%		0.00	%		0.00	%		-0.14	%		0.00	%		-0.02	%
Six months ended June 30, 2022
Beginning balance	$	8,552		$	4,524		$	681		$	309		$	15		$	14,081
Provision for loan losses		973			719			226			(36	)		(7	)		1,875
Charge-offs		—			—			—			—			—			—
Recoveries		1			—			—			—			—			1

Ending balance	$	9,526		$	5,243		$	907		$	273		$	8		$	15,957

Net recoveries (charge-offs) / gross loans		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Six months ended June 30, 2021
Beginning balance	$	8,923		$	3,877		$	681		$	604		$	26		$	14,111
Provision for loan losses		(997	)		192			16			(9	)		(2	)		(800	)
Charge-offs		—			—			—			(278	)		—			(278	)
Recoveries		207			—			—			—			—			207

Ending balance	$	8,133		$	4,069		$	697		$	317		$	24		$	13,240

Net recoveries (charge-offs) / gross loans		0.05	%		0.00	%		0.00	%		-0.14	%		0.00	%		-0.01	%

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The provision for loan losses of $925,000 and $1.9 million for the quarter and six months ended June 30, 2022, respectively, were primarily the result of growth in our core loan portfolio along with continued qualitative assessments of the general macroeconomic environment, including the potential impact of

COVID-19

and regulatory sanctions imposed upon other countries.

Investment Portfolio

Our investment portfolio is comprised of debt securities. We use two classifications for our investment portfolio: available for sale and held to maturity. Securities that we have the positive intent and ability to hold to maturity are classified as “held to maturity securities” and reported at amortized cost. Securities not classified as held to maturity securities are classified as “investment securities available for sale” and reported at fair value.

During the first quarter of 2022, the Company

re-designated

certain securities previously classified as available for sale to the held to maturity classification. The securities

re-designated

Our investments provide a source of liquidity as they can be pledged to support borrowed funds or can be liquidated to generate cash proceeds. The investment portfolio is also a significant resource to us in managing interest rate risk, as the maturity and interest rate characteristics of this asset class can be readily changed to match changes in the loan and deposit portfolios. The majority of our investment portfolio is comprised of mortgage backed securities, government agency securities, and corporate bonds.

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The following table reflects the amortized cost and fair market values for the total portfolio for each of the categories of investments in our securities portfolio as of June 30, 2022 and December 31, 2021.


			Gross		Gross
			Unrealized /		Unrealized /			Estimated
	Amortized		Unrecognized		Unrecognized			Fair
	Cost		Gains		Losses			Value
(Dollars in thousands)
At June 30, 2022:
Mortgage backed securities	$	24,358	$	48	$	(654	)	$	23,752
Government agencies		29,755		—		(381	)		29,374
Corporate bonds		428		59		—			487

Total available for sale securities	$	54,541	$	107	$	(1,035	)	$	53,613

Mortgage backed securities	$	63,912	$	—	$	(5,465	)	$	58,447
Government agencies		3,088		—		(482	)		2,606
Corporate bonds		44,696		29		(1,997	)		42,728

Total held to maturity securities	$	111,696	$	29	$	(7,944	)	$	103,781

At December 31, 2021:
Mortgage backed securities	$	29,943	$	325	$	(320	)	$	29,948
Government agencies		3,093		—		(100	)		2,993
Corporate bonds		41,725		694		(468	)		41,951

Total available for sale securities	$	74,761	$	1,019	$	(888	)	$	74,892

Mortgage backed securities	$	22,772	$	—	$	(140	)	$	22,632
Government agencies		—		—		—			—
Corporate bonds		5,614		—		(30	)		5,584

Total held to maturity securities	$	28,386	$	—	$	(170	)	$	28,216

Deposits

Our deposits are generated through core customer relationships, related predominantly to business relationships. Many of our business customers maintain high levels of liquid balances in their demand deposit accounts and use the Bank’s treasury management services.

At June 30, 2022, approximately 46% of our deposits were in noninterest-bearing demand deposits. The balance of our deposits at June 30, 2022 were held in interest-bearing demand, savings and money market accounts and time deposits. Approximately 43% of total deposits were held in interest-bearing demand, savings and money market deposit accounts at June 30, 2022, which provide our customers with interest and liquidity. Time deposits comprised the remaining 11% of our deposits at June 30, 2022.

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The following table provides a comparative distribution of our deposits by outstanding balance as well as by percentage of total deposits at the dates indicated.


(Dollars in thousands)	Balance		% of Total
At June 30, 2022:
Demand noninterest-bearing	$	715,432		46	%
Demand interest-bearing		45,511		3	%
Money market and savings		626,156		40	%
Time		165,040		11	%

Total deposits	$	1,552,139		100	%

At December 31, 2021:
Demand noninterest-bearing	$	771,205		46	%
Demand interest-bearing		37,250		2	%
Money market and savings		717,480		43	%
Time		154,203		9	%

Total deposits	$	1,680,138		100	%

Liquidity

Our primary source of funding is deposits from our core banking relationships. The majority of the Bank’s deposits are transaction accounts or money market accounts that are payable on demand. A small number of customers represent a large portion of the Bank’s deposits, as evidenced by the fact that approximately 20% of deposits were represented by the 10 largest depositors as of June 30, 2022. We strive to manage our liquidity in a manner that enables us to meet expected and unexpected liquidity needs under both normal and adverse conditions. The Bank maintains significant

on-balance

sheet and

off-balance

liquidity sources, including a marketable securities portfolio and borrowing capacity through various secured and unsecured sources.

Capital Resources

We are subject to various regulatory capital requirements administered by federal and state banking regulators. Our capital management consists of providing equity to support our current operations and future growth. Failure to meet minimum regulatory capital requirements may result in mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and

off-balance

sheet items as calculated under regulatory accounting policies. As of June 30, 2022 and December 31, 2021, we were in compliance with all applicable regulatory capital requirements, including the capital conservation buffer, and the Bank’s capital ratios exceeded the minimums necessary to be considered ‘‘well-capitalized’’ for purposes of the FDIC’s prompt corrective action regulations. At June 30, 2022, the capital conservation buffer was 3.40%.

At June 30, 2022, the Bank had a Tier 1 risk based capital ratio of 10.53%, a total capital to risk-weighted assets ratio of 11.39%, and a leverage ratio of 10.75%. At December 31, 2021, the Bank had a Tier 1 risk based capital ratio of 11.38%, a total capital to risk-weighted assets ratio of 12.25%, and a leverage ratio of 9.51%.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this item.

Item 4. Controls and Procedures

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness as of June 30, 2022 of the Company’s disclosure controls and procedures, as defined in Rules

13a-15(e)

and

15d-15(e)

under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the fiscal quarter covered by this Form

10-Q.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, such controls.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are party to legal actions that are routine and incidental to our business. Given the nature, scope and complexity of the extensive legal and regulatory landscape applicable to our business, we, like all banking organizations, are subject to heightened regulatory compliance and legal risk. However, based on available information, management does not expect the ultimate disposition of any or a combination of these actions to have a material adverse effect on our business, financial condition and results of operation.

Item 1A. Risk Factors

There have been no material changes in the risk factors that were disclosed in Item 1A, under the caption “Risk Factors” in Part I of our Annual Report on Form

10-K

for the year ended December 31, 2021, which we filed with the SEC on March 23, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

On August 9, 2022, the Bank entered into an employment agreement with Scott Myers (the “Employment Agreement”), pursuant to which he will continue to serve as Senior Executive Vice President and Chief Lending Officer. The Employment Agreement has a three year term, which will automatically extend for additional one year terms unless either party declines to extend. The Employment Agreement provides that Mr. Myers will receive an annual base salary of $290,600 (which is subject to annual review by the Compensation Committee of the Bank), and will be eligible for an annual bonus pursuant to an executive incentive plan to be developed each year by the Bank’s Board of Directors. Mr. Myers is also entitled to an automobile allowance of $900 per month plus reimbursement in an amount not to exceed $750 per month for club dues and expenses. If the Bank terminates Mr. Myers’ employment without cause or he terminates his employment for good reason (as defined in the Employment Agreement), subject to his providing a release of claims in favor of the Bank, Mr. Myers will receive a lump sum payment equal to

one-half

of the sum of his annual base salary plus the average of his three most recent annual bonuses in addition to monthly payments in amounts equal to the cost of his COBRA premiums for up to 12 months. Following a change in control of the Company, in the event Mr. Myers is terminated without cause or terminates his employment for good reason, he will instead be entitled to a lump sum payment equal to his annual base salary plus the average of his three most recent annual bonuses, the COBRA benefits described above and accelerated vesting of his restricted stock and stock options.

The Bank and Mr. Myers have also entered into an Executive Supplemental Compensation Agreement (the “ESC Agreement”) providing for an annual projected target benefit of $60,000, payable monthly for a period of ten years, generally commencing upon separation from service. This benefit is subject to vesting based on continued service, with full vesting if he is terminated or quits for good reason (as defined in the agreement) in connection with a change of control. The Bank and Mr. Myers have also entered into a split-dollar agreement (the “Split-Dollar Agreement”) that shares the proceeds of bank owned life insurance previously purchased on his life such that if he should he die while employed, his named beneficiaries would receive a specified sum or the net amount at risk, whichever is smaller.

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The foregoing descriptions of the Employment Agreement, ESC Agreement and Split-Dollar Agreement are not intended to be complete and are qualified in their entirety by reference to the Employment Agreement, ESC Agreement and Split-Dollar Agreement, copies of which are attached as Exhibits 10.3, 10.4 and 10.5, respectively, to this report.

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Item 6. Exhibits


Exhibit Number		Description of Exhibit

3.1		Articles of Incorporation of California BanCorp (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10 filed with the Commission on March 4, 2020)

3.2		Amended and Restated Bylaws of California Bancorp (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 10 filed with the Commission on March 4, 2020)

10.1		First Amendment to Employment Agreement, dated as of April 28, 2022, by and between California Bank of Commerce and Steven E. Shelton (incorporated by reference to Exhibit 10.1 of California BanCorp’s Form 8-K filed on May 2, 2022)

10.2		First Amendment to Employment Agreement, dated as of April 28, 2022, by and between California Bank of Commerce and Thomas A. Sa (incorporated by reference to Exhibit 10.2 of California BanCorp’s Form 8-K filed on May 2, 2022)

10.3		Employment Agreement, dated as of August 9, 2022, by and between California Bank of Commerce and Scott Myers

10.4		Form of Executive Supplemental Compensation Agreement by and between California Bank of Commerce and each of Scott Myers, Thomas M. Dorrance, Vivian Mui and Michele Wirfel

10.5		Split-Dollar Agreement by and between California Bank of Commerce and Scott Myers

10.6		Employment Agreement, dated as of March 10, 2016, by and between California Bank of Commerce and Thomas M. Dorrance

10.7		Amendment No. 1 to Employment Agreement, dated as of June 19, 2018, by and between California Bank of Commerce and Thomas M. Dorrance

10.8		Employment Agreement, dated as of July 1, 2019, by and between California Bank of Commerce and Vivian Mui

10.9		Employment Agreement, dated as of June 19, 2018, by and between California Bank of Commerce and Michele Wirfel

31.1		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Principal Executive Officer Pursuant to Section 906 of the Public Company Accounting Reform and Investor Protections Act of 2002

32.2		Certification of Principal Financial Officer Pursuant to Section 906 of the Public Company Accounting Reform and Investor Protections Act of 2002

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Exhibit Number		Description of Exhibit

101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		California BanCorp

Dated: August 11, 2022	By:	/s/ Steven E. Shelton
		Steven E. Shelton
		Chief Executive Officer
		(Principal Executive Officer)

Dated: August 11, 2022	By:	/s/ Thomas A. Sa
		Thomas A. Sa
		President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

Exhibit 10.3

EMPLOYMENT AGREEMENT

This employment agreement (this “Agreement”) is entered into effective as of the 9th day of August, 2022 (the “Effective Date”), by and between CALIFORNIA BANK OF COMMERCE, a California banking corporation (the “Bank”), and Scott Myers (“Employee”).

In consideration of the mutual covenants and promises contained herein, the parties hereto agree as follows:

1. Position and Duties. Employee will be employed as the Bank’s Senior Executive Vice President and Chief Lending Officer. In those roles, he shall have the duties and responsibilities set forth in this Agreement and in the By-Laws of the Bank, subject to the direction of the Board of Directors of the Bank (the “Board”) and the Bank’s Chief Executive Officer.

As the Bank’s Senior Executive Vice President and Chief Lending Officer, Employee shall perform the duties of each such office as is customary in the commercial banking industry and such additional duties not inconsistent therewith, as may from time to time be reasonably requested of him by the Board or the Bank’s Chief Executive Officer.

Employee will devote substantially all his professional time, attention, and energy to the business of the Bank. Employee agrees to perform his duties conscientiously, efficiently and to the best of his ability. Except with the prior consent of the Bank’s Board of Directors, Employee will not, during the term of this Agreement, engage directly or indirectly, in any other business activity that is or may be competitive with or might place him in a competing position to that of the Bank or any company affiliated with the Bank. Notwithstanding the foregoing, Employee may (i) serve in any capacity with any civic, educational or charitable organization, or any trade association, without seeking or obtaining approval by the Board, provided such activities and service do not materially interfere or conflict with the performance of his duties hereunder and (ii) with the approval of the Board serve on the boards of directors of other corporations that are not involved in commercial banking or similar business activities; provided, however, Employee shall not directly or indirectly acquire, hold, or retain any beneficial interest in any business competing with or similar in nature to the business of the Bank except passive shareholder investments in other financial institutions and their respective affiliates which do not exceed three percent (3%) of the outstanding voting securities in the aggregate in any single financial institution and its affiliates on a consolidated basis.

2. Term. The term of this Agreement shall be three years from the Effective Date, unless earlier terminated by either party as set forth herein. Upon the occurrence of the third anniversary of the Effective Date, and on each anniversary date thereafter, the term of this Agreement shall be automatically extended for an additional one (1) year term, unless either party gives the other written notice of non-renewal not less than three (3) months before the expiration of such extension period, and in any event unless earlier terminated by either party as set forth herein. The term of this Agreement as in effect from time to time in accordance with the foregoing is referred to herein as the “Term.” Upon the termination of his employment, neither Employee nor the Bank will have any further obligation to the other under this Agreement, except for those provisions intended by the parties to survive termination of Employee’s employment as set forth in Paragraphs 12-36.

3. Base Salary. During the Term, the Bank will pay Employee a base salary at a rate of $290,600 per year (“Base Salary”), subject to an annual compensation review by the Compensation Committee of the Bank’s board of directors. Base Salary will be paid in accordance with the Bank’s normal payroll procedures, but in any case, no less frequently than monthly. Base Salary may be increased but not decreased during the Term, except in connection with a temporary reduction for cost savings that proportionately affects all executives of the Bank.

4. Stock Awards. Employee shall be eligible to participate in the 2017 Equity Incentive Plan of the Bank’s holding company, California BanCorp (“Bancorp”) and any other equity incentive plan generally made available to the Bank’s executives, subject to approval of the board of directors of Bancorp.

5. Bonuses. Employee shall be eligible for an annual bonus pursuant to the executive incentive plan developed each year by the Board. In order to earn an annual bonus, Employee must meet the goals set forth in the executive incentive plan and must be employed through December 31 of the applicable bonus year.

6. Automobile Allowance; Dues. During the Term, the Bank will pay Employee a $900 monthly auto allowance in accordance with the Bank’s normal payroll procedures in lieu of any mileage reimbursements. Employee will be personally responsible for all automobile expenses. In addition, during the Term, the Bank will reimburse Employee each calendar month in an amount not to exceed $750 for monthly dues and expenses at a country club selected by Employee and reasonably acceptable to the Bank.

7. Executive Retirement Plan; 401(k).

(a) The parties have instituted a supplemental executive retirement plan (the “SERP”) providing for payments to Employee after his termination of employment. Such deferred compensation benefits shall be in addition to any retirement benefits under any tax qualified benefit plan of the Bank.

(b) During the Term, Employee shall be entitled to participate in the Bank’s 401k profit sharing savings plan.

8. Health Benefits. The Bank will provide health benefits to Employee and his family with options and coverage consistent with those of the Bank’s group medical plans as in effect from time to time for the Bank’s other executives and will pay all related insurance premiums unless waived in writing by Employee.

9. Group Term Life Insurance. The Bank will provide group term life insurance to Employee to the same extent the Bank provides group term life insurance to its other full time employees; and Employee will designate the beneficiaries thereof. Upon Employee’s termination of employment for any reason his group term life insurance will cease and be of no further effect.

10. Disability Insurance. The Bank will provide long term disability insurance to Employee to the same extent the Bank provides such disability insurance to its senior executives generally.

11. Vacation. During the Term, Employee will be eligible for unlimited vacation commencing as of the Effective Date.

12. Withholding of Taxes. Bank may withhold from any amounts payable to Employee under this Agreement all federal, state, city or other taxes and withholdings as shall be required pursuant to any applicable law, rule or regulation.

13. Disability and Death. If, during the Term, Employee is unable to performing the essential functions of his job, with or without reasonable accommodation, then, to the extent permitted by applicable law, Employee’s employment shall terminate (“Termination by Reason of Disability”) on a date that is at the end of the period of paid administrative leave, as defined in this paragraph 13. If Employee is unable to perform the essential functions of his job with reasonable accommodation, the Bank shall place Employee on paid administrative leave, with continuation of full Base Salary and all employee benefits, for a period that ends upon the completion of the waiting period under the Bank’s long term disability insurance (“LTD Plan”) if Employee qualifies for LTD Plan benefits or, if earlier, three months from the date that he is placed on paid administrative leave. The end of the period of paid administrative leave is called the “Determination Date”. As of the Determination Date or upon Employee’s death, the Bank will pay to Employee or his estate the Accrued Obligations as defined in paragraph 15.

14. Termination of Agreement; Employee Resignation. Each party has the right to terminate Employee’s employment with the Bank at any time prior to the end of the term specified in paragraph 2, with or without Cause. For purposes of this Agreement, termination shall mean separation from service as defined by Treasury Regulation§ l.409A-l(h). If Employee decides to terminate his employment under this Agreement, Employee will provide the Bank with two weeks’ advance written notice; provided however that after receiving such notice the Bank, at any time prior to the end of the notice period, may terminate Employee’s employment immediately and pay Employee for the period that the notice otherwise would have run, in addition to all other amounts and benefits then due under this Agreement. Except in the case of termination for Good Reason, any voluntary termination or resignation by Employee pursuant to this paragraph shall be deemed for purposes of Employee’s compensation to be treated as if it were a Termination for Cause and Employee shall only be entitled to the Accrued Obligations.

15. Termination for Cause. Termination for Cause is defined as (i) willfully breaching Bank policies or banking regulations, (ii) habitually neglecting the duties required to be performed under this Agreement, (iii) committing an intentional act that has a material detrimental effect on the reputation or business of the Bank, including without limitation an act of sexual harassment in violation of Company policy, (iv) conviction of a felony or committing any such act of dishonesty, fraud, intentional misrepresentation or moral turpitude as would prevent effective performance of his duties under this Agreement, (v) repeatedly or willfully disregarding or failing to comply with a lawful directive of the board of directors of the Bank or Bancorp or (vi) the Bank receiving a written finding, order or directive from any state or federal banking regulator with jurisdiction over the Bank ordering the removal of Employee as an

executive officer of the Bank (“Cause”). If the Bank decides to terminate Employee’s employment for Cause, the Bank will provide Employee with a written statement stating the grounds for termination. Upon termination of Employee’s employment for Cause, Employee will not be entitled to any further amounts or benefits from the Bank except for accrued Base Salary, any annual bonus earned for the prior year but not yet paid, validly incurred and not reimbursed business expenses, and any and all other benefits earned through Employee’s last day of employment (“Accrued Obligations”), except as otherwise required by law.

16. Termination without Cause or Termination for Good Reason. Employee’s employment under this Agreement may also be terminated prior to the end of the Term by the Bank without Cause or by the Employee for Good Reason. For purposes of this Agreement, “Good Reason” shall mean that one or more of the following has occurred without the Employee’s written consent:

(i)

a material negative change in the nature or scope of the Employee’s position, responsibilities, duties or authority as set forth in paragraph 1;

(ii)

a material reduction in the Employee’s Base Salary in violation of this Agreement;

(iii)

Employee’s required relocation to a worksite location which is more than 25 miles from Employee’s then current principal worksite without Employee’s consent; or

(iv)

the Bank’s material breach of this Agreement.

provided that, in any such case, the Employee provides written notice to the Bank that the event giving rise to such claim of Good Reason has occurred within 60 days after the first occurrence of such event, and such Good Reason remains uncured by the Bank 30 days after the Employee has provided such written notice; provided further that any resignation of the Employee’s employment for “Good Reason” occurs no later than 60 days following the expiration of such cure period.

If during the Term the Bank terminates Employee’s employment without Cause or the Employee terminates for Good Reason, the Bank shall pay Employee the Accrued Obligations, and in addition, as full and final severance, the Bank will provide to Employee: (A) within fifteen business days of effective date of Employee’s release of claims, a lump sum payment in an amount equal to one-half (1/2) times the sum of his then-current annual Base Salary plus the average of the three (3) most recent annual bonuses previously paid to Employee (collectively, the “Standard Severance”); and (B) commencing within fifteen business days of the effective date of Employee’s release of claims, an amount each month that is equal to the monthly cost of COBRA premium for equivalent health insurance coverage, as in effect at the date of termination, for a period equal to the lesser of (x) 12 months from the date of Employee’s termination, (y) the number of months between the date of Employee’s termination and the date on which Employee becomes eligible to begin receiving benefits pursuant to Medicare, or (z) if

Employee accepts new employment, the number of months between the date of Employee’s termination and the date on which Employee becomes eligible to begin receiving benefits under the new employer’s health care plan (“COBRA Severance Benefits”). Notwithstanding the foregoing, if the Bank determines, in its sole discretion, that its payment of the foregoing premiums on Employee’s behalf would result in a violation of the nondiscrimination rules of Code Section 105(h)(2) or any statute or regulation of similar effect (including but not limited to the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then the Bank shall instead provide Employee each month (for the duration that is the lesser of clauses (x), (y), or (z)) with a taxable payment equal to the amount of the Company-portion of the premiums which Employee may, but is not required to, use towards the cost of coverage.

17. Release Agreement; Resignation.

(a) In the event of Termination without Cause by the Bank or a Termination for Good Reason by the Employee, Employee shall be eligible for the termination benefits and payments provided for in paragraphs 16 and 18 of this Agreement only if he first enters into a form of release agreement in the form of Exhibit A to this Agreement releasing the Bank from any and all claims, known and unknown, related to Employee’s employment with the Bank and he allows such release to become effective (by its own terms) within 60 days of termination of the Employee’s employment. Further provided that, if such termination benefits and payments are made by the Bank, and if the 60 day period (plus the fifteen business day period in which to make payment after the release agreement has become effective) spans two calendar years, regardless of when such release is executed by the Employee, such Standard Severance or Change of Control Severance payment must be made in the later calendar year. This condition precedent requiring execution and non-revocation of a release agreement does not apply to payment of the Accrued Obligations.

(b) If Employee’s employment terminates at any time and for any reason, such termination of employment shall be deemed to be an automatic and immediate resignation by Employee from all committees or other positions held with the Bank, effective as of the last date of his employment.

18. Change of Control.

(a) If during the Term the Bank undergoes a Change of Control, and within one year following such Change of Control Employee terminates his employment for Good Reason or Employee’s services are terminated by the Bank or its acquirer without Cause, then the Bank shall pay Employee the Accrued Obligations and, in addition, as full and final change of control severance, the Bank will provide to Employee: (i) a lump sum payment in an amount equal to one times the sum of (A) his then-current annual Base Salary and (B) the average of the three (3) most recent annual bonuses previously paid to Employee (collectively, the “Change of Control Severance”); (ii) the acceleration of the vesting of all outstanding and unvested equity awards previously granted to Employee, to the extent permitted under the applicable equity plan, if any (“Stock Acceleration”); and (iii) the COBRA Severance Benefits. Payment under this paragraph 18(a) shall be provided under the same conditions and timing specified in paragraph 17.

(b) If at any time that is less than six (6) months prior to a Change of Control the Bank terminates Employee’s employment without Cause or Employee terminates his employment for Good Reason, then such termination shall be treated as though it were a termination without Cause occurring within one year following a Change of Control and the Bank shall provide to Employee if and when the Change of Control is consummated (i) the Stock Acceleration and (ii) the Change of Control Severance minus any Standard Severance previously paid under paragraph 16. Any payments made to Employee under this paragraph 18(b) will be made at the later of (x) the Change of Control or (y) within fifteen business days after the effective date of Employee’s release of claims. Payment under this paragraph 18(b) shall be subject to the conditions and timing specified in paragraph 17. For purposes of this Agreement, a “Change of Control” occurs when the Bank experiences a Code Section 409A “change in control event.”

19. Indemnification. The parties acknowledge that on or prior to the Effective Date, each of the Bank and Bancorp has entered into an Indemnification Agreement with Employee. Such Indemnification Agreements remain in full force and effect and shall not be modified or otherwise affected by this Agreement, its modification or its termination.

20. Purchase or Return of Bank Property. Upon termination of Employee’s employment, Employee shall return all items of Bank property in his possession or under his control, provided that Employee may upon written notice to the Bank, elect to purchase any or all of his mobile phone, iPad and notebook computer at their then respective depreciated value, subject to Bank removing any Bank property or data or that of its customers.

21. Reimbursement of Business Expenses. During the Term, Employee will be reimbursed by the Bank for his ordinary, reasonable and necessary business expenses incurred by Employee in the performance of his duties and in furthering the Bank’s interests, including the costs of a cell phone using Bank designated equipment and service provider and, with the approval of the Bank’s Chief Executive Officer, continuing education programs. Employee will be diligent in observing the expense policies of the Bank. He will at all times be prudent and use good judgment in balancing the Bank’s objectives of minimizing expenses while at the same time aggressively seeking new business opportunities and a position in the community. He will prepare and promptly submit expense reports with substantially adequate records and other documentary evidence as required by the Bank’s policies or by federal and state statutes and regulations with respect to the substantiation of such expenditures as deductible business expenses of the Bank. The Bank shall reimburse Employee for all such expenses within 30 days of Employee’s written notice to Bank of such expenses.

22. Confidential and Proprietary Information and Trade Secrets. All records of the accounts of customers, and any other records and books relating in any manner whatsoever to the customers of the Bank, and all other files, books and records and other materials owned by the Bank or used by it in connection with the conduct of its business, whether prepared by Employee or otherwise coming into Employee’s possession, shall be the exclusive property of the Bank regardless of who actually prepared the original material, book or record. All such books and records and other materials shall be immediately returned to the Bank by Employee upon the end of his employment for any reason. Employee agrees that all information, including but not limited to that which is directly or indirectly related to the Bank’s financial status, profitability, deposit base, portfolio size and quality as well as its customers and prospective customers, is confidential and proprietary to the Bank and that he will maintain such information as confidential. Employee agrees that as a condition of employment he will execute such form of confidentiality agreement as the Bank may adopt from time to time for senior officers of the Bank.

During the term of employment Employee shall have access to and become acquainted with trade secrets of the Bank, including the names of customers and clients, their financial condition and financial needs, financial information regarding the Bank and other information relating to the Bank’s products, services and methods of doing business. Employee agrees not to disclose any of the Bank’s trade secrets, directly or indirectly, or use them in any way, either during the term of employment (except as required in the course of employment with the Bank) or at any time thereafter.

23. Unsecured General Creditor. Neither Employee nor any other person or entity shall have any legal right or equitable rights, interests or claims in or to any property or assets of the Bank under the provisions of this Agreement. No assets of the Bank shall be held under any trust for the benefit of Employee or any other person or entity or held in any way as security for the fulfilling of the obligations of the Bank under this Agreement. All of the Bank’s assets shall be and remain the general, unpledged, unrestricted assets of the Bank. The Bank’s obligations under this Agreement are unfunded and unsecured promises, and to the extent such promises involve the payment of money, they are promises to pay money in the future. Employee and any person or entity claiming through him shall be unsecured general creditors with respect to any rights or benefits hereunder.

24. Excise Tax Provision. Notwithstanding anything elsewhere in this Agreement to the contrary, if any of the payments or benefits provided for in this Agreement, together with any other payments or benefits (the “Payment”) which Employee has the right to receive from the Bank (or its affiliated companies) or any acquirer of the Bank, would constitute an “excess parachute payment” within the meaning of Section 280G of the Internal Revenue Code (the “Code”) and be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), such Payment shall be reduced to the least extent necessary so that no portion of the Payment shall be subject to the Excise Tax, but only if, by reason of such reduction, the net after-tax benefit received by the Employee as a result of such reduction will exceed the net after-tax benefit that would have been received by the Employee if no such reduction were made. The Payment shall be reduced, if applicable, by the Bank in the following order of priority: (A) reduction of any cash severance payments otherwise payable to the Employee that are exempt from Section 409A of the Code; (B) reduction of any other cash payments or benefits otherwise payable to the Employee that are exempt from Section 409A of the Code, but excluding any payments attributable to any acceleration of vesting or payments with respect to any equity award that are exempt from Section 409A of the Code; (C) reduction of any payments attributable to any acceleration of vesting or payments with respect to any equity award that are exempt from Section 409A of the Code, in each case beginning with payments that would otherwise be made last in time; and (D) reduction of any other payments or benefits otherwise payable to the Employee on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payments attributable to any acceleration of vesting and payments with respect to any equity award that are exempt from Section 409A of the Code. If, however, such Payment is not reduced as described above, then such Payment shall be paid in full to the Employee and the Employee shall be responsible for payment of any Excise Taxes relating to the Payment.

25. Adjustment of Severance Payment Amounts to Accommodate Internal Revenue Code Section 409A Limitation. It is the intention of the Bank and Employee that all payments made in connection with a termination of employment under this Agreement either be exempt from, or otherwise comply with, Section 409A of the Code. Notwithstanding any other term or provision of this Agreement, to the extent that any provision of this Agreement is determined by the Bank with the advice of its independent accounting firm or other tax advisors to be subject to and not in compliance with Section 409A of the Code, including, without limitation, the definition of “change in control” or “disability,” the timing of commencement and completion of severance and/or other benefit payments to Employee hereunder, or the amount of any such payments, such provisions shall be interpreted in the manner required to comply with Section 409A. The Bank and Employee acknowledge and agree that such interpretation could, among other matters, (i) limit the circumstances or events that constitute a “change in control” or “disability,” (ii) delay for a period of six (6) months or more, or otherwise modify the commencement of severance and/or other benefit payments, and/or (iii) modify the completion date of severance and/or other benefit payments. The parties agree, however, that if the date of payment called for by this Agreement is altered pursuant to the requirements of Section 409A, then the timing of such payment shall be adjusted to the earliest practicable date, but the amount of such payment will not be adjusted, thus insuring the payment in full of all payments promised hereunder. In addition, each payment hereunder is intended to constitute a separate payment from each other payment for purposes of Treasury Regulation § l.409A-2(b)(2).

Notwithstanding the above, the Bank and Employee further acknowledge and agree that if, in the judgment of the Bank and its independent accounting firm or other tax advisors, amendment of this Agreement is necessary to comply with Section 409A, the Bank and Employee will negotiate reasonably and in good faith to amend the terms of this Agreement to the extent necessary so that it complies with Section 409A of the Code.

26. Regulatory Restrictions. The parties understand and agree that if at the time any payment would otherwise be made or benefit provided under paragraphs 16 or 18 depending on the facts and circumstances existing at such time, the satisfaction of such obligations by the Bank may be deemed by a regulatory authority to be illegal, an unsafe and unsound practice, or for some other reason not properly due or payable by the Bank. Among other restrictions, the regulations at 12 C.F.R., Part 30, Appendix A promulgated pursuant to Section 39(a) of the Federal Deposit Insurance Act, and at 12 C.F.R. Part 359, or similar regulations or regulatory action following similar principles may apply at such time. The parties understand, acknowledge and agree that, notwithstanding any other provision of this Agreement, the Bank shall not be obligated to make any payment or provide any benefit under paragraphs 16 or 18 where an appropriate regulatory authority disapproves or does not acquiesce as required, if required, and the authority’s disapproval or non-acquiescence is documented in a writing from the authority a copy of which is actually provided by the authority or the Bank to Employee.

27. No Conflicting Agreements. Employee represents that his performance of all of the terms of this Agreement and any service to be rendered as an employee of the Bank does not and will not breach any fiduciary or other duty or any covenant, agreement or understanding, including without limitation any agreement relating to any proprietary information, knowledge or data acquired by Employee in confidence, trust or otherwise prior to Employee’s employment by the Bank to which Employee is a party or by the terms of which Employee may be bound. Employee covenants and agrees that he will not disclose to the Bank, or induce the Bank to use, any proprietary information, knowledge or data, belonging to any previous employer or others and that Employee will disclose to the Bank the terms of any prior confidentiality agreement or agreements Employee has entered into. Employee further covenants and agrees not to enter into any agreement or understanding, either written or oral, in conflict with the provisions of this Agreement.

28. Successors and Assigns. This Agreement will inure to the benefit of and be binding upon the Bank and any of its successors and assigns. In view of the personal nature of the services to be performed under this Agreement by Employee, he will not have the right to assign or transfer any of his rights, obligations or benefits under this Agreement, except as may be required by the surviving entity in a Change of Control.

29. Governing Law. This Agreement will at all times and in all respects be governed by the laws of the State of California applicable to transactions wholly performed in California between California residents, except to the extent governed by the laws of the United States of America in which case federal laws shall govern.

30. Arbitration. All claims, disputes and other matters in question arising out of or relating to the employment relationship or its termination shall be resolved by binding arbitration before a representative member, selected by the mutual agreement of parties, of the Judicial Arbitration and Mediation Services, Inc. (“JAMS”), in accordance with the rules and procedures of JAMS then in effect. In the event JAMS is unable or unwilling to conduct such arbitration, or has discontinued its business, the Bank and Employee agree that a representative member, selected by the mutual agreement of the parties, of the American Arbitration Association (“AAA”), shall conduct such binding arbitration in accordance with the rules and procedures of the AAA then in effect.

Notice of the demand for arbitration shall be filed in writing with the other party to this Agreement and with JAMS (or AAA, if necessary). In no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. Any award rendered by JAMS or AAA shall be final and binding upon the parties, and as applicable, their representative heirs, beneficiaries, legal representatives, agents, successors and assigns, and may be entered in any court having jurisdiction thereof. The obligation of the parties to arbitrate pursuant to this paragraph 30 shall be specifically enforceable in accordance with, and shall be conducted consistently with, the provisions of Title 9 of Part 3 of the California Code of Civil Procedure. Either party may seek preliminary injunctive or equitable relief from a court in furtherance of the arbitration. Any arbitration hereunder shall be conducted in Alameda County, California, unless otherwise agreed to by the parties.

31. Advice to Seek Counsel. Employee acknowledges that he has been advised by the Bank that this Agreement imposes legal obligations upon him and to consult with legal counsel with regard to this Agreement. Employee acknowledges that he has been afforded the opportunity to obtain legal counseling with regard to this Agreement.

32. Notices. Any notice required to be given hereunder will be sufficient if in writing and sent by certified or registered mail, return receipt requested, first-class-postage-paid, and sent, in the case of Employee, to Employee’s address as shown on the Bank’s records and, in the case of the Bank, to its principal office, addressed to the Chairman of the Board. Notices will be deemed given when actually received, or three days after mailing, whichever is earlier. E-mail will also be sufficient and may be relied upon by the sender if and only if the latter has received e-mail or written confirmation from the party to whom such e-mail was sent.

33. Entire Agreement; Modification; Severability. This Agreement and any attachments hereto contain the entire agreement and understanding by and between the Bank and Employee with respect to the subject matter herein, and no representation, promise, agreement or understanding, written or oral, not herein contained will be of any force or effect. No modification hereof will be valid or binding unless in writing and signed by the party intended to be bound. No waiver of any provision of this Agreement will be valid unless in writing and signed by the party against whom such waiver is sought to be enforced. No valid waiver of any provision of this Agreement at any time will be deemed a waiver of any other provision of this Agreement, or will be deemed a valid waiver of any of such provision at any other time. If any provision of this Agreement is held by a court of competent jurisdiction or an arbitration body to be invalid, void or unenforceable, the remaining provisions of this Agreement will, nonetheless, continue in full force without being impaired or invalidated in any way.

34. Non-Competition, Non-Solicitation. During the Term, Employee will not directly or indirectly engage in or prepare to engage in any banking or financial products business, loan origination or deposit taking business or any other business competitive with the Bank. During the Term and for a period of eighteen (18) months thereafter, Employee shall not directly or indirectly induce or solicit, or attempt to induce or solicit, any employee, contractor or consultant of the Bank to terminate his/her employment or relationship with the Bank or otherwise interfere with the employment or service relationship between the Bank and its employees, contractors or consultants.

35. Regulatory Approval. In the event that any regulatory authority with jurisdiction over the Bank disapproves of any provision of this Agreement, the parties hereto will use their commercially reasonable best efforts, acting in good faith, to amend the Agreement in a manner that will be acceptable to the parties and to the regulatory authorities.

36. Counterparts. This Agreement may be executed in one or more counterparts, all of which together shall constitute a single agreement and each of which shall be an original for all purposes.

[signature page follows]

In witness whereof, the Bank and Employee have duly executed both counterparts of this Agreement and it is effective as of the Effective Date.


CALIFORNIA BANK OF COMMERCE

By:		/s/ Steven E. Shelton
Name:		Steven E. Shelton
Title:		President and Chief Executive Officer

EMPLOYEE

/s/ Scott Myers
Scott Myers

EXHIBIT A

RELEASE AGREEMENT

California Bank of Commerce (“Bank”) and Scott Myers (“Employee”) hereby enter into this Release Agreement (the “Agreement”). The parties agree as follows:

1. Consideration for Release. In consideration for the releases and covenants contained in this Agreement, Bank shall pay to Employee the sums described in paragraphs 16 or 18, as applicable, of the Employment Agreement dated as of August 9, 2022 between Bank and Employee (the “Employment Agreement”). Employee acknowledges that the payment of such sums provides good, sufficient and valuable consideration for Employee’s covenants, waivers, and releases contained in this Agreement. Employee understands that Bank’s willingness to pay such sums is contingent upon Employee’s fulfillment of his obligations contained herein. If Employee revokes this Agreement as described in Section 5 below, Bank shall be released from its obligations under this Agreement and paragraph 16 or 18, as applicable, of the Employment Agreement.

2. General Mutual Release. In exchange for the consideration described in this Agreement the adequacy of which is hereby acknowledged, each party hereto, on behalf of himself or itself and his or its heirs, successors and assigns, hereby fully releases and forever discharges the other party hereto, including each of their officers, directors, agents, employees, attorneys, parents, affiliates and/or subsidiaries, from any and all claims, actions and liabilities of any kind or character whatsoever, arising at law or in equity, known or unknown, suspected or unsuspected, that such party has ever had, now has or may now have against the other party, including, without limitation, all claims directly or indirectly related to or arising out of Employee’s employment by Bank, the performance of his duties during that employment, and/or the termination of or his resignation from that employment. This waiver and release specifically includes, but is not limited to, all claims, if any, whether arising in tort or in contract, related to Employee’s employment, including any and all claims for wrongful discharge or wrongful termination; claims for alleged violation of public policy or breach of implied covenant of good faith and fair dealing; claims for breach of fiduciary duty; claims for negligent or intentional infliction of emotional distress; claims arising in connection with Employee’s compensation, benefits, warrants and/or stock options; claims for breach of express or implied contract or for further monetary compensation by way of additional salary or bonus allegedly due Employee by reason of his employment with Bank; and all other claims, based on common law or federal or state statute, including claims for discrimination based on age arising under state statute or the federal Age Discrimination in Employment Act, the Older Workers’ Benefits Protection Act, or any similar federal or state law prohibiting age discrimination. Notwithstanding the foregoing, the claims released in this Section do not include any intentional acts by Employee that are outside the course and scope of Employee’s employment with Bank. This Agreement will not affect Employee’s entitlement to benefits described in the Employment Agreement (including Employee’s right to continued healthcare under the Employment Agreement and/or COBRA), or any non-waivable benefits under California’s unemployment or worker’s compensation laws, nor shall this Agreement constitute a release of any claims for breach of the Employment Agreement by Bank.

3. Waiver of Unknown Claims or Rights. Employee acknowledges that he is waiving unknown claims pursuant to California Code of Civil Procedure Section 1542, and he expressly waives such rights as quoted below:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.

Employee hereby expressly waives any rights he may have under any other statute or common law principles of similar effect.

4. Knowing and Voluntary Agreement. Employee acknowledges he is freely and voluntarily entering into this Agreement based on his own judgment and not as a result of any representations or promises made by Bank, other than those contained in this Agreement. Employee also acknowledges that he has been given a full opportunity to review this Agreement with an attorney, and has signed it only after full reflection and analysis of its provisions.

5. Review Period, Acceptance, ADEA Waiver, Waiting and Revocation Period. Employee acknowledges and understands that the release of claims under the Age Discrimination in Employment Act (“ADEA’’), 29 U.S.C. Sections 621-634, is subject to special waiver protections under 29 U.S.C. Section 626(f). In accordance with the ADEA and the Older Workers benefits Protection Act (“OWBPA”), Employee specifically agrees that he is knowingly and voluntarily releasing and waiving any rights or claims of age discrimination under the ADEA. In particular he acknowledges that he understands that:

(i) he is not waiving any claims for age discrimination under the ADEA that may arise after the date he signs this Agreement and he is not waiving vested benefits if any;

(ii) he is waiving rights or claims for age discrimination under the ADEA in exchange for payments described above, which are in addition to anything of value to which he is already entitled; and

(iii) he is advised to consult with and has had an opportunity to consult with an attorney before signing this Agreement.

Employee understands and agrees that he has up to 21 days to review this Agreement. This Agreement is revocable by Employee for seven days following his signing of this Agreement (“Revocation Period”). This Agreement automatically becomes enforceable and effective on the eighth (8th) day after the Agreement is signed by Employee, provided there has been no timely revocation.

6. Non-Execution or Revocation of Agreement. In the event that Employee does not execute this Agreement or revokes it within the time provided, he shall not be entitled to receive the payment described in Section 1 of this Agreement.

7. Warranties. Employee warrants and represents that there are no liens or claims of lien or assignments in law or equity or otherwise on or against any potential claims or causes of action released herein, and, further, that Employee is fully entitled and duly authorized to give this complete and final general release and discharge. Employee warrants that he has not filed any lawsuits or administrative claims against Bank, and he is not aware of any claims, filed by him against Bank in any forum, that are pending.

The parties have read and understand the terms of this Agreement, have had an opportunity to consult with an attorney, and hereby voluntarily and knowingly agree to its terms.



						Date:
Scott Myers

CALIFORNIA BANK OF COMMERCE

By:						Date:
Its: Chairman of the Board

Exhibit 10.4

EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT

(By and Between California Bank of Commerce and )

This Executive Supplemental Compensation Agreement (hereinafter “Agreement”) is made and entered into effective as , 20 , by and between California Bank of Commerce (hereinafter the “Bank” or the “Employer”), a state-chartered commercial bank with its principal offices located in the city of Lafayette, California and , an Executive of the Bank (“Executive”).

WHEREAS, it is deemed to be in the best interests of the Employer to provide the Executive with certain fringe benefits, on the terms and conditions set forth herein, in order to reasonably induce Executive to remain in the Bank’s employ during Executive’s lifetime or until the age of retirement; and

WHEREAS, Executive and the Employer wish to specify in writing the terms and conditions upon which these certain fringe benefits will be provided to Executive; and

WHEREAS, it is the intent of the parties hereto that this Agreement be considered an unfunded arrangement maintained primarily to provide supplemental retirement benefits for Executive, who is a member of management and a highly compensated employee within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); and

WHEREAS it is the intent of the parties hereto that this Agreement be compliant with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”),

NOW, THEREFORE, in consideration of the past employment performance and the services to be performed by Executive in the future, as well as the mutual promises and covenants contained herein, Executive and the Employer agree as follows:

1.0 Definitions. For the purposes of this Agreement, the following terms shall have the meanings indicated, unless the context clearly indicates otherwise. In addition, in the event of any ambiguity, then any terms herein shall be interpreted so as to be compliant with Internal Revenue Code Section 409A.

1.1 Accrued Liability Balance. For the purposes of this Agreement, the “Accrued Liability Balance” shall mean the liability accrued by the Bank to fund the future benefit payments associated with this Agreement. The Bank shall accrue the liability associated with this benefit using Generally Accepted Accounting Principles, regulatory accounting guidance of the Bank’s primary federal regulator, and other applicable accounting guidance. The discount rate employed shall be periodically adjusted by the Bank and will be within reasonable standards according to GAAP. Any one of a variety of amortization methods may be used to determine the Accrued Liability Balance; however, once chosen, the method must be consistently applied.

1.2 Administrator. The Bank shall be the “Administrator” of this Agreement.

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1.3 Beneficiary(ies) or Designated Beneficiary(ies). The terms “Beneficiary(ies)” or “Designated Beneficiary(ies)” shall mean those individual(s) or entities designated in accordance with the provisions of Section 7.0 to receive any Executive Benefit due or outstanding to Executive upon Executive’s death.

1.4 Board of Directors. The term “Board of Directors” or “Board” shall mean the Board of Directors of California Bank of Commerce.

1.5 Change in Control. For the purpose of this Agreement, a Change in Control shall include any of the following (and for the purposes of this provision, the term “corporation” shall mean the “Bank”):

Change in the Ownership of a Corporation. A change in the ownership of a corporation occurs on the date that any one person or persons acting as a group (as defined in IRC 409A), acquires ownership of stock of the corporation that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of such corporation. The acquisition of additional stock by the same person or group is not considered to cause a change in the ownership of the corporation.

Change in the Effective Control of a Corporation. A change in the effective control of the corporation shall be deemed to occur on either of the following dates:

(1) The date any one person, or persons acting as a group acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or group) ownership of stock of the corporation possessing thirty percent (30%) or more of the total voting power of the stock of such corporation; or

(ii) The date a majority of members of the corporation’s board of directors is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the corporation’s board of directors before the date of the appointment or election.

Change in the Ownership of a Substantial Portion of a Corporation’s Assets. A change in the ownership of a substantial portion of a corporation’s assets shall be deemed to occur on the date that any one person or group acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the corporation that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of the corporation immediately before such acquisition or acquisitions. No Change in Control shall result if the assets are transferred to certain entities controlled directly or indirectly by the shareholders of the transferring corporation.

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In addition, to constitute a change in control event with respect to Executive, the change in control event must relate to (1) the corporation for which Executive is performing services at the time of the Change in Control; (ii) the corporation that is liable for the payment of the amounts described herein (or all corporations liable for the payment if more than one corporation is liable) but only if either the deferred compensation is attributable to the performance of services by Executive for such corporation(s) or there is a bona fide business purpose for such corporation(s) to be liable for such payment and, in either case, no significant purpose of making such corporation(s) liable for such payment is the avoidance of Federal income tax; or (iii) a corporation that is a majority shareholder of a corporation identified in (i) or (ii) above, or any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending in a corporation identified in (i) or (ii) above.

1.6 Claimant. The term “Claimant” shall refer to an individual or entity that files a claim to benefits pursuant to Section 8.0.

1.7 The Code. The “Code” shall mean the Internal Revenue Code of 1986, as amended.

1.8 Committee. The term “Committee” shall mean the Compensation Committee of the Board of Directors of California Bank of Commerce.

1.9 Disability/Disabled. For the purposes of this Agreement, Executive will be considered Disabled if it is determined, in a manner consistent with IRC 409A, that:

Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or

Executive is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Employer.

In the event a disability policy has been purchased by Employer for Executive, then the individual or entity responsible for determining such disability thereunder shall determine Executive’s Disability under this Agreement (using the forgoing Disability definition). In the event no such disability policy exists, then the Administrator shall make a good faith determination of Disability in a manner consistent with IRC 409A.

1.10 Effective Date. The term “Effective Date” shall mean the date first written above.

1.11 Employer. The term the “Employer” shall mean California Bank of Commerce, any subsidiaries or affiliates thereof, or any successors thereto.

1.12 ERISA. The term “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

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1.13 Executive Benefit. For the purposes of this Agreement, the term “Executive Benefit” shall refer to the benefit to which Executive may be entitled to receive pursuant to this Agreement. Amounts actually received by Executive, however, shall be determined pursuant to Sections 4-6 (including sub-paragraphs, as applicable), forfeited, reduced or adjusted to the extent: (a) required under the other provisions of this Agreement; (b) required by reason of the lawful order of any regulatory agency or body having jurisdiction over Employer; or (c) required in order for Employer to comply with any and all applicable state and federal laws, including, but not limited to, income, employment and disability income tax laws (e.g., FICA, FUTA, SDI).

1.14 Involuntary Termination/Involuntary Separation From Service. In accordance with IRC 409A, the terms “Involuntary Termination” or “Involuntary Separation From Service” shall mean a Separation From Service due to the independent exercise of the unilateral authority of the Bank to terminate Executive’s services, other than due to Executive’s implicit or explicit request, where Executive was willing and able to continue performing services (and not as the result of death, Disability or a Termination For Cause).

1.15 IRC 409A. The term “IRC 409A” shall refer to Section 409A of the Code and the related regulations or other guidance issued by the Internal Revenue Service and/or the Treasury Department.

1.16 Remains Employed. The term “Remains Employed” shall mean that Executive has not experienced a Separation From Service with Employer.

1.17 Separation From Service/ Termination of Employment. The terms “Separation From Service” (Separates From Service) and “Termination of Employment” shall be used interchangeably for the purposes of this Agreement and shall be defined in accordance with the provisions of IRC 409A. Consistent with IRC 409A, whether a termination of employment has occurred shall be determined based on whether the facts and circumstances indicate that the Bank and Executive reasonably anticipate that no further services will be performed after a certain date or that the level of bona fide services Executive will perform after such date (whether as an employee or as an independent contractor) will permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (as an employee or an independent contractor) over the immediately preceding thirty-six (36) month period (or the full period of services to the Employer if Executive has been providing services to the Employer less than 36 months). There shall be no Separation From Service while Executive is on military leave, sick leave or other bona fide leave of absence, as long as such leave does not exceed six (6) months, or if longer, so long as Executive retains a right to re-employment with the Employer under an applicable statute or by contract.

1.18 Service Period. For the purposes of this Agreement, the term “Service Period” shall refer to the period of time between and . The Service Period shall expire at the close of business on .

1.19 Service Ratio. For the purposes of this Agreement, the “Service Ratio” shall be a fraction, the numerator of which shall be the number of full months Executive has been employed by the Bank since the beginning of the Service Period, and the denominator of which shall be one hundred twenty (120).

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1.20 Specified Employee. In accordance with IRC 409A, a “Specified Employee” shall mean a key employee (as defined in Code Section 416(i), disregarding paragraph 5 thereof) of an employer of which any stock is publicly traded on an established securities market or otherwise.

1.21 Target Benefit. For the purposes of this Agreement, the “Target Benefit” shall be an annual amount equal to sixty thousand dollars ($60,000).

1.22 Termination For Cause. For the purposes of this Agreement, “Termination for Cause” shall be defined as Executive’s Termination of Employment with the Bank for one or more of the following reasons:

Willfully breaching Bank policies or banking regulations;

Habitually neglecting the duties required to be performed under their Employment Agreement;

Committing an intentional act that has a material detrimental effect on the reputation or business of the Bank;

Conviction of a felony or committing any act of dishonesty, fraud, intentional misrepresentation or moral turpitude as would prevent effective performance of Executive’s duties under Executive’s Employment Agreement;

Repeatedly or intentionally disregarding or failing to comply with a directive of the Board of Directors; or

The Bank receiving a written finding, order or directive from any state or federal banking regulator with jurisdiction over the Bank ordering the removal of Executive as an executive officer of the Bank.

1.23 Termination For Good Reason. A Termination of Employment shall be deemed to be “For Good Reason” if Executive Separates From Service on or after the occurrence of any of the below events, and such events occur without Executive’s consent:

A material diminution in Executive’s base compensation;

A material diminution in Executive’s authority, duties, or responsibilities;

A material diminution in the authority, duties, or responsibilities of the supervisor to whom Executive is required to report, including a requirement that Executive report to a corporate officer or employee instead of reporting directly to the Board;

A material diminution in the budget over which Executive retains authority;

A material change in the geographic location at which Executive must perform services;

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Any other action or inaction that constitutes a material breach by the Employer of Executive’s Employment Agreement.

In the event of any of the forgoing circumstances, Executive shall provide notice to the Employer of the existence of the conditions described above within a period not to exceed ninety (90) days of the initial existence of said condition, upon the notice of which the Employer must be provided a period of at least thirty (30) days during which it may remedy the condition. If the condition is not remedied within those thirty (30) days and Executive Voluntarily Terminates within the two (2) year period following the initial occurrence of one or more of these conditions, then such Separation From Service shall be deemed to have been a “Termination For Good Reason”.

1.24 Voluntary Termination. The term “Voluntary Termination” or “Voluntarily Terminates” shall mean a Separation From Service elected by Executive and not as a result of death or Disability (and distinguishable from a Termination For Good Reason).

2.0 Scope, Purpose and Effect.

2.1 Not a Contract of Employment. Although this Agreement is intended to provide Executive with an additional incentive to remain in the employ of the Employer, this Agreement shall not be deemed to constitute a contract of employment between Executive and the Employer, nor shall any provision of this Agreement restrict or expand the right of the Employer to terminate Executive’s employment. This Agreement shall have no impact or effect upon any separate written Employment Agreement which Executive may have with the Employer, it being the parties’ intention and agreement that unless this Agreement is specifically referenced in said Employment Agreement (or any modification thereto), this Agreement (and the Employer’s obligations hereunder) shall stand separate and apart and shall have no effect on or be affected by, the terms and provisions of the Employment Agreement.

2.2 Fringe Benefit. The benefit provided by this Agreement is granted by the Bank as a fringe benefit to Executive and is not a part of any salary reduction plan or any arrangement deferring a bonus or a salary increase. Executive has no option to take any current payments or bonus in lieu of the benefits provided by this Agreement.

2.3 Prohibited Payments. Notwithstanding anything in this Agreement to the contrary, if any payment made under this Agreement is a “golden parachute payment” as defined in Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. section 1828(k) and Part 359 of the Rules and Regulations of the Federal Deposit Insurance Corporation (collectively, the “FDIC Rules”) or is otherwise prohibited, restricted or subject to the prior approval of a bank regulator, no payment shall be made hereunder without complying with said FDIC Rules.

3.0 Payment Restrictions and Limitations.

3.1 Delay in Payments for Specified Employee in the Event of a Separation From Service and Compliance With IRC 409A. If Executive is a Specified Employee as of the date of Separation From Service, then, when required by IRC 409A, any payment conditioned upon a Separation From Service may not be made before the date that is six (6) months after the date of Separation From Service (or, if earlier than the end of the six (6) month period, the date of Executive’s death).

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If payments to which Executive would otherwise be entitled during the first (1st) six (6) months following a Separation From Service are subject to this six (6) month delay in payment, then such payments shall be accumulated and paid on the first (1st) day of the seventh (7th) month following the date of Separation From Service. Payments will then continue thereafter as called for pursuant to the terms of this Agreement.

Notwithstanding any provision existing in this Agreement or any amendment thereto, it is the intent of the Bank and Executive that any payment or benefit provided pursuant to this Agreement shall be made and paid in a manner, at a time and in a form which complies with the applicable requirements of IRC 409A in order to avoid any unfavorable tax consequences resulting from any such failure to comply.

3.2 Change in Time or Form of Distributions. Executive and the Bank may amend this Agreement to change the timing or form of distributions, however, any such amendment must comply with the restrictions imposed by IRC 409A, including the following:

A modification may not accelerate the time or schedule of any distribution, except as provided in IRC 409A;

A modification must be made at least twelve (12) months prior to the first scheduled distribution;

A modification must delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made;

A modification may not take effect until twelve (12) months has elapsed.

3.3 Withholding of Payroll Taxes. Employer shall withhold from payments made hereunder any taxes required to be withheld from Executive’s wage under federal, state or local law.

3.4 Payment Due Under Only One Provision. Executive Benefit payments due under this Agreement shall be determined and payable pursuant to only one (1) provision hereinbelow. The date and circumstances of Executive’s Separation From Service shall determine which paragraph shall be used to calculate the Executive Benefit due.

4.0 In the Event Executive Remains Employed by the Bank Throughout the Service Period. If Executive Remains Employed throughout the Service Period, then they shall receive an annual Executive Benefit equal to the Target Benefit, payable for a period of ten (10) years. Such annual Executive Benefit shall be paid by the Employer in twelve (12) substantially equal monthly installments, commencing on the first day of the first month immediately following the expiration of the Service Period, and continuing for a period of one hundred twenty (120) months thereafter.

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5.0 Separation From Service or Disability Prior to the Expiration of the Service Period. If Executive Separates From Service or becomes Disabled at any time prior to the expiration of the Service Period, then the Executive Benefit due under this Agreement shall be determined under this Section 5.0 and based on the circumstances identified below.

5.1 Executive Benefit if, Within Six (6) Months Before or Eighteen (18) Months Following a Change in Control, Executive is (i) Involuntarily Terminated or (ii) Terminates For Good Reason. If, prior to the expiration of the Service Period, Executive Separates From Service within a period beginning six (6) months before and ending eighteen (18) months after a Change in Control, AND such Separation From Service is either (i) an Involuntary Termination or (ii) a Termination For Good Reason, then the Executive Benefit to which they are entitled shall be as follows:

Benefit Amount. Executive shall receive an annual amount equal to the Target Benefit and payable for a period of ten (10) years.

Benefit Payment. Amounts due under this provision shall be paid by the Employer in twelve (12) substantially equal monthly installments, commencing on the first day of the first month immediately following the Separation From Service and continuing for a period of one hundred twenty (120) months thereafter.

5.2 Executive Benefit Absent a Change in Control and Due to Either an (i) Involuntary Termination or (ii) a Termination For Good Reason. If, prior to the expiration of the Service Period and absent a Change in Control, Executive is (i) Involuntarily Terminated or (ii) Terminates For Good Reason, then the Executive Benefit to which they are entitled shall be as follows:

Benefit Amount. Executive shall receive an annual amount equal to the Service Ratio multiplied by the Target Benefit, and payable for a period of ten (10) years.

5.3 Voluntary Separation From Service Prior to the Expiration of the Service Period. If Executive Voluntarily Separates From Service prior to the expiration of the Service Period, then the Executive Benefit to which they are entitled shall be determined as follows:

Voluntary Separation From Service on or after . If Executive’s Voluntary Separation From Service occurs prior to the expiration of the Service Period but on or after , then they shall receive the same Executive Benefit as provided under Paragraph 5.2 above.

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Voluntary Separation From Service Before . If Executive’s Voluntary Separation From Service occurs prior to the expiration of the Service Period and before , then they shall forfeit any and all rights and benefits under the terms of this Agreement and shall have no right to be paid any of the amounts which would otherwise be due or paid to Executive by the Bank pursuant to the terms of this Agreement.

5.4 Disability. If Executive becomes Disabled prior to the expiration of the Service Period, then they shall receive the following:

Accrued Liability Balance. Executive shall receive a lump sum amount equal to the Accrued Liability Balance. The Accrued Liability Balance shall be paid in one (1) lump sum on the first (1st) day of the first (1st) month following Disability.

Additional Benefit Payment. In addition to the forgoing, if the Bank has purchased a pre-approved Individual Total Disability Policy through Lloyd’s of London (“Lloyd’s Policy”), and Executive qualifies to receive a benefit thereunder, then they shall be paid any amounts due and payable under the Lloyd’s Policy (in amount and date as provided therein).

5.5 Termination For Cause at Any Time. If Executive is Terminated For Cause at any time after the effective date of this Agreement, then they shall forfeit any and all rights and benefits they may have under the terms of this Agreement and shall have no right to be paid any of the amounts which would otherwise be due or paid to Executive by the Bank pursuant to the terms of this Agreement.

6.0 Death. In the event of Executive’s death, then whether Executive’s Beneficiary(ies) are entitled to receive any amounts pursuant to this Agreement shall be determined as follows.

6.1 Death After Becoming Entitled to Receive an Executive Benefit. If Executive has become entitled to an Executive Benefit pursuant to one of the provisions of Section 4 or 5 of this Agreement, then Executive’s Designated Beneficiary shall be entitled to receive such amount and on the same date as Executive would have received had they survived.

6.2 Death in All Other Circumstance. Other than as addressed above in Paragraph 6.1, there shall be no death benefits payable pursuant to this Agreement.

7.0 Beneficiary Designation

7.1 Beneficiary Designation. Executive shall have the right, at any time, to designate any person or persons as their Beneficiary or Beneficiaries (both primary as well as secondary) to whom benefits under this Agreement shall be paid in the event of their death prior to complete distribution to Executive of the benefits due under this Agreement. Each Beneficiary designation shall be in a written form approved by the Bank and will be effective only when filed with the Bank during Executive’s lifetime. Attached hereto is a Beneficiary Designation Form approved by the Bank. The Bank reserves the right to modify such Beneficiary Designation Form as it deems necessary in the future.

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7.2 Amendments to Beneficiary Designation. Any Beneficiary Designation Form may be changed by Executive without the consent of any Designated Beneficiary by the filing of a new Beneficiary Designation Form with the Bank. The filing of a new Beneficiary Designation Form will cancel all Beneficiary Designation Forms previously filed. If Executive’s compensation is community property, any Beneficiary Designation Form shall be valid or effective only as permitted under applicable law.

7.3 No Beneficiary Designation. In the absence of an effective beneficiary designation, or if all Designated Beneficiaries predecease Executive or die prior to complete distribution of the Executive Benefit, then Executive’s designated Beneficiary shall be deemed to be Executive’s lawful spouse or registered domestic partner, or if none exists, Executive’s estate.

7.4 Doubt as to Beneficiary. If there is a doubt as to the proper Beneficiary to receive payments pursuant to this Agreement, then the Bank shall have the right to withhold such payments until this matter is resolved to the satisfaction of the Bank. In the event of any such doubt or dispute, the Bank reserves all rights to file an interpleader action or to require a court decree or order directing the payment of benefits or to require indemnification from any claimant or to require claimants to otherwise finally resolve such claims prior to the Bank paying any benefits under this Plan.

7.5 Effect of Payment to the Beneficiary. Payment to the Designated Beneficiary shall fully and completely discharge the Bank from all further obligations under this Agreement.

8.0 Administration.

8.1 Committee and Duties. This Agreement shall be administered by an Administrative Committee (as defined in Paragraph 1.8) appointed by the Board of Directors. Any member of the Committee may be removed from the Committee at any time by the Board. Any member may resign from the Committee by delivering his written resignation to the Board. Upon the existence of any vacancy, the Board may appoint a successor. The Committee shall have the authority to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement. A majority of the members of the Committee shall constitute a quorum for the transaction of business. A majority vote of the Committee members constituting a quorum shall control any decision.

8.2 Agents. In the administration of this Agreement, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with counsel who may be counsel to the Employer.

8.3 Binding Effect of Decisions. The decision or action of the Committee in respect of any question arising out of or in connection with the administration, interpretation and application of this Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in this Agreement.

8.4 Indemnity of Committee. The Employer shall indemnify and hold harmless the members of the Committee against any and all claims, loss, damage, expense, or liability arising from any action or failure to act with respect to this Agreement, except in the case of gross negligence or willful misconduct.

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9.0 Claims Procedure.

9.1 Dispute Over Benefits. In the event a dispute arises over the benefits under this plan and benefits are not paid to Executive [or to Executive’s Beneficiary(ies)], if applicable) and such claimants feel they are entitled to receive such benefits, then a written claim must be made to the Administrator named above in accordance with the following procedures:

Written Claim. The Claimant may file a written request for such benefit to the Administrator.

Claim Decision. Upon receipt of such claim, the Administrator shall respond to such Claimant within ninety (90) days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional ninety (90) days for reasonable cause by notifying the Claimant in writing, prior to the end of the initial ninety (90) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

If the claim is denied in whole or in part, the Administrator shall notify the Claimant in writing of such denial. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth:

(i)

The specific reasons for the denial;

(ii)

The specific reference to pertinent provisions of the Agreement on which the denial is based;

(iii)

A description of any additional information or material necessary for Claimant to perfect the claim and an explanation of why such material or information is necessary;

(iv)

Appropriate information as to the steps to be taken if Claimant wishes to submit the claim for review and the time limits applicable to such procedures; and

(v)

A statement of Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

Request for Review. Within sixty (60) days after receiving notice from the Administrator that a claim has been denied (in part or in its entirety), then Claimant (or their duly authorized representative) may file with the Administrator, a written request for a full and fair review of the denial of the claim. In the case of disability benefits where a medical judgment was part of the basis of the adverse benefit determination, the review shall include a consultation with an independent health care professional.

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Claimant (or his duly authorized representative) shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Administrator shall also provide Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to Claimant’s claim for benefits.

Decision on Review. The Administrator shall respond in writing to such Claimant within sixty (60) days after receiving the request for review. If the Administrator determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to Claimant prior to the termination of the initial sixty (60) day period. In no event shall such extension exceed a period of sixty (60) days from the end of the initial period. The notice of extension must set forth the special circumstances requiring an extension of time and the date by which the Administrator expects to render its decision.

In considering the review, the Administrator shall take into account all materials and information Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

The Administrator shall notify Claimant in writing of its decision on review. The Administrator shall write the notification in a manner calculated to be understood by Claimant. The notification shall set forth:

(i)

The specific reasons for the denial;

(ii)

Reference the specific provisions of the Agreement on which the denial is based;

(iii)

A statement that Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to Claimant’s claim for benefits; and

(iv)

A statement of Claimant’s right to bring a civil action under ERISA Section 502(a).

Special Timing and Rules for Disability Claims. In the event a claim above is a claim for disability benefits, then the applicable time periods for notifying Claimant regarding benefit determinations shall be reduced as required by 29 CFR 2560.503-1 (within a reasonable period of time, but not to exceed forty-five (45) days, subject to no more than two (2) thirty (30) day extensions if necessary due to matters beyond control of the plan and subject to proper notice being given). In the event any extension is required, then notice of such extension shall specify the standards on which the entitlement to a benefit is based, all unresolved issues that prevent a decision on a claim, the additional information needed to resolve those issues, and claimant shall be afforded at least forty-five (45) days in which to provide the specified information. Additionally, all disability claims shall be handled in a manner which is compliant with the Department of Labor Rules, including but not limited to the following:

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(i)

Claims and appeals will be adjudicated in a manner designed to ensure independence and impartiality of the persons involved in making the benefit determination;

(ii)

All benefit denial notices shall contain a complete discussion of why the claim was denied and the standards applied in reaching the decision, including the basis for disagreeing with the views of health care professionals, vocational professionals, or the Social Security Administration;

(iii)

Claimant shall have the right to access to the entire claim file and other relevant documents, and shall be guaranteed the right to present evidence and testimony in support of their claim during the review process;

(iv)

Claimant shall be given notice and a fair opportunity to respond before denials at the appeals stage are based on new or additional evidence or rationales;

(v)

Claimant is not prohibited from seeking court review of a claim denial based on a failure to exhaust administrative remedies under the plan if the plan failed to comply with the claims procedure requirements (unless the violation was the result of a minor error);

(vi)

Certain rescissions of coverage are to be treated as adverse benefit determinations triggering the plan’s appeals procedures; and

(vii)

All required notices and disclosures issued hereunder shall be written in a culturally and linguistically appropriate manner.

9.2 Arbitration of Disputes. Other than any claim which must be brought in accordance with the requirements established by ERISA, all unresolved claims, disputes and other matters in question arising out of or relating to this Agreement or the breach or interpretation thereof, other than those matters which are to be determined by the Employer in its sole and absolute discretion shall be resolved by binding arbitration before an arbitrator selected by the mutual agreement of the parties (unless prohibited by ERISA). Notice of the demand for arbitration shall be filed in writing with the other party to this Agreement and in no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. The arbitration shall be subject to such rules of procedure used or established by the Judicial Arbitration & Mediation Services. Any award rendered by the arbitrator shall be final and binding upon the successors and assigns, and may be entered in any court having jurisdiction thereof. The obligation of the parties to arbitrate pursuant to this clause shall be specifically enforceable in accordance with, and shall be conducted consistently with the provisions of the California Rules of Civil Procedure. Any arbitration hereunder shall be conducted in Lafayette, California, unless otherwise agreed to by the parties.

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9.3 Attorneys’ Fees. In the event of any arbitration or litigation concerning any controversy, claim or dispute between the parties hereto, arising out of or relating to this Agreement or the breach hereof, or the interpretation hereof, (a) each party shall pay his own attorneys’ arbitration and legal fees incurred pursuant to this Agreement; and (b) if Executive prevails, they shall be entitled to recover from the other party reasonable expenses, attorneys’ fees and costs incurred in the enforcement or collection of any judgment or award rendered. The term “prevails” applies if the arbitrator(s) or court finds that Executive is entitled to contested money payments from the Employer but does not necessarily imply a judgment rendered in favor of Executive. Furthermore, the Employer recognizes that Executive may not pursue a legitimate claim for benefits or benefit amounts if they are found not to be the prevailing party at arbitration or litigation. Thus, to ensure that Executive is not deterred from pursuing a legitimate claim, the Employer hereby agrees to waive any and all rights it may have to recover attorneys’ fees from Executive pursuant to this Agreement in the future, whether by statute or contract, and regardless of whether the Employer is found to be the “prevailing party”.

9.4 Attorneys’ Fees in the event of a Change in Control. The Employer is aware that, after a Change in Control, management of the Employer could cause or attempt to cause the Employer to refuse to comply with its obligations under this Agreement, or could institute or cause or attempt to cause the Employer to institute litigation seeking to have this Agreement declared unenforceable, or could take or attempt to take other action to deny Executive the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement would be frustrated. The Employer desires that Executive not be required to incur the expenses associated with the enforcement of rights under this Agreement, whether by litigation or other legal action, because the cost and expense thereof would substantially detract from the benefits intended to be granted to Executive hereunder. The Employer desires that Executive not be forced to negotiate settlement of rights under this Agreement under threat of incurring expenses. Accordingly, if after the occurrence of a Change in Control, it appears to Executive that (i) the Employer has failed to comply with any of its obligations under this Agreement, or (ii) the Employer or any other person has taken any action to declare this Agreement void or unenforceable, or instituted any litigation or other legal action designed to deny, diminish or to recover from Executive the benefits intended to be provided to Executive hereunder, the Employer irrevocably authorizes Executive from time to time to retain counsel of Executive’s choice, at the Employer’s expense as provided in this subparagraph, to represent Executive in the initiation or defense of any litigation or other legal action, whether by or against the Employer or any director, officer, stockholder or other person affiliated with the Employer, in any jurisdiction. Notwithstanding any existing or previous attorney-client relationship between the Employer and any counsel chosen by Executive under this subparagraph, the Employer irrevocably consents to Executive entering into an attorney-client relationship with that counsel, and Executive and the Employer agree that a confidential relationship shall exist between Executive and that counsel. The fees and expenses of counsel selected from time to time by Executive as provided in this section shall be paid or reimbursed to Executive by the Employer on a regular periodic basis upon presentation by Executive of a statement or statements prepared by such counsel in accordance with such counsel’s customary practices up to a maximum aggregate amount of one hundred fifty thousand dollars ($150,000), whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings. The Employer’s obligation to pay Executive’s legal fees provided by this subparagraph operate separately from and in addition to any legal fees reimbursement obligation the Employer may have with Executive under any separate employment, severance or other agreement between Executive and the Employer. Despite any contrary provision within this Agreement, however, the Employer shall not be required to pay or reimburse Executive’s legal

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expenses if doing so would violate section 18(k) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)] and rule 359.3 of the Federal Deposit Insurance Act [12 CFR 359.3]. Furthermore, the Employer again acknowledges that Executive may not pursue a legitimate claim for benefits or benefit amounts if he is found not to be the prevailing party at arbitration or litigation. Thus, to ensure that Executive is not deterred from pursuing a legitimate claim, the Employer hereby agrees to waive any and all rights it may have to recover attorneys’ fees from Executive pursuant to this Agreement in the future, whether by statute or contract, and regardless of whether the Employer is found to be the “prevailing party”.

10.0 Miscellaneous.

10.1 Unfunded Plan. This Agreement is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of “management or highly compensated employees” within the meaning of Sections 201, 301, and 401 of ER1SA, and therefore to be exempt from the provisions of Parts 2, 3, and 4 of Title I of ERISA. Accordingly, this Agreement shall terminate and no further benefits shall be paid hereunder in the event it is determined by a court of competent jurisdiction or by an opinion of counsel that this Agreement constitutes an employee pension benefit plan within the meaning of Section 3(2) of ERISA which is not so exempt.

10.2 Status as an Unsecured General Creditor and Rabbi Trust. Notwithstanding anything contained herein to the contrary: (i) Executive shall have no legal or equitable rights, interests or claims in or to any specific property or assets of the Bank as a result of this Agreement; (ii) none of the Bank’s assets shall be held in or under any trust for the benefit of Executive or held in any way as security for the fulfillment of the obligations of the Bank under this Agreement; (iii) all of the Bank’s assets shall be and remain the general unpledged and unrestricted assets of the Bank; (iv) the Bank’s obligation under this Agreement shall be that of an unfunded and unsecured promise by the Bank to pay money in the future; and (v) Executive shall be an unsecured general creditor with respect to any benefits which may be payable under the terms of this Agreement.

Notwithstanding subparagraphs (i) through (v) above, the Bank and Executive acknowledge and agree that, in the event of a Change in Control, upon Executive’s request, or in the Bank’s discretion if Executive does not so request and the Bank nonetheless deems it appropriate, the Bank shall establish, not later than the effective date of the Change in Control, a Rabbi Trust or multiple Rabbi Trusts (the “Trust” or “Trusts”) upon such terms and conditions as the Bank, in its sole discretion, deems appropriate and in compliance with applicable provisions of the Code, in order to permit the Bank to make contributions and/or transfer assets to the Trust or Trusts to discharge its obligations pursuant to this Agreement. The principal of the Trust or Trusts and any earnings thereon shall be held separate and apart from other funds of the Bank to be used exclusively for discharge of the Bank’s obligations pursuant to this Agreement and shall continue to be subject to the claims of the Bank’s general creditors until paid to Executive in such manner and at such times as specified in this Agreement.

10.3 Non-assignability. Neither Executive nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and nontransferable. No part of the amount payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by Executive or any other person, nor be transferable by operation of law in the event of Executive’s or any other person’s bankruptcy or insolvency.

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10.4 Not a Contract of Employment. The terms and conditions of this Agreement shall not be deemed to constitute a contract of employment between Employer and Executive, and Executive (or his beneficiary, if applicable) shall have no rights against Employer except as may otherwise be specifically provided herein. Moreover, nothing in this Agreement shall be deemed to give Executive the right to be retained in the service of the Employer or to interfere with the right of the Employer to discipline or discharge him at any time.

10.5 Protective Provisions. Executive will cooperate with the Employer by furnishing any and all information requested by the Employer, in order to facilitate the payment of benefit hereunder, and/or by taking such physical examinations as the Employer may deem necessary and taking such other action as may be requested by the Employer.

10.6 Terms. Whenever any words are used herein in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or singular, as the case may be, in all cases where they would so apply.

10.7 Captions. The captions of the sections, and paragraphs of this Agreement are for convenience only and shall not control or affect the meaning or construction of any of its provisions.

10.8 Governing Law. The provisions of this Agreement shall be construed, interpreted, and governed in all respects in accordance with applicable federal law and, to the extent not preempted by such federal law, in accordance with the laws of the State of California.

10.9 Binding Effect/Merger or Reorganization. This Agreement shall be binding upon and inure to the benefit of Executive and the Bank. Accordingly, the Bank shall not merge or consolidate into or with another corporation, or reorganize or sell substantially all of its assets to another corporation, firm or person, unless and until such succeeding or continuing corporation, firm or person agrees to assume and discharge the obligations of the Bank under this Agreement. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of the Bank, and successors of any such corporation or other business entity.

10.10 Nonwaiver. The failure of either party to enforce at any time or for any period of time any one or more of the terms or conditions of this Agreement shall not be a waiver of such term(s) or condition(s) or of that party’s right thereafter to enforce each and every term and condition of this Agreement.

10.11 Validity. If any terms, provision, covenant, or condition of this Agreement is determined by an arbitrator or a court, as the case may be, to be invalid, void, or unenforceable, such determination shall not render any other term, provision, covenant or condition invalid, void or unenforceable, and this Agreement shall remain in full force and effect notwithstanding such partial invalidity.

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10.12 Entire Agreement. This Agreement supersedes any and all other agreements, either oral or in writing, between the parties with respect to the subject matter of this Agreement and contains all of the covenants and agreements between the parties with respect thereto. Each party to this Agreement acknowledges that no other representations, inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not set forth herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding on either party.

10.13 Modifications. Any modification or Amendment of this Agreement shall be effective only if it is in writing and signed by each party or such party’s authorized representative and only to the extent that it is compliant with all applicable codes and statutes, including but not limited to IRC 409A. However, the Bank may unilaterally amend this Agreement to conform with written directives to the Bank from its auditors or banking regulators or to comply with legislative or tax law, including without limitation Section 409A of the Code and any and all regulations and guidance promulgated thereunder.

10.14 Notice. Any notice required or permitted of either Executive or the Bank under this Agreement shall be deemed to have been duly given if in compliance with the following: if by personal delivery, upon the date received by the party or its authorized representative; if by facsimile, upon transmission to a telephone number previously provided by the party to whom the facsimile is transmitted as reflected in the records of the party transmitting the facsimile and upon reasonable confirmation of such transmission; if by electronic delivery or email upon transmission to the email address previously provided by the party to whom the email is transmitted as reflected in the records of the party transmitting the email and upon reasonable confirmation of such transmission; and if by mail, on the third day after mailing via U.S. first class mail, registered or certified, postage prepaid and return receipt requested, and addressed to the party at the address given below for the receipt of notices, or such changed address as may be requested in writing by a party.


		If to the Bank:		California Bank of Commerce
				3595 Mt. Diablo Blvd., Suite 220
				Lafayette, CA 94549
				Attn: President & Chief Executive Officer

		If to Executive:		Last known address on file with the Bank

10.15 Code Section 280G Issues.

Treatment of Excess Parachute Payments. In the event that any benefits payable to Executive pursuant to this Agreement (“Payments”) (i) constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) but for this Paragraph 10.15 would be subject to the excise tax imposed by Section 4999 of the Code, or any comparable successor provisions (the “Excise Tax”), then Executive’s Payments hereunder shall be either (a)

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provided to Executive in full, or (b) provided to Executive as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax, whichever of the foregoing amounts, when taking into account applicable federal, state, local and foreign income and employment taxes, the Excise Tax, and any other applicable taxes, results in the receipt by Executive, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under the Excise Tax. In the event of a reduction of benefits hereunder, the Accountants (as defined below) shall determine which benefits shall be reduced so as to achieve the principle set forth in the preceding sentence.

Determination of Amounts. All computations and determinations called for by this Paragraph 10.15 shall be promptly determined and reported in writing to the Bank and Executive by independent public accountants or other independent advisors selected by the Bank and reasonably acceptable to Executive (the “Accountants”), and all such computations and determinations shall be conclusive and binding upon Executive and the Bank. For the purposes of such determinations, the Accountants may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Bank and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make their required determinations. The Bank shall bear all fees and expenses charged by the Accountants in connection with such services.

Potential Further Reduction of Benefits. If, notwithstanding any reduction described in Paragraph 10.15A, the IRS determines that Executive is liable for the Excise Tax as a result of the receipt of any payments made pursuant to this Plan, then Executive shall be obligated to pay back to the Bank, within thirty (30) days after a final IRS determination or in the event that Executive challenges the final IRS determination, a final judicial determination, a portion of the Payments equal to the “Repayment Amount.” The Repayment Amount shall be the smallest such amount, if any, as shall be required to be paid to the Bank so that Executive’s net after-tax proceeds with respect to the Payments (after taking into account the payment of the Excise Tax and all other applicable taxes imposed on such benefits) shall be maximized. The Repayment Amount shall be zero if a Repayment Amount of more than zero would not result in Executive’s net after-tax proceeds with respect to the Payments being maximized. If the Excise Tax is not eliminated pursuant to this Paragraph 10.15C, Executive shall pay the Excise Tax.

Potential Increase in Benefits. Notwithstanding any other provision of this Paragraph 10.15, if (i) there is a reduction in the payments to Executive as described in this Paragraph 10.15, (ii) the IRS later determines that Executive is liable for the Excise Tax, the payment of which would result in the maximization of Executive’s net after-tax proceeds (calculated as if

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Executive’s benefits had not previously been reduced), and (iii) Executive pays the Excise Tax, then the Bank shall pay to Executive those payments which were reduced pursuant to this Paragraph 10.15 as soon as administratively possible after Executive pays the Excise Tax so that Executive’s net after-tax proceeds with respect to the payment of the Payments are maximized.

10.16 Opportunity To Consult With Independent Advisors. Executive acknowledges that they have been afforded the opportunity to consult with independent advisors of their choosing including, without limitation, accountants or tax advisors and counsel regarding both the benefits granted to them under the terms of this Agreement and the (i) terms and conditions which may affect Executive’s right to these benefits and (ii) personal tax effects of such benefits including, without limitation, the effects of any federal or state taxes, Section 280G of the Code, IRC 409A, and any other taxes, costs, expenses or liabilities whatsoever related to such benefits, which in any of the foregoing instances Executive acknowledges and agrees shall be the sole responsibility of Executive notwithstanding any other term or provision of this Agreement. Executive further acknowledges and agrees that the Bank shall have no liability whatsoever related to any such personal tax effects or other personal costs, expenses, or liabilities applicable to Executive and further specifically waives any right for himself, and his heirs, Beneficiaries, legal representatives, agents, successor and assign to claim or assert liability on the part of the Bank related to the matters described above in this paragraph. Executive further acknowledges that they have read, understand and consent to all of the terms and conditions of this Agreement, and that they enter into this Agreement with a full understanding of its terms and conditions.

11.0 IRC 409A Penalties. The intent of the parties is that payments and benefits under this Agreement comply with or be exempt from IRC 409A and, thus, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith or exempt therefrom. Notwithstanding the forgoing, this Agreement has been created as a retention tool for the Bank and Executive has played a more passive role in its creation. All efforts have been made to make this Agreement compliant with the Code, however, in the event there is a failure in either the document or actual payments hereunder, then Employer shall reimburse Executive for all penalties incurred as a result of a failure to comply with IRC 409A.


CALIFORNIA BANK OF COMMERCE

By:						Date:
President & CEO

						Date:
Executive– Signature and Date

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Exhibit 10.5

CALIFORNIA BANK OF COMMERCE

SPLIT-DOLLAR AGREEMENT

(By and Between California Bank of Commerce and Scott Myers)

This CALIFORNIA BANK OF COMMERCE SPLIT-DOLLAR AGREEMENT (“Agreement”) is made and entered into effective as of 12/15 , 2020, by and between California Bank of Commerce, a California banking corporation having its main office in Lafayette, California (the “Bank”), and Scott Myers, an individual (“Insured”).

RECITALS:

A. Insured is currently an executive of the Bank and provides valuable service to the Bank.

B. The Bank desires to provide Insured with certain death benefits under a life insurance policy or polices purchased by the Bank on the life of Insured.

NOW, THEREFORE, the parties hereto, for and in consideration of the mutual promises contained herein and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, intending to be legally bound hereby, do hereby agree as follows:

1. This Agreement pertains to the life insurance policy or policies (the “Policy”) listed on Exhibit A, attached and made a part hereto.

2. Ownership of Policy. The Bank (or the trustee in the event a Rabbi Trust is established at the direction of the Bank) shall own all of the right, title and interest in the Policy and shall control all rights of ownership with respect thereto. The Bank, in its sole discretion, may exercise its right to borrow against or withdraw the cash value of the Policy, but only pursuant to an enforceable order at law or from any regulatory body having jurisdiction over the Bank. In the event coverage under the Policy is increased by the Bank, such increased coverage shall be subject to all of the rights, duties and obligations set forth in this Agreement.

3. Designation of Beneficiary. Insured may designate one or more beneficiaries (on the Beneficiary Designation Form attached hereto as Exhibit B) to receive that portion of the death benefit under the Policy set forth herein below in paragraph 6(a) (the “Death Benefit”), subject to any right, title or interest the Bank may have in such proceeds as provided herein. In the event Insured fails to designate a beneficiary, any benefits payable pursuant hereto shall be paid to the estate of Insured.

4. Maintenance of Policy. It is the Bank’s intention to maintain a life insurance policy for the benefit of the Insured. Accordingly, the Bank shall be responsible for making any required premium payments and to take all other actions within the Bank’s reasonable control in order to keep the Policy in full force and effect; provided, however, that the Bank must replace the Policy with a comparable policy or policies so long as Insured’s beneficiaries will be entitled to receive an amount of death proceeds under Section 6 substantially equal to those that the beneficiaries would be entitled to if the original Policy were to remain in effect. If any such replacement is made, all references herein to the “Policy” shall thereafter be references to such replacement policy or policies. If the Policy contains any premium waiver provision, any such waived premiums shall be considered for the purposes of this Agreement as having been paid by the Bank. The Bank shall be under no obligation to set aside, earmark or otherwise segregate any funds with which to pay its obligations under this Agreement, including, but not limited to, payment of Policy premiums. The parties acknowledge that as of the date hereof all Policy premiums have been paid in full.

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(a) Notwithstanding anything in this Agreement to the contrary, in the event that for any reason:

(i) The Insurer as defined in Exhibit A, or any successor Insurer or substitute or replacement Insurer denies a claim under the Policy;

(ii) The Insurer or any successor Insurer or substitute or replacement Insurer fails to pay a claim under the Policy, including but not limited to as a result of the bankruptcy, insolvency or other similar proceeding being instituted by or against the Insurer or any successor Insurer or substitute or replacement Insurer; or

(iii) No death benefits have been paid under the Policy to Bank (or to the extent of any endorsement agreed to by Bank to the Insured, the Insured’s estate or the Beneficiaries);

then no amounts shall be due hereunder by Bank to Insured, Insured’s estate or beneficiaries. Insured and all beneficiaries hereby and will in the future, hold Bank harmless from any payment obligation hereunder to the extent an event described in subsections (1), (ii) or (iii) occurs or a claim under the Policy has not been paid for any reason by the Insurer or death benefits have not been paid under the Policy to Bank (or to the extent of any endorsement agreed to by Bank to the Insured, the Insured’s estate or the beneficiaries) by Insurer. This hold harmless provision shall not preclude nor prevent Insured and his beneficiaries from seeking any recoveries from or against Insurer.

(b) It is the intent of the parties that this Agreement provides for a death benefit only and provides Insured with no retirement or deferred compensation benefits or rights. In addition, it is the intent of the parties that this Agreement shall provide a benefit only while Insured is employed by the Bank, and this Agreement shall terminate upon Insured’s termination of employment in accordance with the provisions of Paragraph 8(a)(iii).

(c) It is the intent of the parties that any of Insured’s rights to payment hereunder shall be funded solely from the Policy proceeds and Bank shall have no liability or obligation to Insured in the event of non-payment of Policy death proceeds or default of Insurer for any reason, unless such non-payment is solely due to the action or inaction of the Bank.

5. Reporting Requirements. The Bank will report on an annual basis to Insured the economic benefit attributable to this Agreement on IRS Form W-2, or if applicable Form 1099, so that Insured can properly include said amount in his or her taxable income. Insured agrees to accurately report and pay all applicable taxes on such amount as income reportable hereunder to Insured.

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6. Policy Proceeds. Upon the death of Insured, the death proceeds of the Policy shall be divided in the following manner:

(a) In the event the Insured has not terminated employment with the Bank at the time of death, Insured’s beneficiary(ies) designated in accordance with Section 3 shall be entitled to an amount equal to the lesser of six hundred thousand dollars ($600,000) or one hundred percent (100%) of the Net Amount-at-Risk. The term “Net Amount-at-Risk” shall be defined as the total proceeds of the Policy less the cash value of the Policy.

In the alternative, in the event the Insured has terminated employment with the Bank at the time of death, then this Agreement shall have terminated pursuant to the terms of Paragraph 8(a)(iii) and neither Insured nor Insured’s designated beneficiaries shall be entitled to receive any amounts under this Agreement.

For the purposes of this Agreement, Insured will be considered to have terminated his or her employment when they “Separate from Service” or “terminate employment” within the meaning of Code Section 409A and any future notices or guidance related thereto.

(b) The Bank shall be entitled to any death proceeds payable under the Policy remaining after payment of the Death Benefit to the Insured’s beneficiary(ies) under Section 6(a) above.

(c) The Bank and Insured shall share in any interest due on the death proceeds of the Policy on a pro rata basis based upon the amount of proceeds due each party divided by the total amount of proceeds, excluding any such interest.

7. Cash Surrender Value of the Policy. In addition, and subject to the Bank’s obligations herein, at all times prior to the Insured’s death, the Bank shall be entitled to an amount equal to the Policy(ies)’s cash value, as that term is defined in the Policy(ies) contract, less (i) any Policy loans or withdrawls or any other indebtedness secured by the Policy(ies), and any unpaid interest or cash withdrawals previously incurred by the Bank and (ii) any applicable surrender charges. Such cash value shall be determined as of the date of surrender or death as the case may be.

8. Termination of Agreement.

(a) This Agreement shall terminate immediately upon the first to occur of the following:

(i) The distribution of the death benefit proceeds in accordance with Section 6 above;

(ii) The surrender or termination of the Policy by the Bank (A) pursuant to an enforceable order at law or from any regulatory body having jurisdiction over the Bank or (B) upon the asset represented by the Policy being classified as substandard by any regulatory body having jurisdiction over the Bank; or

(iii) Insured’s termination of employment.

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(b) Insured acknowledges and agrees that the termination of this Agreement pursuant to subsections (a)(ii) through (iii) above shall terminate any rights of the Insured’s Beneficiary(ies) to receive any death proceeds of the Policy under this Agreement, and such termination shall be without any liability of any nature by Bank to Insured.

9. Assignment. Insured shall not make any assignment of Insured’s rights, title or interest in or to the Death Benefit whatsoever without the prior written consent of the Bank (which may be withheld for any reason or no reason in its sole and absolute discretion) and acknowledgment by the Insurer. The foregoing sentence shall not preclude nor prevent Insured from changing his beneficiary under the Policy in accordance with the terms of the Policy.

10. Administration.

(a) This Agreement shall be administered by the Compensation Committee of the Board of Directors of the Bank (the “Committee”).

(b) As the administrator, the Committee shall have the powers, duties and full discretion to:

(i) Construe and interpret the provisions of this Agreement;

(ii) Adopt, amend or revoke rules and regulations for the administration of this Agreement, provided they are not inconsistent with the provisions of this Agreement;

(iii) Provide appropriate parties with such returns, reports, descriptions and statements as may be required by law, within the times prescribed by law and to make them available to the Insured (or the Insured’s beneficiary) when required by law;

(iv) Take such other action as may be reasonably required to administer this Agreement in accordance with its terms or as may be required by law;

(v) Withhold applicable taxes and file with the Internal Revenue Service appropriate information returns with respect to any payments and/or benefits provided hereunder; and

(vi) Appoint and retain such persons as may be necessary to carry out its duties as administrator.

(c) The Bank shall be responsible for the management, control and administration of the Policy’s death proceeds. The Bank may, in its reasonable discretion, delegate certain aspects of its management and administrative responsibilities. If the Bank has a claim which it believes may be covered under the Policy, it will contact the Insurer in order to complete a claim form and determine what other steps need to be taken. The Insurer will evaluate and make a decision as to payment. If the claim is eligible for payment under the Policy, checks will be issued to the Bank and the Beneficiary(ies). If the Insurer determines that a claim is not eligible for payment under the Policy, the Bank may, in its sole discretion, contest such claim denial by contacting the Insurer in writing, but shall not be liable to Insured for any failure to contest such claim denial.

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11. Claims Procedures.

(a) For purposes of these claims procedures, the Committee shall serve as the “Claims Administrator.”

(b) If the Insured or any beneficiary of the Insured should have a claim for benefits hereunder he or she shall file such claim by notifying the Claims Administrator in writing. The Claims Administrator shall make all determinations as to the right of any person or persons to a benefit hereunder, and the amount of such benefit, in its full and sole discretion. Benefit claims shall be made by the Insured, his beneficiary or beneficiaries or a duly authorized representative thereof (the “claimant”). All determinations of the Claims Administrator shall be binding upon the Insured, any claimant, and any person claiming through them.

If the claim is wholly or partially denied, the Claims Administrator shall provide written or electronic notice thereof to the claimant within a reasonable period of time, but not later than ninety (90) days after receipt of the claim. An extension of time for processing the claim for benefits is allowable if special circumstances require an extension, but such an extension shall not extend beyond one hundred eighty (180) days from the date the claim for benefits is received by the Claims Administrator. Written notice of any extension of time shall be delivered or mailed within ninety (90) days after receipt of the claim and shall include an explanation of the special circumstances requiring the extension and the date by which the Claims Administrator expects to render the final decision.

The notice of adverse benefit determination shall (i) specify the reason for the denial; (ii) reference the provisions of this Agreement on which the denial is based; (iii) describe the additional material or information, if any, necessary for the claimant to receive benefits and explain why such information is necessary; (iv) indicate the steps to be taken by the claimant if a review of the denial is desired, including the time limits applicable thereto; and (v) contain a statement of the claimant’s right to bring a civil action under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), in the event of an adverse determination on review.

If notice of the adverse benefit determination is not furnished in accordance with the preceding provisions of this Section, the claim shall be deemed denied and the claimant shall be permitted to exercise his right to review as set forth below.

(c) If a claim is denied and a review is desired, the claimant shall notify the Claims Administrator in writing within sixty (60) days after receipt of written notice of a denial of a claim. In requesting a review, the claimant may submit any written comments, documents, records, and other information relating to the claim, the claimant feels are appropriate. The claimant shall, upon request and free of charge, be provided reasonable access to, and copies of, all documents, records and other information “relevant” to the claimant’s claim for benefits. The Claims Administrator shall review the claim taking into account all comments, documents, records and other information submitted by the claimant, without regard to whether such information was submitted or considered in the initial benefit determination.

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The Claims Administrator shall provide the claimant with written or electronic notification of the benefit determination upon review. In the event of an adverse benefit determination on review, the notice thereof shall (i) specify the reason or reasons for the adverse determination; (ii) reference the specific provisions of this Agreement on which the benefit determination is based; (iii) contain a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of all records and other information in the file and regarding claimant’s claim for benefits; and (iv) inform the claimant of the right to bring a civil action under the provisions of ERISA.

(d) After exhaustion of the claims procedure as provided herein, nothing shall prevent the claimant from pursuing any other legal or equitable remedy otherwise available, including the right to bring a civil action under Section 502(a) of ERISA, if applicable. Notwithstanding the foregoing, no legal action may be commenced or maintained against the Bank, the Board, the Compensation Committee of the Board, and any member of the Board or the Claims Administrator more than ninety (90) days after the claimant has exhausted the administrative remedies set forth in this Section 11.

(e) In the event a claim above is a claim for disability benefits, then the applicable time periods for notifying claimants regarding benefit determinations shall be reduced as required by 29 CFR 2560.503-1. Thus, the plan administrator shall provide notice to the claimant within a reasonable period of time, but not later than forty-five (45) days after receipt of the claim. This period may be extended by up to thirty (30) days, provided that the plan administrator both determines that such an extension is necessary due to matters beyond the control of the plan and notifies the claimant, prior to the expiration of the initial forty-five (45) day period, of the circumstances requiring the extension of time and the date by which the plan expects to render a decision. If, prior to the end of the first thirty (30) day extension period, the administrator determines that, due to matters beyond the control of the plan, a decision cannot be rendered within that extension period, the period for making the determination may be extended for up to an additional thirty (30) days, provided that the plan administrator notifies the claimant, prior to the expiration of the first thirty (30) day extension period, of the circumstances requiring the extension and the date as of which the plan expects to render a decision. In the case of any extension under this paragraph, the notice of extension shall specifically explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve those issues, and the claimant shall be afforded at least forty-five (45) days within which to provide the specified information. In addition to complying with such timing rules, a claim under this paragraph shall comply with all procedural requirements under ERISA, including but not limited to providing a detailed explanation for the denial in a language calculated to be understood by the Claimant, considering all submitted information regardless of whether submitted in the initial claim, avoiding conflicts of interest when making a determination, and advising of any statutory filing deadlines.

12. Confidentiality. Insured agrees that the terms and conditions of this Agreement, except as such may be disclosed in financial statements and tax returns, or in connection with estate planning, or otherwise required by state or federal securities laws or any regulatory authority, are and shall forever remain confidential, and Insured agrees that he shall not reveal the terms and conditions contained in this Agreement at any time to any person or entity, other than his financial and professional advisors unless required to do so by a court of competent jurisdiction.

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13. Other Agreements. The benefits provided for herein for Insured are supplemental life insurance benefits and shall not be deemed to modify, affect or limit any salary or salary increases, bonuses, profit sharing or any other type of compensation of Insured in any manner whatsoever. No provision contained in this Agreement shall in any way affect, restrict or limit any existing employment agreement between the Bank and Insured, nor shall any provision or condition contained in this Agreement create specific rights of Insured or limit the right of the Bank to discharge Insured with or without cause. Except as otherwise provided therein, nothing contained in this Agreement shall affect the right of Insured to participate in or be covered by or under any qualified or non-qualified pension, profit sharing, group, bonus or other supplemental compensation, retirement or fringe benefit plan constituting any part of the Bank’s compensation structure whether now or hereinafter existing.

14. Withholding. Notwithstanding any of the provisions hereof, the Bank may withhold from any payment to be made hereunder or deemed reportable income such amount as it may be required to withhold under any applicable federal, state or other law, and transmit such withheld amounts to the applicable taxing authority, in accordance with Section 10(b)(v) above.

15. Miscellaneous Provisions.

(a) Counterparts. This Agreement may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument.

(b) Survival. The provisions of Sections 4(a), 12 and 15 of this Agreement shall survive the termination of this Agreement indefinitely, regardless of the cause of, or reason for, such termination.

(c) Construction. As used in this Agreement, the neuter gender shall include the masculine and the feminine, the masculine and feminine genders shall be interchangeable among themselves and each with the neuter, the singular numbers shall include the plural, and the plural the singular. The term “person” shall include all persons and entities of every nature whatsoever, including, but not limited to, individuals, corporations, partnerships, governmental entities and associations. The terms “including,” “included,” “such as” and terms of similar import shall not imply the exclusion of other items not specifically enumerated.

(d) Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall be held to be invalid, illegal, unenforceable or inconsistent with any present or future law, ruling, rule or regulation of any court, governmental or regulatory authority having jurisdiction over the subject matter of this Agreement, such provision shall be rescinded or modified in accordance with such law, ruling, rule or regulation and the remainder of this Agreement or the application of such provision to the person or circumstances other than those as to which it is held inconsistent shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

(e) Governing Law. This Agreement is made in the State of California and shall be governed in all respects and construed in accordance with the laws of the State of California without regard to its conflicts of law principles, except to the extent superseded by the Federal laws of the United States.

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(f) Binding Effect. This Agreement is binding upon the parties, their respective successors, permitted assigns, heirs and legal representatives. Without limiting the foregoing, the terms of this Agreement shall be binding upon Insured’s estate, administrators, personal representatives and heirs. This Agreement may be assigned by Bank to any party to which Bank assigns or transfers the Policy. This Agreement has been approved by the Committee and the Bank agrees to maintain an executed counterpart of this Agreement in a safe place as an official record of the Bank.

(g) [Omitted].

(h) Assignment of Rights. None of the payments provided for by this Agreement shall be subject to seizure for payment of any debts or judgments against the Insured or any beneficiary; nor shall the Insured or any beneficiary have any right to transfer, modify, anticipate or encumber any rights or benefits hereunder; provided, however, that the undistributed portion of any benefit payable hereunder shall at all times be subject to set-off for debts owed by Insured to Bank.

(i) Entire Agreement. This Agreement (together with its exhibits, which are incorporated herein by reference) constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous negotiations, agreements and understandings, whether oral or written, relating to the subject matter hereof.

(j) Notice. Any notice to be delivered under this Agreement shall be given in writing and delivered by hand, or by first class, certified or registered mail, or by nationally-recognized overnight delivery service, postage prepaid, addressed to the Bank or the Insured, as applicable, at the address for such party set forth below or such other address designated by notice.

Bank: California Bank of Commerce

3595 Mt. Diablo Blvd., Suite 220

Lafayette, CA 94549

Attn: President & Chief Executive Officer

Insured: Scott Myers-last address provided to Bank

Such notice shall be deemed to have been given upon the earlier of receipt or refusal.

(k) Non-waiver. No delay or failure by either party to exercise any right under this Agreement, and no partial or single exercise of that right, shall constitute a waiver of that or any other right.

(l) Headings. Headings in this Agreement are for convenience only and shall not be used to interpret or construe its provisions.

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(m) Amendment. No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties. No waiver of any provision contained in this Agreement shall be effective unless it is in writing and signed by the party against whom such waiver is asserted

(n) Seal. The parties hereto intend this Agreement to have the effect of an agreement executed under the seal of each.

(o) Purpose. The primary purpose of this Agreement is to provide certain death benefits to the Insured as a member of a select group of management or highly compensated employees of the Bank.

(p) The parties do not intend that any amounts payable under this Agreement will be subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and this Agreement shall be interpreted and administered in accordance with such intention. Notwithstanding the foregoing, the Bank may amend, modify or terminate this Agreement (and may do so retroactively) without the consent and or approval of the Insured or any beneficiary of the Insured if such amendment, modification or termination is necessary to either make this Agreement not subject to Code Section 409A, or to ensure compliance with Code Section 409A or in order to avoid the application of any penalties that may be imposed upon the Insured and any beneficiary of the Insured pursuant to the provisions of Code Section 409A. Notwithstanding the foregoing, Insured understands and agrees that he bears the entire risk of any adverse federal, state or local tax consequences and penalty taxes which may result from payment on a basis contrary to the provisions of Section 409A or comparable provisions of any applicable state or local income tax laws.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year set forth above.


CALIFORNIA BANK OF COMMERCE		INSURED

/s/ Steven E. Shelton		/s/ Scott Myers
President & CEO

DATE:	12/9/20	DATE:	12/15/20

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Exhibit 10.6

EMPLOYMENT AGREEMENT

This Employment Agreement (the Agreement) is entered into by and between CALIFORNIA BANK OF COMMERCE a California banking corporation (the Bank), and Thomas M. Dorrance an individual (the Executive) as of March 10, 2016 (Effective Date). The definitions for certain defined terms in the Agreement are referred to in Section 5 below and are listed in Exhibit B; these defined terms are in bold text. This Agreement replaces any previous employment agreements between the parties and makes such previous agreements null and void.

In consideration of the promises and mutual covenants and agreements herein contained and intending to be legally bound hereby, the Bank and the Executive hereby agree as follows:

1.	Employment.

1.1 Title. The Executive is employed as Executive Vice President of the Bank. The job description for this position is attached hereto as Exhibit A. The Executive shall have such other duties and responsibilities as may be designated to him by the President of the Bank, or its Board of Directors, and in accordance with the objectives or policies of the Board of Directors, from time to time, in connection with the business activities of the Bank.

1.2 Devotion To Bank Business. The Executive shall devote his full business time, ability, and attention to the business of the Bank during the term of this Agreement and shall not during the term of this Agreement engage in any other business activities, duties, or pursuits whatsoever, or directly or indirectly render any services of a business, commercial, or professional nature to any other person or organization, whether for compensation or otherwise, without the prior written consent of the Board of Directors of the Bank. It shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees or to deliver lectures, fulfill speaking engagements or teach at educational institutions so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Bank in accordance with this Agreement provided such activity is disclosed in writing to the Bank, or (B) manage personal investments. Nothing in this Agreement shall be interpreted to prohibit the Executive from making passive personal investments.

1.3 Standard. The Executive will set a high standard of professional conduct given his role with the Bank and his responsibility relative to the Bank’s presence and stature in the community. The Executive will, at all times, emulate this high professional standard of conduct in order to develop and enhance the Bank’s reputation and image. The Executive will comply with all applicable rules, policies and procedures of the Bank and any of its subsidiaries and all pertinent regulatory standards as may affect the Bank.

1.4 Location. The Executive shall provide services for the Bank at its offices located in Lafayette, California. The Executive agrees that the Executive will be regularly present here and further understands that the Executive may be required to travel from time to time in the course of performing the Executive’s duties for the Bank.

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1.5 No Breach Of Contract. The Executive hereby represents to the Bank that: (i) the execution and delivery of this Agreement by the Executive and the performance by the Executive of the Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any other agreement or policy to which the Executive is a party or by which he is otherwise bound; and (ii) that the Executive is not bound by any confidentiality, trade secret or similar agreement (other than this Agreement) with any other person or entity.

2 Term. The term of this Agreement shall be a period of one (1) year from the Effective Date, subject to the termination provisions of Section 7. Upon the occurrence of the first annual anniversary of the Effective Date; and on each anniversary date thereafter, the term of this Agreement shall be deemed automatically extended for an additional one (1) year term, subject to the termination provisions of Section 7.

3.	Compensation.

3.1 Salary. The Executive shall receive a salary at an annual rate of $190,500, which will be paid in accordance with the Bank’s normal payroll procedures including applicable adjustments for withholding taxes. The Executive shall receive such annual increases in salary, if any, as may be determined by the Bank’s Board of , Directors’ annual review of the Executive’s compensation each year during the term of this Agreement. Participation in deferred compensation, discretionary or performance bonus, retirement, stock option and other employee benefit plans and in fringe benefits shall not reduce the annual rate.

3.2 Incentive Compensation. The Executive shall be entitled to receive an annual incentive compensation payment pursuant to the terms of the Incentive Plan. Except as set forth in the Incentive Plan or this Agreement, or in any successor incentive plan or arrangement, no incentive compensation payments shall be paid or prorated for a partial year during the year Executive terminates his employment and the Executive shall not be entitled to receive incentive compensation payments for any year during the term of this Agreement in which Executive was not employed by the Bank the full fiscal year (not including his initial year of employment).

3.3 Other Benefits. Subject to applicable qualification requirements and regulatory approval requirements, if any, the Executive shall further be entitled to the following benefits:

(a) Insurance. The Bank shall provide during the term of this Agreement group life, health (including medical, dental, vision and hospitalization), accident and disability insurance coverage for the Executive and his dependents through a policy or policies provided by the insurer(s) selected by the Bank in its sole discretion on the same basis and cost as all other executives in comparable positions with the Bank.

(b) 401(k). The Bank maintains a 401(k) plan for its eligible employees. Subject to the terms and conditions set forth in the official plan documents, the Executive will be eligible to participate in the 401(k) plan, and shall receive a matching contribution in accordance with the terms of the 401(k) plan from the Bank.

3.4 Business Expenses. The Executive shall be entitled to incur and be reimbursed for reasonable business expenses incurred in the course and scope of Executive’s employment under the Agreement. The Bank agrees that it will reimburse the Executive for all such expenses upon the presentation by the Executive, from time to time, of an itemized account of such expenditures setting forth the date, the purposes for which incurred, and the amounts thereof, together with such receipts showing payments in conformity with the Bank’s established policies. Reimbursement shall be made within a reasonable period after the Executive’s submission of an itemized account in accordance with the Bank’s policies.

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3.5 Benefit Eligibility And Governance. The Executive’s and his family’s eligibility and all other terms and conditions of the Executive’s participation in the Bank’s benefit, insurance and disability plans and programs will be governed by the official plan documents which may change from year-to-year.

3.6 [Omitted].

3.7 [Omitted].

3.8 [Omitted].

3.9 [Omitted].

3.10 Employee Stock Ownership Plan. The Executive will be eligible to participate in the Bank’s Employee Stock Ownership Plan (ESOP), which is incorporated by reference as if fully set forth here, when and at such time as one is created by the Bank. Participation will be subject to the terms and conditions of the ESOP.

3.11 Automobile Allowance. The Bank will pay to the Executive an automobile allowance in the amount of $425.00 per month during the term of this Agreement. The Executive shall obtain and maintain public liability insurance and property damage insurance policies with insurer(s) acceptable to the Bank with such coverages in such amounts which may be acceptable to the Bank from time to time.

3.12 [Omitted].

4. Indemnity. To the extent permitted or required by applicable law and when consistent with this Agreement and the Bank’s articles of incorporation and bylaws, the Bank shall indemnify and hold the Executive harmless from any cost, expense or liability arising out of or relating to any acts or decisions made by the Executive in acting on behalf of the Bank in the course and scope of Executive’s employment.

The Executive agrees to promptly notify the Bank of any actual or threatened claim arising out of or as a result of the Executive’s employment with the Bank.

5. Terms Defined. The definitions for certain defined terms to this Agreement are attached, and incorporated herein, as Exhibit B. These defined terms are in bold text in the Agreement.

6. Change Of Control. Subject to the limitations of Section 409A of the Code, set forth in Section 8 of this Agreement, the earliest occurrence of one of the following events are considered a Change of Control:

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(a) the acquisition (or acquisition during the 12-month period ending on the date of the most recent acquisition) by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either (i) the then outstanding shares of common stock of the Bank (the “Outstanding Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Bank entitled to vote generally in the election of directors (“Outstanding Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Bank, (ii) any acquisition by the Bank that reduces the number of shares issued and outstanding through a stock repurchase program or otherwise, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Bank or any corporation controlled by the Bank or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 6; or

(b) individuals who, as of the Effective Date, constitute the Board of Directors of the Bank (the Incumbent Board) cease for any reason other than resignation, death or disability to constitute at least a majority of the Bank’s Board of Directors during any 12-month period; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Bank’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Bank’s Board of Directors; or

(c) consummation of a reorganization, merger or consolidation of the Bank, or sale or other disposition (in one transaction or a series of transactions) of any assets of the Bank having a total fair market value equal to, or more than, 40% of the total gross fair market value of all of the assets of the Bank immediately prior to such acquisition or acquisitions (a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns all or substantially all of the Bank’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Bank or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, of the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Bank’s Board of Directors at the time of the execution of the initial agreement, or of the action of the Bank’s Board of Directors, providing for such Business Combination; or

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(d) approval by the shareholders of the Bank of a complete liquidation or dissolution of the Bank.

6.1 Change Of Control Period. The Change of Control period for purposes of this Agreement is the period of time (a) commencing on the earlier of (i) 120 days before the date the Change of Control occurs, or (ii) 120 days before a definitive agreement is executed by the Bank for a transaction described in Section 6, and (b) ending on the last day of the 18th calendar month immediately following the month the Change of Control occurred.

7.	Termination.

7.1	This Agreement may be terminated for the following reasons:

(a) Death. This Agreement shall terminate automatically upon the Executive’s death.

(b) Disability. In the event of the Executive’s Disability, the Bank may give the Executive a notice of termination after receipt of the written opinion of the physician selected by the Bank, if in the opinion of such physician, the condition will render the Executive unable to return to his job duties for an indefinite period of time of not less than 180 days. In such event, the Executive’s employment with the Bank and this Agreement shall terminate without further act of the parties on the earlier of (i) commencement of disability payments under either California State Disability Insurance (SDI) or Bank insurance, (ii) a denial of the claim for above-referenced disability application to SDI of the Bank insurance, or (iii) four months after the Bank receives the above-referenced written opinion from the physician. All rights and obligations accruing to the Executive under this Agreement shall cease at such termination, except that such termination shall not prejudice the Executive’s rights regarding employment benefits which shall have accrued prior to such termination, and any other remedy which the Executive may have at law, in equity or under this Agreement, which remedy accrued prior to such termination.

(c) Cause. The Bank may terminate the Executive’s employment and this Agreement for Cause by giving written notice of such termination to the Executive. Unless otherwise agreed in writing between the Executive and the Bank, upon receipt of the notice under this Section the Executive shall immediately cease performing and discharging the duties and responsibilities of his positions and remove himself and his personal belongings from the Bank’s premises. All rights and obligations accruing to the Executive under this Agreement shall cease at such termination, except that such termination shall not prejudice the Executive’s rights regarding employment benefits which shall have accrued prior to such termination, and any other remedy which the Executive may have at law, in equity or under this Agreement, which remedy accrued prior to such termination.

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(d) Termination By Bank Without Cause. The Bank may, at its election and in its sole discretion, terminate the Executive’s employment and this Agreement at any time and for any reason or for no reason, upon 30 days prior written notice to the Executive, without prejudice to any other remedy to which the Bank may be entitled either at law, in equity or under this Agreement. Unless otherwise agreed in writing between the Executive and the Bank, upon receipt of the notice under this Section the Executive shall immediately cease performing and discharging the duties and responsibilities of his positions and remove himself and his personal belongings from the Bank’s premises. All rights and obligations accruing to the Executive under this Agreement shall cease at such termination, except that such termination shall not prejudice the Executive’s rights regarding employment benefits which shall have accrued prior to such termination, including the right to receive the severance benefits specified in Section 7.2(a) or 7.2(b) below, and any other remedy which the Executive may have at law, in equity or under this Agreement, which remedy accrued prior to such termination.

(e) Voluntary Termination By Executive. The Executive may terminate his employment and this Agreement at any time and for any reason or no reason, upon 30 days prior written notice to the Bank. Unless otherwise agreed in writing between the Executive and the Bank, upon submission of the notice under this Section the Executive shall immediately cease performing and discharging the duties and responsibilities of his positions and remove himself and his personal belongings from the Bank’s premises. All rights and obligations’ accruing to the Executive under this Agreement shall cease at such termination, except that such termination shall not prejudice the Executive’s rights regarding employment benefits which shall have accrued prior to such termination and any other remedy which the Executive may have at law, in equity or under this Agreement, which remedy accrued prior to such termination.

7.2 Certain Benefits Upon Termination.

(a) Termination Without Cause. In the event the Bank terminates based on Section 7.1(d) (termination without cause), then in such case, the Executive shall receive the Accrued Obligations on the Date of Termination, and severance benefits constituting of:

(i) cash payment in the amount equal to one half times the sum of the Executive’s (A) Base Salary, less any remaining balance under the Term of this Agreement pursuant to section 2 above which would otherwise be payable as remaining Base Salary, and (B) Average Annual Bonus, all payable in a lump sum within 30 days of the Date of Termination, and

(ii) payment of one hundred percent (100%) of the premiums for the continuation of group insurance coverages specified in Section 3.3(a) of this Agreement for the Executive and his dependents pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), or under applicable California law pursuant to Assembly Bill No. 1401 (“Cal COBRA”) on terms at least equal to those if the Executive’s employment had not been terminated, but not less favorable than that provided to other executives in comparable positions with the Bank, for a period of 12 months from the Date of Termination. After expiration of the 12 month period, the Executive and his dependents shall have such rights to continue to participate under the Bank’s group insurance coverages specified in Section 3.3(a) of this Agreement at the Executive’s expense to the extent available under the terms of the plan or benefit and the provisions of COBRA and CaICOBRA. The Executive agrees to notify the Bank as soon as practicable, but not less than 10 business days in advance of the commencement of

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comparable insurance coverages with another employer. The Bank’s obligation for the 12 month period specified herein with respect to the foregoing premium payments shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, or the Executive becomes eligible for Medicare, in which case the Bank may reduce the premium payments for coverage of any benefits it provides the Executive or his or her dependents hereunder so long as the aggregate coverages and benefits of the combined benefit plans of the new employer (or Medicare) are not substantially less favorable to the Executive than the coverages and benefits to be provided hereunder. Any continuing benefits and coverage must be permitted under the rules of COBRA or CalCOBRA.

Notwithstanding the foregoing or any other provision of this Agreement, if any part or all of the severance benefits is subject to taxation under Section 409A of the Code, as determined by the Bank, with the advice of its independent accounting firm or other tax advisors, then the severance benefits shall be subject to modification as set forth in Section 8 of this Agreement.

Notwithstanding the foregoing, when the Executive is entitled to the severance benefits provided in Section 7.2(b), then Executive shall not be entitled to the severance benefits pursuant to this Section 7.2(a). The provision of severance benefits under this section are conditioned upon and subject to Executive signing a valid Release and Waiver of All Claims in Full (Waiver) following his termination, without revocation, a copy of which is attached hereto as Exhibit C. The Executive acknowledges and agrees that severance benefits pursuant to this Section 7.2(a) are in lieu of all damages, payments and liabilities on account of the early termination of this Agreement and are the sole and exclusive remedy for the Executive for a termination specified in Section 7.1(d).

(b) Termination And Change of Control. In the event of a Change of Control and at any time during the Change of Control Period (x), the Executive’s employment is terminated by the Bank other than for Cause or (y), the Executive voluntarily terminates his employment in a good faith reasonable determination that Good Reason exists for such termination, then the Executive shall receive the Accrued Obligations on the Date of Termination, and the severance benefits consisting of:

(i) a cash payment in an amount equal to one (1) times the Executive’s (A) Base Salary less any remaining balance under the Term of this Agreement pursuant to section 2 above which would otherwise be payable as remaining Base Salary and (B) Average Annual Bonus, all payable in a lump sum within 30 days following such termination; and

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participate under the Bank’s group insurance coverages specified in Section 3.3(a) of this Agreement at the Executive’s expense to the extent available under the terms of the plan or benefit and the provisions of COBRA and CalCOBRA. The Executive agrees to notify the Bank soon as practicable, but not less than 10 business days in advance of the commencement of comparable insurance coverages with another insurance carrier. The Bank’s obligation for the 24 month period specified herein with respect to the foregoing premium payments shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, or the Executive becomes eligible for Medicare, in which case the Bank may reduce the premium payments for coverage of any benefits it provides the Executive or his or her dependents hereunder so long as the aggregate coverages and benefits of the combined benefit plans of the new employer (or Medicare) are not substantially less favorable to the Executive than the coverages and benefits to be provided hereunder. Any continuing benefits and coverage must be permitted under the rules of COBRA or CalCOBRA.

Notwithstanding the foregoing or any other provision of this Agreement, if any part or all of the severance benefits is subject to taxation under Section 409A of the Code, as determined by the Bank, with the advice of its independent accounting firm or other tax advisors, then the severance payment shall be subject to modification as set forth hereafter in Section 8 of this Agreement.

The Executive acknowledges and agrees that severance benefits pursuant to this Section 7.2(b) are in lieu of all damages, payments and liabilities on account of the events described above for which such severance benefits may be due the Executive under Section 7.2(b) of this Agreement. This Section 7.2(b) shall be binding upon and inure to the benefit of the Bank and their respective successors and assigns.

The provision of severance benefits under this section are conditioned upon and subject to Executive signing a valid Release and Waiver of All Claims in Full (Waiver) following his termination, without revocation, a copy of which is attached hereto as Exhibit C. Notwithstanding the foregoing, the Executive shall not be entitled to receive severance benefits pursuant to this Section 7.2(b) in the event his termination of employment results from an occurrence described in Sections 7.1(a), 7.1(b) or 7.1(c).

(c) Death. If the Executive’s employment terminates by reason of the Executive’s death, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than for payment of Accrued Obligations and any compensation accrued and vested under the terms of the Incentive Plan for the year in which the death occurred prorated through the Date of Termination. Any payments that may be due the Executive from the Bank under this Agreement as of the date of death shall be paid to the Executive’s heirs, beneficiaries, successors, permitted assigns or transferees, executors, administrators, trustees, or any other legal or personal representatives. Accrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination; provided, however, that payment may be deferred until the Executive’s executor or personal representative has been appointed and qualified pursuant to the laws in effect in the Executive’s jurisdiction of residence at the time of the Executive’s death.

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(d) Disability. If the Executive’s employment terminates during the Term by reason of the Executive’s Disability, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations, and any compensation accrued and vested under the terms of the Incentive Plan for the year in which the termination occurs prorated through the Date of Termination and any benefits under such plans, programs, practices and policies relating to disability benefits, if any, as in effect on the Date of Termination.

(e) Cause/Voluntary Termination. If the Executive’s employment terminates for Cause, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive the Accrued Obligations. If the Executive’s employment terminates due to the Executive’s voluntarily termination this Agreement, except as provided in Section 7.2(b), this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive the Accrued Obligations.

(f) Single Trigger Event. The provisions for payments contained in this Section 7.2 may be triggered only once during the term of this Agreement according to the event that occurs first that gives rise to a benefit under Section 7.2. Thus, for example, should the Executive be terminated because of a Disability and should there thereafter be a Change of Control, then the Executive would be entitled to be paid only under Section 7.2(d) and not under Section 7.2(b), as well. In addition, the Executive shall not be entitled to receive severance benefits of any kind from any parent entity, wholly owned subsidiary or other affiliated entity of the Bank if in connection with the same event or series of events the payments provided for in this Section 7.2 have been triggered.

8. Section 409A Limitation. It is the intention of the Bank and the Executive that the severance benefits payable to the Executive under Section 7.2 either be exempt from, or otherwise comply with, Section 409A (“Section 409A”) of the Code.

Notwithstanding any other term or provision of this Agreement, to the extent that any provision of this Agreement is determined by the Bank, with the advice of its independent accounting firm or other tax advisors, to be subject to and not in compliance with Section 409A, including, without limitation, the definition of Change in Control or the timing of commencement and completion of severance benefits and/or other benefit payments to the Executive hereunder, or the amount of any such payments, such provisions shall be interpreted in the manner required to exempt the benefit from or to comply with Section 409A. The Bank and the Executive acknowledge and agree that such interpretation could, among other matters, (i) limit the circumstances or events that constitute a “change in control”; (ii) delay for a period of 6 months or more, or otherwise modify the commencement of ‘ severance and/or other benefit payments; (iii) modify the completion date of severance; and/or (iv) modify other benefit payments and/or reduce the amount of the benefit otherwise provided.

The Bank and the Executive further acknowledge and agree that if, in the judgment of the Bank, with the advice of its independent accounting firm or other tax advisors, amendment of this Agreement is necessary to exempt the benefits from or to comply with Section 409A, the Bank and the Executive will negotiate reasonably and in good faith to amend the terms of this Agreement to the extent necessary so that it exempts the benefits from or to comply with

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Section 409A (with the most limited possible economic effect on the Bank and the Executive). For example, if this Agreement is subject to Section 409A and Section 409A requires that severance and/or other benefit payments must be delayed until at least 6 months after the Executive terminates employment, then the Bank and the Executive shall delay payments and/or promptly seek a written amendment to this Agreement that would, if permissible under Section 409A, eliminate any such payments otherwise payable during the first 6 months following the Executive’s termination of employment and substitute therefor a lump sum payment or an initial installment payment, as applicable, at the beginning of the 7th month following the Executive’s termination of employment which, in the case of an initial installment payment, would be equal in the aggregate to the amount of all such payments thus eliminated. Notwithstanding the foregoing, (a) the Executive and his dependents shall not be denied access to and participation in any health or medical insurance coverage and benefits, for any period of time the Executive and his dependents are otherwise eligible, and (b) the Executive acknowledges and agrees that the Bank shall have the exclusive authority to determine whether the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i). The Bank makes no representations that the payments and benefits • provided under this Agreement comply with Section 409A. In no event shall the Bank be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Executive on account of noncompliance with Section 409A.

9. Assignment. This Agreement will inure to the benefit of and be binding upon the Bank and any of its respective successors and assigns. In view of the personal nature of the services to be performed under this Agreement by the Executive, the Executive will not have the right to assign or transfer any of his rights, obligations or benefits under this Agreement. The Bank will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Bank to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform it if no such succession had taken place.

10. Executive’s Services Unique And Warrant Injunctive Relief. The Executive hereby represents and agrees that the services to be performed under the terms of this Agreement are of a special, unique, unusual, extraordinary, and intellectual character that gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages in an action at law. The Executive therefore expressly agrees that the Bank, in addition to any other rights or remedies that the Bank may possess, shall be entitled to injunctive and other equitable relief to prevent or remedy a breach of this Agreement by the Executive.

11.	No Solicitation And Nondisclosure By The Executive.

(a) The Executive shall not, during the term of this Agreement, directly or indirectly, either as an employee, employer, consultant, agent, principal, stockholder (except as permitted in Section 1.2 of this Agreement), officer, director, or in any other individual or representative capacity, engage or participate in any competitive banking or financial services business without the prior written consent of the Board of Directors of the Bank.

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(b) Following termination of this Agreement and the Executive’s employment hereunder, the Executive shall not use any Trade Secret or Proprietary Information of the Bank or its affiliates, parents, and subsidiaries to solicit, encourage or assist, directly, indirectly or in any manner whatsoever, (i) any employees of the Bank, or its affiliates, parent, and subsidiaries (including any former employees who voluntarily terminated employment with the Bank within a 12 month period prior to the Executive’s termination of employment) to resign or to apply for or accept employment with any other competitive banking or financial services business within the counties in California in which the Bank has located its headquarters or branch offices; or (ii) any customer, person or entity that has a business relationship with the Bank during the 12 month period prior to the Executive’s termination of employment with the Bank, or was engaged in a business relationship with the Bank, to terminate such business relationship and engage in a business relationship with any other competitive banking or financial services business within the counties in California in which the Bank has located its headquarters or branch offices.

12. Disclosure Of Information. The Executive shall not, at any time or in any manner, directly or indirectly, either before or after termination of this Agreement, without the prior written consent of the Board of Directors of the Bank, except as required by law to comply with legal process including, without limitation, by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process, use for his own benefit or the benefit of any other person or entity, or otherwise disclose or communicate to any person or entity including, without limitation, the media or by way of the internet or World Wide Web, any information concerning any Trade Secret or Proprietary Information of the Bank. The Executive further recognizes and acknowledges that any Trade Secrets concerning any customers of the Bank and their respective affiliates and subsidiaries, as it may exist from time to time, is strictly confidential and is a valuable, special and unique asset of the Bank’s business. In the event the Executive is required by law to disclose Trade Secrets or Proprietary Information, the Executive will provide the Bank and their counsel with immediate notice of such request so that they may consider seeking a protective order. If, in the absence of a protective order or the receipt of a waiver hereunder, the Executive is nonetheless, in the written opinion of knowledgeable counsel, compelled to disclose Trade Secrets or Proprietary Information to any tribunal or any other party or else stand liable for contempt or suffer other material censure or material penalty, then the Executive may disclose (on an “as needed” basis only) such information to such tribunal or other party without liability hereunder. Notwithstanding the foregoing, the Executive may disclose Trade Secrets or Proprietary Information as may be required by any regulatory agency having jurisdiction over the operations of the Bank in connection with an examination of the Bank or other proceeding conducted by such regulatory agency.

13. Written, Printed Or Electronic Material And Return Of Other Bank Property. All written, printed or electronic material, notebooks and records including, without limitation, computer disks, thumb drives, flash drives, cloud stored information, smart phones, tablets or laptops and all similar devices used by the Executive in performing duties for the Bank, other than the Executive’s personal address lists, telephone lists, notes and diaries, are and shall remain the sole property of the Bank. Upon termination of employment, the Executive shall promptly return all such material (including all copies, extracts and summaries thereof) to the Bank.

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Further, Executive acknowledges that all Bank property must be returned upon termination of employment, including but not limited to phones, computers, laptops, tablets and similar devices.

14.	280G Payments

14.1 If any of the payments or benefits received or to be received by the Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or the Executive’s termination of employment whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement, or otherwise) (all such payments collectively referred to herein as the “280G Payments”) constitute “parachute payments” within the meaning of Section 280G of the Code and would, but for this Section 14.2, be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then such 280G Payments shall be reduced in a manner determined by the Bank (by the minimum possible amounts) that is consistent with the requirements of Section 409A until no amount payable to the Executive will be subject to the Excise Tax. If two economically equivalent amounts are subject to reduction but are payable at different times, the amounts shall be reduced (but not below zero) on a pro rata basis.

14.2 Any such reduction shall be made in accordance with Section 409A of the Code and the following: (i) the Covered Payments which do not constitute nonqualified deferred compensation subject to Section 409A of the Code shall be reduced first; and (ii) all other Covered Payments shall then be reduced as follows: (A) cash payments shall be reduced before non-cash payments; and (B) payments to be made on a later payment date shall be reduced before payments to be made on an earlier payment date.

15.	Miscellaneous.

15.1 Notice. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when: (1) personally delivered, (2) three days after mailing by United States mail, certified or registered, return receipt requested, postage prepaid; or (3) three days after sending by overnight delivery via either FedEx or UPS. Notice should be personally delivered, mailed or sent to the respective addresses set forth below, or to such other addresses as either party may have furnished to the other in writing in accordance herewith, except that notice of a change of address shall be effective only upon actual receipt:

Bank: California Bank of Commerce

3595 Mt. Diablo Blvd., Suite 220

Lafayette, California 94549

Attn: President & CEO

Executive: Thomas M. Dorrance

Address:

15.2 Amendments Or Additions. No amendment, modification or additions to this Agreement shall be binding unless in writing and signed by the parties hereto.

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15.3 Section Headings. The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement.

15.4 Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

15.5 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but both of which together will constitute one and the same instrument.

15.6 Mediation. Prior to engaging in any legal or equitable litigation or other dispute resolution process, regarding any of the terms and conditions of this Agreement between the parties, or concerning the subject matter of the Agreement between the parties, each party specifically agrees to engage in good faith, in a mediation process at the expense of the Bank, complying with the procedures provided for under California Evidence Code Sections 1115 through and including 1125, as then currently in effect. The parties further and specifically agree to use their best efforts to reach a mutually agreeable resolution of the matter. The parties understand and agree that should any party to this Agreement refuse to participate in mediation for any reason, the other party will be entitled to seek a court order to enforce this provision in any court of appropriate jurisdiction requiring the dissenting party to attend, participate, and to make a good faith effort in the mediation process (and the related alternative dispute resolution process under the Agreement) to reach a mutually agreeable resolution of the matter.

Nothing in this section or Section 15.7 is intended to cover claims that Executive may have for workers’ compensation benefits or unemployment insurance benefits. Further, pursuant to California Code of Civil Procedure §1281.8 (b) either party hereto may apply to a California court for provisional remedy prior to and during the pendency of the alternative dispute resolution process, including a temporary restraining order or preliminary injunction.

15.7 Arbitration. To the extent not resolved through mediation as provided in Section 15.6, all claims, disputes and other matters in question arising out of or relating to this Agreement, any termination of the Executive’s employment, the enforcement or interpretation of this Agreement, or because of an alleged breach, default, or misrepresentation in connection with any of the provisions of this Agreement, including (without limitation) any state or federal statutory claims, shall be resolved by binding arbitration, with the costs of the arbitration (excluding the fees of the parties attorneys) to be paid by the Bank, in Contra Costa County, California, before a sole arbitrator (the Arbitrator) mutually selected by the parties from JAMS in accordance with the rules and procedures of JAMS then in effect and the arbitration shall be conducted in accordance with the JAMS Employment-Arbitration Rules & Procedures and subject to JAMS policy on Employment Arbitration Minimum Standards of Procedural Fairness. If JAMS is no longer able to supply the arbitrator, such arbitrator shall be mutually selected from the American Arbitration Association (AAA). The obligation of the parties to arbitrate pursuant to this clause shall be specifically enforced in accordance with, and shall be conducted consistently with the provisions of Title 9 of Part 3 of the California Code of Civil Procedure as the exclusive remedy of such dispute; provided, however, that provisional injunctive relief may,

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but need not, be sought in a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the Arbitrator. Final resolution of any dispute through arbitration may include any remedy or relief that the Arbitrator deems just and equitable, including any and all remedies provided by applicable state or federal statutes. At the conclusion of the arbitration, the Arbitrator shall issue a written decision that sets forth the essential findings and conclusions upon which the Arbitrator’s award or decision is based. Any award or relief granted by the Arbitrator hereunder shall be final and binding on the parties hereto and may be enforced by any court of competent jurisdiction.

15.8 Attorneys Fees. In the event of litigation, arbitration or any other action or proceeding between the parties to interpret or enforce this Agreement, or any part thereof or relating to this Agreement, the prevailing party shall be entitled to recover its costs related to such action or proceeding and its reasonable fees of attorneys, accountants and expert witnesses incurred by such party in connection with any such action or proceedings. The prevailing party shall be deemed to be the party which obtains substantially the relief sought or as may otherwise be determined by order of a court of competent jurisdiction in the event of litigation, or an award or decision of an arbitrator in the event of arbitration.

15.9 Entire Agreement. This Agreement, and the matters incorporated by reference as set forth herein, supersedes any and all agreements, either oral or in writing, between the parties with respect to the employment of the Executive by the Bank and contains all of the covenants and agreements between the parties with respect to the employment of the Executive by the Bank; provided, however, that, this Agreement does not supersede or replace the rights and benefits under any restricted stock agreement between the Bank and the Executive in connection Section 3.8. Each party to this Agreement acknowledges that no other representations, inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not set forth herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding on either party.

15.10 Waiver. The failure of a party to insist on strict compliance with any of the terms, provisions, covenants, or conditions of this Agreement by another party shall not be deemed a waiver of any term, provision, covenant, or condition, individually or in the aggregate, unless such waiver is unequivocal and in writing, nor shall any waiver or relinquishment of any right or power at any one time or times be deemed a waiver or relinquishment of that right or power for all or any other times.

15.11 Severability. If any provision in this Agreement is held by a court of competent jurisdiction or arbitrator to be invalid, void, or unenforceable, the remaining provisions shall nevertheless continue in full force and effect without being impaired or invalidated in any way. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

15.12 Interpretation. This Agreement shall be construed without regard to the party responsible for the preparation of the Agreement and shall be deemed to have been prepared jointly by the parties. Any ambiguity or uncertainty existing in this Agreement shall not be interpreted against any party, but according to the application of other rules of contract interpretation, if an ambiguity or uncertainty exists.

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15.13 Governing Law And Venue. The laws of the State of California, other than those laws denominated choice of law rules, shall govern the validity, construction and effect of this Agreement. Any action which in any way involves the rights, duties and obligations of the parties hereunder and is not resolved by binding arbitration shall be brought in the courts of the State of California and venue for any action or proceeding shall be in Contra Costa County or in the United States District Court for the Northern District of California, and the parties hereby submit to the personal jurisdiction of said courts.

15.14 Effect Of Termination On Certain Provisions. Upon the termination of this Agreement, the obligations of the Bank and the Executive hereunder shall cease except to the extent of the Bank’s obligation to make payments, if any, to or for the benefit of the Executive following termination, and provided that this Section 15.14 and Sections 4, 7.2, 8, 9, 10, 11, 12, 13, 14.1, 14.2, 15.1, 15.2, 15.3, 15.4, 15.6, 15.7, 15.8, 15.9, 15.10, 15.11, 15.12, and 15.13 shall remain in full force and effect.

15.15 Advice Of Counsel And Advisors. The Executive acknowledges and agrees that he has read and understands the terms and provisions of this Agreement and prior to signing this Agreement, he has had the advice of counsel and/or such other advisors as he deemed appropriate in connection with his review and analysis of such terms and provisions of this Agreement.

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement on the date first indicated below.


DATED: 3-10-2016	CALIFORNIA BANK OF COMMERCE
	a California banking corporation

	By:	/s/ Terry A. Peterson
		Terry A. Peterson, President and CEO

DATED: 3/10/2016

	/s/ Thomas M. Dorrance
	Thomas M. Dorrance

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EXHIBIT B

Certain Definitions for Employment Agreement Between California

Bank of Commerce and Thomas M. Dorrance

1. “AAA” means the American Arbitration Association.

2. “Arbitrator” means the arbitrator selected under Section 15.7 of the Agreement.

3. “Accrued Obligations” means the sum of the Executive’s Base Salary earned and vacation accrued, if any, through the Date of Termination to the extent not theretofore paid, outstanding expense reimbursements and any compensation previously deferred by the Executive to the extent not theretofore paid.

4. “Agreement” means the Agreement for Employment entered into by and between the California Bank of Commerce, a California banking corporation and Thomas M. Dorrance as of March 10, 2016.

5. “Average Annual Bonus” shall mean the average bonus or incentive compensation amount paid to (or earned by) the Executive during the three (3) fiscal years (or in any shorter number of years if the length of employment of the Executive is less than three (3) years) immediately preceding the Executive’s termination.

6. “Bank” means the California Bank of Commerce, a California banking corporation, and its successors.

7. “Base Salary” means the current annual salary of the Executive, on the Date of Termination.

8. “Cause” shall mean (i) the Executive willfully breaches or habitually neglects the duties which the Executive is required to perform under this Agreement; (ii) the Executive commits an act of moral turpitude that has a material detrimental effect on the reputation or business of the Bank; (iii) the Executive is convicted of a felony or commits any material and actionable act of dishonesty, fraud, or intentional material misrepresentation in the performance of the Executive’s duties under this Agreement; (iv) the Executive engages in an unauthorized disclosure or use of inside information, trade secrets or other confidential information; or (v) the Executive willfully breaches a fiduciary duty, or violates any law, rule or regulation, which breach or violation results in a material adverse effect on the Bank (taken as a whole). If the Bank decides to terminate the Executive’s employment for Cause, the Bank will provide the Executive with notice specifying the grounds for termination, accompanied by a brief written statement stating the relevant facts supporting such grounds.

9. “Code” means the Internal Revenue Code of 1986, as amended and any successor provisions to such sections.

10. “Date of Termination” means (i) if the Executive’s employment is terminated due to the Executive’s death, the Date of Termination shall be the date of death; (ii) if the Executive’s employment is terminated due to Disability, the Date of Termination is the Disability Effective Date as described in Section 7.1(b) of the Agreement; (iii) if the Executive’s employment is terminated by the Bank for Cause, the Date of Termination is the date on which the Bank gives notice to the Executive of such termination; (iv) if the Executive’s employment is terminated by the Bank without Cause or voluntarily by the Executive, the Date of Termination shall be the date specified in the notice of termination; and (v) if the Executive’s employment terminates for any other reason, the Date of Termination shall be the Executive’s final date of employment.

11. “Disability” shall mean a physical or mental condition of the Executive which occurs and persists and which, in the written opinion of a physician selected by the Bank, (under Section 7.1(b) of the Agreement) and in the written opinion of such physician, the condition will render the Executive unable to return to his duties for an indefinite period of not less than 180 days.

12. “Effective Date” means March 10, 2016.

13. “ESOP” means the Bank’s Employee Stock Ownership Plan.

14. “Exchange Act” means the Securities Exchange Act of 1934.

15. “Executive” means Thomas M. Dorrance.

16. “Good Reason” shall mean the following after a Change of Control if without the express consent of the Executive:

(i)

a material change by the Bank in Executive’s title, functions, duties or responsibilities that would cause the Executive’s position to become of less responsibility, importance or scope; or

(ii)

a significant reduction in Executive’s base salary; or

(iii)

a material failure of the Bank to comply with any of the provisions of this Agreement; or

(iv)

a change in the location of employment more than 35 miles from the location immediately preceding the Change of Control other than for reasonable travel requirements in carrying out the Executive’s responsibilities.

If the Executive gives the Bank notice of termination based upon Good Reason, the Bank shall have ten days after receipt of such notice to reasonably remedy the facts and circumstances which provided Good Reason.

17. “Incentive Plan” means the California Bank of Commerce Incentive Bonus Compensation Program in effect on the Effective Date of the Agreement, as later amended or changed by the Bank.

18. “Incumbent Board” means individuals who constitute the Board of Directors of the Bank on the Effective Date of the Agreement.

19. “Plan” means the California Bank of Commerce 2007 Equity Incentive Plan.

20. “Proprietary Information” shall also be given its broadest possible interpretation and shall mean any and all information disclosed or made available by the Bank to the Executive including, without limitation, any information which is not publicly known or available and upon which the Bank’s business or success depends.

21. “Trade Secrets” shall be given its broadest possible interpretation and shall mean any information, including formulas, patterns, compilations, reports, records, programs, devices, methods, know-how, negative know-how, techniques, raw material properties and specifications, formulations, discoveries, ideas, concepts, designs, technical information, drawings, data, customer and supplier lists, information regarding customers, buyers and suppliers, distribution techniques, production processes, research and development projects, marketing plans, general financial information and financial information concerning customers, the Bank’s legal, business and financial structure and operations, and other confidential and proprietary information or processes which (i) derive independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use and (ii) are the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

22. “Waiver” shall mean the Release and Waiver of All Claims in full, a sample of which is attached as Exhibit C to the Agreement, that is required to be signed by Executive, without revocation, as a condition precedent to Bank being required to pay severance benefits to Executive that are contemplated by Section 7.2(a) or Section 7.2(b).

Exhibit 10.7

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT

THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT ( the “Amendment”) is entered by and between CALIFORNIA BANK OF COMMERCE a California banking corporation (the “Bank”), and Thomas M. Dorrance, an individual (the “Executive”), as of June 19, 2018 and amends that certain Employment Agreement dated as of March 10, 2016 between the Bank and the Executive (the “Agreement”).

For good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound hereby, the Bank and the Executive hereby agree as follows:

1. The first sentence of Section 3.1 of the Agreement is hereby amended to replace “$190,500” with “$208,500.”

2. The following sentence is hereby added to the end of Section 2 of the Agreement:

“Notwithstanding any provision of this Agreement to the contrary, however, this Agreement and Executive’s employment with the Bank, unless earlier terminated in accordance with the provisions of this Agreement, shall terminate on April 22, 2032.”

3. Section 7.2(a)(i) of the Agreement is hereby deleted in its entirety and replaced with the following:

“(i) cash payment in the amount equal to one half times the sum of the Executive’s (A) Base Salary and (B) Average Annual Bonus, all payable in a lump sum within 30 days of the Date of Termination, and”

4. The first sentence of the third paragraph of Section 7.2(b)(iii) of the Agreement is hereby deleted in its entirety and replaced with the following:

“The Executive acknowledges and agrees that severance benefits pursuant to this Section 7.2(b) are in lieu of all damages, payments and liabilities on account of the events described above for which such severance benefits may be due the Executive under Section 7.2(a) of this Agreement.”

5. Except as modified by this Amendment, the Agreement shall remain in full force and effect. No amendment, modification or additions to this Amendment shall be binding unless in writing and signed by the parties hereto. This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and permitted assigns.

[Signature page follows]

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IN WITNESS WHEREOF, each of the parties hereto has executed this Amendment as of the date first set forth above.


CALIFORNIA BANK OF COMMERCE,
a California banking corporation

By:		/s/ Steven E. Shelton
		Steven E. Shelton, President and CEO

/s/ Thomas M. Dorrance
Thomas M. Dorrance

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Exhibit 10.8

EMPLOYMENT AGREEMENT

This Employment Agreement (the Agreement) is entered into by and between CALIFORNIA BANK OF COMMERCE, a California banking corporation (the Bank), and Vivian Mui, an individual (the Executive), effective as of July 1, 2019 (the Effective Date). The definitions for certain defined terms in the Agreement are referred to in Section 5 below and are listed in Exhibit B; these defined terms are in bold text. This Agreement replaces any previous employment agreements between the parties and makes such previous agreements null and void.

In consideration of the promises and mutual covenants and agreements herein contained and intending to be legally bound hereby, the Bank and the Executive hereby agree as follows:

1. Employment.

1.1 Title. The Executive is employed as Senior Executive Vice President and Chief Credit Officer of the Bank. The job description for this position is attached hereto as Exhibit A. The Executive will report to the Chief Executive Officer of the Bank and shall have such other duties and responsibilities as may be designated to her by the Chief Executive Officer, or the Bank’s Board of Directors, and in accordance with the objectives or policies of the Board of Directors, from time to time, in connection with the business activities of the Bank.

1.2 Devotion To Bank Business. The Executive shall devote her full business time, ability, and attention to the business of the Bank during the term of this Agreement and shall not during the term of this Agreement engage in any other business activities, duties, or pursuits whatsoever, or directly or indirectly render any services of a business, commercial, or professional nature to any other person or organization, whether for compensation or otherwise, without the prior written consent of the Board of Directors of the Bank. It shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees or to deliver lectures, fulfill speaking engagements or teach at educational institutions so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Bank in accordance with this Agreement provided such activity is disclosed in writing to the Bank, or (B) manage personal investments. Nothing in this Agreement shall be interpreted to prohibit the Executive from making passive personal investments.

1.3 Standard. The Executive will set a high standard of professional conduct given her role with the Bank and her responsibility relative to the Bank’s presence and stature in the community. The Executive will, at all times, emulate this high professional standard of conduct in order to develop and enhance the Bank’s reputation and image. The Executive will comply with all applicable rules, policies and procedures of the Bank and any of its subsidiaries and all pertinent regulatory standards as may affect the Bank.

1.4 Location. The Executive shall provide services for the Bank at its offices located in Oakland, California. The Executive agrees that the Executive will be regularly present here and further understands that the Executive may be required to travel from time to time in the course of performing the Executive’s duties for the Bank.

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1.5 No Breach Of Contract. The Executive hereby represents to the Bank that: (i) the execution and delivery of this Agreement by the Executive and the performance by the Executive of the Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any other agreement or policy to which the Executive is a party or by which she is otherwise bound; and (ii) that the Executive is not bound by any confidentiality, trade secret or similar agreement (other than this Agreement) with any other person or entity.

2. Term. The term of this Agreement shall be a period of one (1) year from the Effective Date, subject to the termination provisions of Section 7. Upon the occurrence of the first annual anniversary of the Effective Date, and on each anniversary date thereafter, the term of this Agreement shall be deemed automatically extended for an additional one (1) year term, subject to the termination provisions of Section 7. Notwithstanding any provision of this Agreement to the contrary, however, this Agreement and Executive’s employment with the Bank, unless earlier terminated in accordance with the provisions of this Agreement, shall terminate on December 13, 2037.

3. Compensation.

3.1 Salary. The Executive shall receive a salary at an annual rate of $235,000, which will be paid in accordance with the Bank’s normal payroll procedures including applicable adjustments for withholding taxes. The Executive shall receive such annual increases in salary, if any, as may be determined by the Bank’s Board of Directors’ annual review of the Executive’s compensation each year during the term of this Agreement. Participation in deferred compensation, discretionary or performance bonus, retirement, stock option and other employee benefit plans and in fringe benefits shall not reduce the annual rate.

3.2 Incentive Compensation. The Executive shall be entitled to receive an annual incentive compensation payment pursuant to the terms of the Incentive Plan. Except as set forth in the Incentive Plan or this Agreement, or in any successor incentive plan or arrangement, no incentive compensation payments shall be paid or prorated for a partial year during the year the Executive terminates her employment and the Executive shall not be entitled to receive incentive compensation payments for any year during the term of this Agreement in which the Executive was not employed by the Bank the full fiscal year (not including her initial year of employment).

3.3 Other Benefits. Subject to applicable qualification requirements and regulatory approval requirements, if any, the Executive shall further be entitled to the following benefits:

(a) Insurance. The Bank shall provide during the term of this Agreement group life, health (including medical, dental, vision and hospitalization), accident and disability insurance coverage for the Executive and her dependents through a policy or policies provided by the insurer(s) selected by the Bank in its sole discretion on the same basis and cost as all other executives in comparable positions with the Bank.

(b) 401(k). The Bank maintains a 401(k) plan for its eligible employees. Subject to the terms and conditions set forth in the official plan documents, the Executive will be eligible to participate in the 401(k) plan, and shall receive a matching contribution in accordance with the terms of the 401(k) plan from the Bank.

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3.4 Business Expenses. The Executive shall be entitled to incur and be reimbursed for reasonable business expenses incurred in the course and scope of the Executive’s employment under the Agreement. The Bank agrees that it will reimburse the Executive for all such expenses upon the presentation by the Executive, from time to time, of an itemized account of such expenditures setting forth the date, the purposes for which incurred, and the amounts thereof, together with such receipts showing payments in conformity with the Bank’s established policies. Reimbursement shall be made within a reasonable period after the Executive’s submission of an itemized account in accordance with the Bank’s policies.

3.5 Benefit Eligibility And Governance. The Executive’s and her family’s eligibility and all other terms and conditions of the Executive’s participation in the Bank’s benefit, insurance and disability plans and programs will be governed by the official plan documents which may change from year-to-year.

3.6 [Omitted].

3.7 [Omitted].

3.8 [Omitted].

3.9 [Omitted].

3.10 [Omitted].

3.11 Automobile Allowance. The Bank will pay to the Executive an automobile allowance in the amount of $900.00 per month during the term of this Agreement. The Executive shall obtain and maintain public liability insurance and property damage insurance policies with insurer(s) acceptable to the Bank with such coverages in such amounts which may be acceptable to the Bank from time to time.

3.12 [Omitted].

4. Indemnity. To the extent permitted or required by applicable law and when consistent with this Agreement and the Bank’s articles of incorporation and bylaws, the Bank shall indemnify and hold the Executive harmless from any cost, expense or liability arising out of or relating to any acts or decisions made by the Executive in acting on behalf of the Bank in the course and scope of Executive’s employment. The Executive agrees to promptly notify the Bank of any actual or threatened claim arising out of or as a result of the Executive’s employment with the Bank.

5. Terms Defined. The definitions for certain defined terms to this Agreement are attached, and incorporated herein, as Exhibit B. These defined terms are in bold text in the Agreement.

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6. Change Of Control. Subject to the limitations of Section 409A of the Code, set forth in Section 8 of this Agreement, the earliest occurrence of one of the following events are considered a Change of Control:

(a) the acquisition (or acquisition during the 12-month period ending on the date of the most recent acquisition) by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either (i) the then outstanding shares of common stock of the Bank (the “Outstanding Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Bank entitled to vote generally in the election of directors (“Outstanding Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Bank, (ii) any acquisition by the Bank that reduces the number of shares issued and outstanding through a stock repurchase program or otherwise, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Bank or any corporation controlled by the Bank or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 6; or

(b) individuals who, as of the Effective Date, constitute the Board of Directors of the Bank (the Incumbent Board) cease for any reason other than resignation, death or disability to constitute at least a majority of the Bank’s Board of Directors during any 12-month period; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Bank’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Bank’s Board of Directors; or

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benefit plan (or related trust) of the Bank or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, of the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Bank’s Board of Directors at the time of the execution of the initial agreement, or of the action of the Bank’s Board of Directors, providing for such Business Combination; or

(d) approval by the shareholders of the Bank of a complete liquidation or dissolution of the Bank.

6.2 Change Of Control Period. The Change of Control period for purposes of this Agreement is the period of time (a) commencing on the earlier of (i) 120 days before the date the Change of Control occurs, or (ii) 120 days before a definitive agreement is executed by the Bank for a transaction described in Section 6, and (b) ending on the last day of the 18th calendar month immediately following the month the Change of Control occurred.

7. Termination.

7.1 This Agreement may be terminated for the following reasons:

(a) Death. This Agreement shall terminate automatically upon the Executive’s death.

(b) Disability. In the event of the Executive’s Disability, the Bank may give the Executive a notice of termination after receipt of the written opinion of the physician selected by the Bank, if in the opinion of such physician, the condition will render the Executive unable to return to her job duties for an indefinite period of time of not less than 180 days. In such event, the Executive’s employment with the Bank and this Agreement shall terminate without further act of the parties on the earlier of (i) commencement of disability payments under either California State Disability Insurance (SDI) or Bank insurance, (ii) a denial of the claim for above-referenced disability application to SDI or the Bank insurance, or (iii) four months after the Bank receives the above-referenced written opinion from the physician. All rights and obligations accruing to the Executive under this Agreement shall cease at such termination, except that such termination shall not prejudice the Executive’s rights regarding employment benefits which shall have accrued prior to such termination, and any other remedy which the Executive may have at law, in equity or under this Agreement, which remedy accrued prior to such termination.

(c) Cause. The Bank may terminate the Executive’s employment and this Agreement for Cause by giving written notice of such termination to the Executive. Unless otherwise agreed in writing between the Executive and the Bank, upon receipt of the notice under this Section the Executive shall immediately cease performing and discharging the duties and responsibilities of her positions and remove herself and her personal belongings from the Bank’s premises. All rights and obligations accruing to the Executive under this Agreement shall cease at such termination, except that such termination shall not prejudice the Executive’s rights regarding employment benefits which shall have accrued prior to such termination, and any other remedy which the Executive may have at law, in equity or under this Agreement, which remedy accrued prior to such termination.

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(d) Termination By Bank Without Cause. The Bank may, at its election and in its sole discretion, terminate the Executive’s employment and this Agreement at any time and for any reason or for no reason, upon 30 days prior written notice to the Executive, without prejudice to any other remedy to which the Bank may be entitled either at law, in equity or under this Agreement. Unless otherwise agreed in writing between the Executive and the Bank, upon receipt of the notice under this Section the Executive shall immediately cease performing and discharging the duties and responsibilities of her positions and remove herself and her personal belongings from the Bank’s premises. All rights and obligations accruing to the Executive under this Agreement shall cease at such termination, except that such termination shall not prejudice the Executive’s rights regarding employment benefits which shall have accrued prior to such termination, including the right to receive the severance benefits specified in Section 7.2(a) or 7.2(b) below, and any other remedy which the Executive may have at law, in equity or under this Agreement, which remedy accrued prior to such termination.

(e) Voluntary Termination By Executive. The Executive may terminate her employment and this Agreement at any time and for any reason or no reason, upon 30 days prior written notice to the Bank. Unless otherwise agreed in writing between the Executive and the Bank, upon submission of the notice under this Section the Executive shall immediately cease performing and discharging the duties and responsibilities of her positions and remove herself and her personal belongings from the Bank’s premises. All rights and obligations accruing to the Executive under this Agreement shall cease at such termination, except that such termination shall not prejudice the Executive’s rights regarding employment benefits which shall have accrued prior to such termination and any other remedy which the Executive may have at law, in equity or under this Agreement, which remedy accrued prior to such termination.

7.2 Certain Benefits Upon Termination.

(a) Termination Without Cause. In the event the Bank terminates based on Section 7.1(d) (termination without cause), then in such case, the Executive shall receive the Accrued Obligations on the Date of Termination, and severance benefits constituting of:

(i) cash payment in the amount equal to one half times the sum of the Executive’s (A) Base Salary and (B) Average Annual Bonus, all payable in a lump sum within 30 days of the Date of Termination, and

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12 month period, the Executive and her dependents shall have such rights to continue to participate under the Bank’s group insurance coverages specified in Section 3.3(a) of this Agreement at the Executive’s expense to the extent available under the terms of the plan or benefit and the provisions of COBRA and Cal COBRA. The Executive agrees to notify the Bank as soon as practicable, but not less than 10 business days in advance of the commencement of comparable insurance coverages with another employer. The Bank’s obligation for the 12 month period specified herein with respect to the foregoing premium payments shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, or the Executive becomes eligible for Medicare, in which case the Bank may reduce the premium payments for coverage of any benefits it provides the Executive or her dependents hereunder so long as the aggregate coverages and benefits of the combined benefit plans of the new employer (or Medicare) are not substantially less favorable to the Executive than the coverages and benefits to be provided hereunder. Any continuing benefits and coverage must be permitted under the rules of COBRA or Cal COBRA.

Notwithstanding the foregoing or any other provision of this Agreement, if any part or all of the severance benefits is subject to taxation under Section 409A of the Code, as determined by the Bank, with the advice of its independent accounting firm or other tax advisors, then the severance benefits shall be subject to modification as set forth in Section 8 of this Agreement.

Notwithstanding the foregoing, when the Executive is entitled to the severance benefits provided in Section 7.2(b), then Executive shall not be entitled to the severance benefits pursuant to this Section 7.2(a). The provision of severance benefits under this section are conditioned upon and subject to Executive signing a valid Release and Waiver of All Claims in Full (Waiver) following her termination, without revocation, a copy of which is attached hereto as Exhibit C. The Executive acknowledges and agrees that severance benefits pursuant to this Section 7.2(a) are in lieu of all damages, payments and liabilities on account of the early termination of this Agreement and are the sole and exclusive remedy for the Executive for a termination specified in Section 7.1(d).

(b) Termination And Change of Control. In the event of a Change of Control and at any time during the Change of Control Period, (x) the Executive’s employment is terminated by the Bank other than for Cause or (y) the Executive voluntarily terminates her employment in a good faith reasonable determination that Good Reason exists for such termination, then the Executive shall receive the Accrued Obligations on the Date of Termination, and the severance benefits consisting of:

(i) a cash payment in an amount equal to one (1) times the Executive’s (A) Base Salary less any remaining balance under the Term of this Agreement pursuant to Section 2 above which would otherwise be payable as remaining Base Salary and (B) Average Annual Bonus, all payable in a lump sum within 30 days following such termination; and

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(ii) payment of one hundred percent (100%) of the premiums for the continuation of group insurance coverages specified in Section 3.3(a) of this Agreement for the Executive and her dependents pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), or under applicable California law pursuant to Assembly Bill No. 1401 (“Cal COBRA”) on terms at least equal to those if the Executive’s employment had not been terminated, but not less favorable than that provided to other executives in comparable positions with the Bank, for a period of 12 months from the Date of Termination. After such expiration of the 12 month period, the Executive and her dependents shall have such rights to continue to participate under the Bank’s group insurance coverages specified in Section 3.3(a) of this Agreement at the Executive’s expense to the extent available under the terms of the plan or benefit and the provisions of COBRA and Cal COBRA. The Executive agrees to notify the Bank soon as practicable, but not less than 10 business days in advance of the commencement of comparable insurance coverages with another insurance carrier. The Bank’s obligation for the 24 month period specified herein with respect to the foregoing premium payments shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, or the Executive becomes eligible for Medicare, in which case the Bank may reduce the premium payments for coverage of any benefits it provides the Executive or her dependents hereunder so long as the aggregate coverages and benefits of the combined benefit plans of the new employer (or Medicare) are not substantially less favorable to the Executive than the coverages and benefits to be provided hereunder. Any continuing benefits and coverage must be permitted under the rules of COBRA or Cal COBRA.

Notwithstanding the foregoing or any other provision of this Agreement, if any part or all of the severance benefits is subject to taxation under Section 409A of the Code, as determined by the Bank, with the advice of its independent accounting firm or other tax advisors, then the severance payment shall be subject to modification as set forth hereafter in Section 8 of this Agreement.

The Executive acknowledges and agrees that severance benefits pursuant to this Section 7.2(b) are in lieu of all damages, payments and liabilities on account of the events described above for which such severance benefits may be due the Executive under Section 7.2(a) of this Agreement. This Section 7.2(b) shall be binding upon and inure to the benefit of the Bank and their respective successors and assigns.

The provision of severance benefits under this section are conditioned upon and subject to Executive signing a valid Waiver following her termination, without revocation. Notwithstanding the foregoing, the Executive shall not be entitled to receive severance benefits pursuant to this Section 7.2(b) in the event her termination of employment results from an occurrence described in Sections 7.1(a), 7.1(b) or 7.1(c).

(c) Death. If the Executive’s employment terminates by reason of the Executive’s death, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than for payment of Accrued Obligations and any compensation accrued and vested under the terms of the Incentive Plan for the year in which the death occurred prorated through the Date of Termination. Any payments that may be due the Executive from the Bank under this Agreement as of the date of death shall be paid to the Executive’s heirs, beneficiaries, successors, permitted assigns or transferees, executors, administrators, trustees, or any other legal or personal representatives. Accrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination; provided, however, that payment may be deferred until the Executive’s executor or personal representative has been appointed and qualified pursuant to the laws in effect in the Executive’s jurisdiction of residence at the time of the Executive’s death.

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(d) Disability. If the Executive’s employment terminates during the Term by reason of the Executive’s Disability, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations, and any compensation accrued and vested under the terms of the Incentive Plan for the year in which the termination occurs prorated through the Date of Termination and any benefits under such plans, programs, practices and policies relating to disability benefits, if any, as in effect on the Date of Termination.

(e) Cause/Voluntary Termination. If the Executive’s employment terminates for Cause, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive the Accrued Obligations. If the Executive’s employment terminates due to the Executive’s voluntarily termination this Agreement, except as provided in Section 7.2(b), this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive the Accrued Obligations.

(f) Single Trigger Event. The provisions for payments contained in this Section 7.2 may be triggered only once during the term of this Agreement according to the event that occurs first that gives rise to a benefit under Section 7.2. Thus, for example, should the Executive be terminated because of a Disability and should there thereafter be a Change of Control, then the Executive would be entitled to be paid only under Section 7.2(d) and not under Section 7.2(b), as well. In addition, the Executive shall not be entitled to receive severance benefits of any kind from any parent entity, wholly owned subsidiary or other affiliated entity of the Bank if in connection with the same event or series of events the payments provided for in this Section 7.2 have been triggered.

8. Section 409A Limitation. It is the intention of the Bank and the Executive that the severance benefits payable to the Executive under Section 7.2 either be exempt from, or otherwise comply with, Section 409A (“Section 409A”) of the Code.

Notwithstanding any other term or provision of this Agreement, to the extent that any provision of this Agreement is determined by the Bank, with the advice of its independent accounting firm or other tax advisors, to be subject to and not in compliance with Section 409A, including, without limitation, the definition of Change in Control or the timing of commencement and completion of severance benefits and/or other benefit payments to the Executive hereunder, or the amount of any such payments, such provisions shall be interpreted in the manner required to exempt the benefit from or to comply with Section 409A. The Bank and the Executive acknowledge and agree that such interpretation could, among other matters, (i) limit the circumstances or events that constitute a “change in control”; (ii) delay for a period of 6 months or more, or otherwise modify the commencement of severance and/or other benefit payments; (iii) modify the completion date of severance; and/or (iv) modify other benefit payments and/or reduce the amount of the benefit otherwise provided.

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The Bank and the Executive further acknowledge and agree that if, in the judgment of the Bank, with the advice of its independent accounting firm or other tax advisors, amendment of this Agreement is necessary to exempt the benefits from or to comply with Section 409A, the Bank and the Executive will negotiate reasonably and in good faith to amend the terms of this Agreement to the extent necessary so that it exempts the benefits from or to comply with Section 409A (with the most limited possible economic effect on the Bank and the Executive). For example, if this Agreement is subject to Section 409A and Section 409A requires that severance and/or other benefit payments must be delayed until at least 6 months after the Executive terminates employment, then the Bank and the Executive shall delay payments and/or promptly seek a written amendment to this Agreement that would, if permissible under Section 409A, eliminate any such payments otherwise payable during the first 6 months following the Executive’s termination of employment and substitute therefor a lump sum payment or an initial installment payment, as applicable, at the beginning of the 7th month following the Executive’s termination of employment which, in the case of an initial installment payment, would be equal in the aggregate to the amount of all such payments thus eliminated. Notwithstanding the foregoing, (a) the Executive and her dependents shall not be denied access to and participation in any health or medical insurance coverage and benefits, for any period of time the Executive and her dependents are otherwise eligible, and (b) the Executive acknowledges and agrees that the Bank shall have the exclusive authority to determine whether the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(8)(i). The Bank makes no representations that the payments and benefits provided under this Agreement comply with Section 409A. In no event shall the Bank be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Executive on account of noncompliance with Section 409A.

9. Assignment. This Agreement will inure to the benefit of and be binding upon the Bank and any of its respective successors and assigns. In view of the personal nature of the services to be performed under this Agreement by the Executive, the Executive will not have the right to assign or transfer any of her rights, obligations or benefits under this Agreement. The Bank will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Bank to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform it if no such succession had taken place.

10. Executive’s Services Unique And Warrant Injunctive Relief. The Executive hereby represents and agrees that the services to be performed under the terms of this Agreement are of a special, unique, unusual, extraordinary, and intellectual character that gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages in an action at law. The Executive therefore expressly agrees that the Bank, in addition to any other rights or remedies that the Bank may possess, shall be entitled to injunctive and other equitable relief to prevent or remedy a breach of this Agreement by the Executive.

11. No Solicitation And Nondisclosure By The Executive.

(a) The Executive shall not, during the term of this Agreement, directly or indirectly, either as an employee, employer, consultant, agent, principal, stockholder (except as permitted in Section 1.2 of this Agreement), officer, director, or in any other individual or representative capacity, engage or participate in any competitive banking or financial services business without the prior written consent of the Board of Directors of the Bank.

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(b) Following termination of this Agreement and the Executive’s employment hereunder, the Executive shall not use any Trade Secret or Proprietary Information of the Bank or its affiliates, parents, and subsidiaries to solicit, encourage or assist, directly, indirectly or in any manner whatsoever, (i) any employees of the Bank, or its affiliates, parent, and subsidiaries (including any former employees who voluntarily terminated employment with the Bank within a 12 month period prior to the Executive’s termination of employment) to resign or to apply for or accept employment with any other competitive banking or financial services business within the counties in California in which the Bank has located its headquarters or branch offices; or (ii) any customer, person or entity that has a business relationship with the Bank during the 12 month period prior to the Executive’s termination of employment with the Bank, or was engaged in a business relationship with the Bank, to terminate such business relationship and engage in a business relationship with any other competitive banking or financial services business within the counties in California in which the Bank has located its headquarters or branch offices.

12. Disclosure Of Information. The Executive shall not, at any time or in any manner, directly or indirectly, either before or after termination of this Agreement, without the prior written consent of the Board of Directors of the Bank, except as required by law to comply with legal process including, without limitation, by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process, use for her own benefit or the benefit of any other person or entity, or otherwise disclose or communicate to any person or entity including, without limitation, the media or by way of the internet or World Wide Web, any information concerning any Trade Secret or Proprietary Information of the Bank. The Executive further recognizes and acknowledges that any Trade Secrets concerning any customers of the Bank and their respective affiliates and subsidiaries, as it may exist from time to time, is strictly confidential and is a valuable, special and unique asset of the Bank’s business. In the event the Executive is required by law to disclose Trade Secrets or Proprietary Information, the Executive will provide the Bank and their counsel with immediate notice of such request so that they may consider seeking a protective order. If, in the absence of a protective order or the receipt of a waiver hereunder, the Executive is nonetheless, in the written opinion of knowledgeable counsel, compelled to disclose Trade Secrets or Proprietary Information to any tribunal or any other party or else stand liable for contempt or suffer other material censure or material penalty, then the Executive may disclose (on an “as needed” basis only) such information to such tribunal or other party without liability hereunder. Notwithstanding the foregoing, the Executive may disclose Trade Secrets or Proprietary Information as may be required by any regulatory agency having jurisdiction over the operations of the Bank in connection with an examination of the Bank or other proceeding conducted by such regulatory agency.

13. Written, Printed Or Electronic Material And Return Of Other Bank Property. All written, printed or electronic material, notebooks and records including, without limitation, computer disks, thumb drives, flash drives, cloud stored information, smart phones, tablets or laptops and all similar devices used by the Executive in performing duties for the Bank, other than the Executive’s personal address lists, telephone lists, notes and diaries, are and shall remain the sole property of the Bank. Upon termination of employment, the Executive shall promptly return all such material (including all copies, extracts and summaries thereof) to the Bank.

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Further, Executive acknowledges that all Bank property must be returned upon termination of employment, including but not limited to phones, computers, laptops, tablets and similar devices.

14. 280G Payments.

14.1 If any of the payments or benefits received or to be received by the Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or the Executive’s termination of employment whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement, or otherwise) (all such payments collectively referred to herein as the “280G Payments”) constitute “parachute payments” within the meaning of Section 280G of the Code and would, but for this Section 14, be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then such 280G Payments shall be reduced in a manner determined by the Bank (by the minimum possible amounts) that is consistent with the requirements of Section 409A until no amount payable to the Executive will be subject to the Excise Tax. If two economically equivalent amounts are subject to reduction but are payable at different times, the amounts shall be reduced (but not below zero) on a pro rata basis.

14.2 Any such reduction shall be made in accordance with Section 409A of the Code and the following: (i) the Covered Payments which do not constitute nonqualified deferred compensation subject to Section 409A of the Code shall be reduced first; and (ii) all other Covered Payments shall then be reduced as follows: (A) cash payments shall be reduced before non-cash payments; and (B) payments to be made on a later payment date shall be reduced before payments to be made on an earlier payment date.

15. Miscellaneous.

Bank: California Bank of Commerce

3595 Mt. Diablo Blvd., Suite 220

Lafayette, California 94549

Attn: President & CEO

Executive: Vivian Mui

At the address listed on the Bank’s records

15.2 Amendments or Additions. No amendment, modification or additions to this Agreement shall be binding unless in writing and signed by the parties hereto.

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15.4 Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

15.5 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but both of which together will constitute one and the same instrument.

Nothing in this section or Section 15.7 is intended to cover claims that Executive may have for workers’ compensation benefits or unemployment insurance benefits. Further, pursuant to California Code of Civil Procedure § 1281.8(b) either party hereto may apply to a California court for provisional remedy prior to and during the pendency of the alternative dispute resolution process, including a temporary restraining order or preliminary injunction.

15.7 Arbitration. To the extent not resolved through mediation as provided in Section 15.6, all claims, disputes and other matters in question arising out of or relating to this Agreement, any termination of the Executive’s employment, the enforcement or interpretation of this Agreement, or because of an alleged breach, default, or misrepresentation in connection with any of the provisions of this Agreement, including (without limitation) any state or federal statutory claims, shall be resolved by binding arbitration, with the costs of the arbitration (excluding the fees of the parties attorneys) to be paid by the Bank, in Contra Costa County, California, before a sole arbitrator (the Arbitrator) mutually selected by the parties from JAMS in accordance with the rules and procedures of JAMS then in effect and the arbitration shall be conducted in accordance with the JAMS Employment-Arbitration Rules & Procedures and subject to JAMS policy on Employment Arbitration Minimum Standards of Procedural Fairness. If JAMS is no longer able to supply the arbitrator, such arbitrator shall be mutually selected from the American Arbitration Association (AAA). The obligation of the parties to arbitrate pursuant to this clause shall be specifically enforced in accordance with, and shall be conducted consistently with the provisions of Title 9 of Part 3 of the California Code of Civil Procedure as the exclusive remedy of such dispute; provided, however, that provisional injunctive relief may,

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but need not, be sought in a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the Arbitrator. Final resolution of any dispute through arbitration may include any remedy or relief that the Arbitrator deems just and equitable, including any and all remedies provided by applicable state or federal statutes. At the conclusion of the arbitration, the Arbitrator shall issue a written decision that sets forth the essential findings and conclusions upon which the Arbitrator’s award or decision is based. Any award or relief granted by the Arbitrator hereunder shall be final and binding on the parties hereto and may be enforced by any court of competent jurisdiction.

15.8 Attorneys’ Fees. In the event of litigation, arbitration or any other action or proceeding between the parties to interpret or enforce this Agreement, or any part thereof or relating to this Agreement, the prevailing party shall be entitled to recover its costs related to such action or proceeding and its reasonable fees of attorneys, accountants and expert witnesses incurred by such party in connection with any such action or proceedings. The prevailing party shall be deemed to be the party which obtains substantially the relief sought or as may otherwise be determined by order of a court of competent jurisdiction in the event of litigation, or an award or decision of an arbitrator in the event of arbitration.

15.9 Entire Agreement. This Agreement, and the matters incorporated by reference as set forth herein, supersedes any and all agreements, either oral or in writing, between the parties with respect to the employment of the Executive by the Bank and contains all of the covenants and agreements between the parties with respect to the employment of the Executive by the Bank. Each party to this Agreement acknowledges that no other representations, inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not set forth herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding on either party.

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15.14 Effect Of Termination On Certain Provisions. Upon the termination of this Agreement, the obligations of the Bank and the Executive hereunder shall cease except to the extent of the Bank’s obligation to make payments, if any, to or for the benefit of the Executive following termination, and provided that this Section 15.14 and Sections 4, 7.2, 8, 9, 10, 11, 12, 13, 14.1, 14.2, 15.1, 15.2, 15.3, 15.4, 15.5, 15.6, 15.7, 15.8, 15.9, 15.10, 15.11, and 15.12 shall remain in full force and effect.

15.15 Advice Of Counsel And Advisors. The Executive acknowledges and agrees that she has read and understands the terms and provisions of this Agreement and prior to signing this Agreement, she has had the advice of counsel and/or such other advisors as she deemed appropriate in connection with her review and analysis of such terms and provisions of this Agreement.

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement on the date first indicated below.


CALIFORNIA BANK OF COMMERCE,
a California banking corporation

By:		/s/ Steven E. Shelton
Steven E. Shelton, President and CEO

/s/ Vivian Mui
Vivian Mui

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EXHIBIT B

Certain Definitions for Employment Agreement Between California

Bank of Commerce and Vivian Mui

1. “AAA” means the American Arbitration Association.

2. “Arbitrator” means the arbitrator selected under Section 15.6 of the Agreement.

3. “Accrued Obligations” means the sum of the Executive’s Base Salary earned and vacation accrued, if any, through the Date of Termination to the extent not theretofore paid, outstanding expense reimbursements and any compensation previously deferred by the Executive to the extent not theretofore paid.

4. “Agreement” means the Agreement for Employment entered into by and between the California Bank of Commerce, a California banking corporation and Vivian Mui, effective as of July 1, 2019.

5. “Average Annual Bonus” shall mean the average bonus or incentive compensation amount paid to (or earned by) the Executive during the three (3) fiscal years (or in any shorter number of year, if the length of employment of the Executive is less than three (3) years) immediately preceding the Executive’s termination.

6. “Bank” means the California Bank of Commerce, a California banking corporation, and its successors.

7. “Base Salary” means the current annual salary of the Executive, on the Date of Termination.

8. “Cause” shall mean (i) the Executive willfully breaches or habitually neglects the duties which the Executive is required to perform under this Agreement; (ii) the Executive commits an act of moral turpitude that has a material detrimental effect on the reputation or business of the Bank; (iii) the Executive is convicted of a felony or commits any material and actionable act of dishonesty, fraud, or intentional material misrepresentation in the performance of the Executive’s duties under this Agreement; (iv) the Executive engages in an unauthorized disclosure or use of inside information, trade secrets or other confidential information; or (v) the Executive willfully breaches a fiduciary duty, or violates any law, rule or regulation, which breach or violation results in a material adverse effect on the Bank (taken as a whole). If the Bank decides to terminate the Executive’s employment for Cause, the Bank will provide the Executive with notice specifying the grounds for termination, accompanied by a brief written statement stating the relevant facts supporting such grounds.

9. “Code” means the Internal Revenue Code of 1986, as amended and any successor provisions to such sections.

10. “Date of Termination” means (i) if the Executive’s employment is terminated due to the Executive’s death, the Date of Termination shall be the date of death; (ii) if the Executive’s employment is terminated due to Disability, the Date of Termination is the Disability Effective Date as described in Section 7.1(b) of the Agreement; (iii) if the Executive’s employment is terminated by the Bank for Cause, the Date of Termination is the date on which the Bank gives notice to the Executive of such termination; (iv) if the Executive’s employment is terminated by the Bank without Cause or voluntarily by the Executive, the Date of Termination shall be the date specified in the notice of termination; and (v) if the Executive’s employment terminates for any other reason, the Date of Termination shall be the Executive’s final date of employment.

11. “Disability” shall mean a physical or mental condition of the Executive which occurs and persists and which, in the written opinion of a physician selected by the Bank (under Section 7.1(b) of the Agreement), and in the written opinion of such physician, the condition will render the Executive unable to return to her duties for an indefinite period of not less than 180 days.

12. “Effective Date” means July 1, 2019.

13. “Exchange Act” means the Securities Exchange Act of 1934.

14. “Executive” means Vivian Mui.

15. “Good Reason” shall mean the following after a Change of Control if without the express consent of the Executive:

a material change by the Bank in Executive’s title, functions, duties or responsibilities that would cause the Executive’s position to become of less responsibility, importance or scope; or

ii.

a significant reduction in Executive’s base salary; or

iii.

a material failure of the Bank to comply with any of the provisions of this Agreement; or

iv.

a change in the location of employment more than 35 miles from the location immediately preceding the Change of Control other than for reasonable travel requirements in carrying out the Executive’s responsibilities.

If the Executive gives the Bank notice of termination based upon Good Reason, the Bank shall have ten days after receipt of such notice to reasonably remedy the facts and circumstances which provided Good Reason.

16. “Incentive Plan” means the California Bank of Commerce Incentive Bonus Compensation Program in effect on the Effective Date of the Agreement, as later amended or changed by the Bank.

17. “Incumbent Board” means individuals who constitute the Board of Directors of the Bank on the Effective Date of the Agreement.

18. “Proprietary Information” shall also be given its broadest possible interpretation and shall mean any and all information disclosed or made available by the Bank to the Executive including, without limitation, any information which is not publicly known or available and upon which the Bank’s business or success depends.

19. “Trade Secrets” shall be given its broadest possible interpretation and shall mean any information, including formulas, patterns, compilations, reports, records, programs, devices, methods, know-how, negative know-how, techniques, raw material properties and specifications, formulations, discoveries, ideas, concepts, designs, technical information, drawings, data, customer and supplier lists, information regarding customers, buyers and suppliers, distribution techniques, production processes, research and development projects, marketing plans, general financial information and financial information concerning customers, the Bank’s legal, business and financial structure and operations, and other confidential and proprietary information or processes which (i) derive independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use and (ii) are the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

20. “Waiver” shall mean the Release and Waiver of All Claims in full, a sample of which is attached as Exhibit C to the Agreement, that is required to be signed by Executive, without revocation, as a condition precedent to Bank being required to pay severance benefits to Executive that are contemplated by Section 7.2(a) or Section 7.2(b).

Exhibit 10.9

EMPLOYMENT AGREEMENT

This Employment Agreement (the Agreement) is entered into by and between CALIFORNIA BANK OF COMMERCE a California banking corporation (the Bank), and Michele Wirfel, an individual (the Executive) as of June 19, 2018 (Effective Date). The definitions for certain defined terms in the Agreement are referred to in Section 5 below and are listed in Exhibit B; these defined terms are in bold text. This Agreement replaces any previous employment agreements between the parties and makes such previous agreements null and void.

In consideration of the promises and mutual covenants and agreements herein contained and intending to be legally bound hereby, the Bank and the Executive hereby agree as follows:

1. Employment.

1.1 Title. The Executive is employed as Senior Executive Vice President and Co-Chief Lending Officer of the Bank. The job description for this position is attached hereto as Exhibit A. The Executive shall have such other duties and responsibilities as may be designated to her by the President of the Bank, or its Board of Directors, and in accordance with the objectives or policies of the Board of Directors, from time to time, in connection with the business activities of the Bank.

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3. Compensation.

3.1 Salary. The Executive shall receive a salary at an annual rate of $210,000, which will be paid in accordance with the Bank’s normal payroll procedures including applicable adjustments for withholding taxes. The Executive shall receive such annual increases in salary, if any, as may be determined by the Bank’s Board of Directors’ annual review of the Executive’s compensation each year during the term of this Agreement. Participation in deferred compensation, discretionary or performance bonus, retirement, stock option and other employee benefit plans and in fringe benefits shall not reduce the annual rate.

3.2 Incentive Compensation. The Executive shall be entitled to receive an annual incentive compensation payment pursuant to the terms of the Incentive Plan. Except as set forth in the Incentive Plan or this Agreement, or in any successor incentive plan or arrangement, no incentive compensation payments shall be paid or prorated for a partial year during the year Executive terminates her employment and the Executive shall not be entitled to receive incentive compensation payments for any year during the term of this Agreement in which Executive was not employed by the Bank the full fiscal year (not including her initial year of employment).

3.3 Other Benefits. Subject to applicable qualification requirements and regulatory approval requirements, if any, the Executive shall further be entitled to the following benefits:

(a) Insurance. The Bank shall provide during the term of this Agreement group life, health (including medical, dental. vision and hospitalization), accident and disability insurance coverage for the Executive and her dependents through a policy or policies provided by the insurer(s) selected by the Bank in its sole discretion on the same basis and cost as all other executives in comparable positions with the Bank.

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3.4 Business Expenses. The Executive shall be entitled to incur and be reimbursed for reasonable business expenses incurred in the course and scope of Executive’s employment under the Agreement. The Bank agrees that it will reimburse the Executive for all such expenses upon the presentation by the Executive, from time to time, of an itemized account of such expenditures setting forth the date, the purposes for which incurred, and the amounts thereof, together with such receipts showing payments in conformity with the Bank’s established policies. Reimbursement shall be made within a reasonable period after the Executive’s submission of an itemized account in accordance with the Bank’s policies.

3.6 [Omitted].

3.7 [Omitted].

3.8 [Omitted].

3.9 [Omitted].

3.10 Employee Stock Ownership Plan. The Executive will be eligible to participate in the Bank’s Employee Stock Ownership Plan (ESOP), which is incorporated by reference as if fully set forth here, when and at such time as one is created by the Bank. Participation will be subject to the terms and conditions of the ESOP.

3.11 Automobile Allowance. The Bank will pay to the Executive an automobile allowance in the amount of $750.00 per month during the term of this Agreement. The Executive shall obtain and maintain public liability insurance and property damage insurance policies with insurer(s) acceptable to the Bank with such coverages in such amounts which may be acceptable to the Bank from time to time.

3.12 [Omitted].

4. Indemnity. To the extent permitted or required by applicable law and when consistent with this Agreement and the Bank’s articles of incorporation and bylaws, the Bank shall indemnify and hold the Executive harmless from any cost, expense or liability arising out of or relating to any acts or decisions made by the Executive in acting on behalf of the Bank in the course and scope of Executive’s employment. The Executive agrees to promptly notify the Bank of any actual or threatened claim arising out of or as a result of the Executive’s employment with the Bank.

5. Terms Defined. The definitions for certain defined terms to this Agreement are attached, and incorporated herein, as Exhibit B. These defined terms are in bold text in the Agreement.

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(a) the acquisition (or acquisition during the 12-month period ending on the date of the most recent acquisition) by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either (i) the then outstanding shares of common stock of the Bank (the “Outstanding Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Bank entitled to vote generally in the election of directors (“Outstanding Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Bank, (ii) any acquisition by the Bank that reduces the number of shares issued and outstanding through a stock repurchase program or otherwise, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Bank or any corporation controlled by the Bank or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 6; or

(b) individuals who, as of the Effective Date, constitute the Board of Directors of the Bank (the Incumbent Board) cease for any reason other than resignation, death or disability to constitute at least a majority of the Bank’s Board of Directors during any 12-month period; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Bank’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Bank’s Board of Directors; or

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(d) approval by the shareholders of the Bank of a complete liquidation or dissolution of the Bank.

7. Termination.

7.1 This Agreement may be terminated for the following reasons:

(a) Death. This Agreement shall terminate automatically upon the Executive’s death.

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7.2 Certain Benefits Upon Termination.

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(b) Termination And Change of Control. In the event of a Change of Control and at any time during the Change of Control Period (x), the Executive’s employment is terminated by the Bank other than for Cause or (y) the Executive voluntarily terminates her employment in a good faith reasonable determination that Good Reason exists for such termination, then the Executive shall receive the Accrued Obligations on the Date of Termination, and the severance benefits consisting of:

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Notwithstanding the foregoing or any other provision of this Agreement, if any part or all of the severance benefits is subject to taxation under Section 409A of the Code, as determined by the Bank, with the advice of its independent accounting firm or other tax advisors, then the severance payment shall be subject to modification as set forth hereafter in Section 8 of this Agreement.

The provision of severance benefits under this section are conditioned upon and subject to Executive signing a valid Release and Waiver of All Claims in Full (Waiver) following her termination, without revocation, a copy of which is attached hereto as Exhibit C. Notwithstanding the foregoing, the Executive shall not be entitled to receive severance benefits pursuant to this Section 7.2(b) in the event her termination of employment results from an occurrence described in Sections 7.1(a), 7.1(b) or 7.1(c).

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(f) Single Trigger Event. The provisions for payments contained in this Section 7.2 may be triggered only once during the term of this Agreement according to the event that occurs first that gives rise to a benefit under Section 7.2. Thus, for example, should the Executive be terminated because of a Disability and should there thereafter be a Change of Control, then the Executive would be entitled to be paid only under Section 7.2(d) and not under Section 7.2(b), as well. In addition, the Executive shall not be entitled to receive severance benefits of any kind from any parent entity, wholly owned subsidiary or other affiliated entity of the Bank if in connection with the same event or series of events the payments provided for in this Section 7.2 have been triggered.

Notwithstanding any other term or provision of this Agreement, to the extent that any provision of this Agreement is determined by the Bank, with the advice of its independent accounting firm or other tax advisors, to be subject to and not in compliance with Section 409A, including, without limitation, the definition of Change in Control or the timing of commencement and completion of severance benefits and/or other benefit payments to the Executive hereunder, or the amount of any such payments, such provisions shall be interpreted in the manner required to exempt the benefit from or to comply with Section 409A. The Bank and the Executive acknowledge and agree that such interpretation could, among other matters, (i) limit the circumstances or events that constitute a “change in control”; (ii) delay for a period of 6 months or more, or otherwise modify the commencement of severance and/or other benefit payments; (iii) modify the completion date of severance; and/or (iv) modify other benefit payments and/or reduce the amount of the benefit otherwise provided.

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9. Assignment. This Agreement will inure to the benefit of and be binding upon the Bank and any of its respective successors and assigns. In view of the personal nature of the services to be performed under this Agreement by the Executive, the Executive will not have the right to assign or transfer any of her rights, obligations or benefits under this Agreement. The Bank will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Bank to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform it if no such succession had taken place.

11. No Solicitation And Nondisclosure By The Executive.

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(b) Following termination of this Agreement and the Executive’s employment hereunder, the Executive shall not use any Trade Secret or Proprietary Information of the Bank or its affiliates, parents, and subsidiaries to solicit, encourage or assist, directly, indirectly or in any manner whatsoever, (i) any employees of the Bank, or its affiliates, parent, and subsidiaries (including any former employees who voluntarily terminated employment with the Bank within a 12 month period prior to the Executive’s termination of employment) to resign or to apply for or accept employment with any other competitive banking or financial services business within the counties in California in which the Bank has located its headquarters or branch offices; or (ii) any customer, person or entity that has a business relationship with the Bank during the 12 month period prior to the Executive’s termination of employment with the Bank, or was engaged in a business relationship with the Bank, to terminate such business relationship and engage in a business relationship with any other competitive banking or financial services business within the counties in California in which the Bank has located its headquarters or branch offices.

12. Disclosure Of Information. The Executive shall not, at any time or in any manner, directly or indirectly, either before or after termination of this Agreement, without the prior written consent of the Board of Directors of the Bank, except as required by law to comply with legal process including, without limitation, by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process, use for her own benefit or the benefit of any other person or entity, or otherwise disclose or communicate to any person or entity including, without limitation, the media or by way of the internet or World Wide Web, any information concerning any Trade Secret or Proprietary Information of the Bank. The Executive further recognizes and acknowledges that any Trade Secrets concerning any customers of the Bank and their respective affiliates and subsidiaries, as it may exist from time to time, is strictly confidential and is a valuable, special and unique asset of the Bank’s business. In the event the Executive is required by law to disclose Trade Secrets or Proprietary Information, the Executive will provide the Bank and their counsel with immediate notice of such request so that they may consider seeking a protective order. If, in the absence of a protective order or the receipt of a waiver hereunder, the Executive is nonetheless, in the written opinion of knowledgeable counsel, compelled to disclose Trade Secrets or Proprietary Information to any tribunal or any other party or else stand liable for contempt or suffer other material censure or material penalty, then the Executive may disclose (on an “as needed” basis only) such information to such tribunal or other party without liability hereunder. Notwithstanding the foregoing, the Executive may disclose Trade Secrets or Proprietary Information as may be required by any regulatory agency having jurisdiction over the operations of the Bank in connection with an examination of the Bank or other proceeding conducted by such regulatory agency.

13. Written, Printed Or Electronic Material And Return Of Other Bank Property. All written, printed or electronic material, notebooks and records including, without limitation, computer disks, thumb drives, flash drives, cloud stored information, smart phones, tablets or laptops and all similar devices used by the Executive in performing duties for the Bank, other than the Executive’s personal address lists, telephone lists, notes and diaries, are and shall remain the sole property of the Bank. Upon termination of employment, the Executive shall promptly return all such material (including all copies, extracts and summaries thereof) to the Bank.

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Further, Executive acknowledges that all Bank property must be returned upon termination of employment, including but not limited to phones, computers, laptops, tablets and similar devices.

14. 280G Payments.

14.1 If any of the payments or benefits received or to be received by the Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or the Executive’s termination of employment whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement, or otherwise) (all such payments collectively referred to herein as the “280G Payments”) constitute “parachute payments” within the meaning of Section 280G of the Code and would, but for this Section 14.2, be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then such 280G Payments shall be reduced in a manner determined by the Bank (by the minimum possible amounts) that is consistent with the requirements of Section 409A until no amount payable to the Executive will be subject to the Excise Tax. If two economically equivalent amounts are subject to reduction but are payable at different times, the amounts shall be reduced (but not below zero) on a pro rata basis.

15. Miscellaneous.

Bank: California Bank of Commerce

3595 Mt. Diablo Blvd., Suite 220

Lafayette, California 94549

Attn: President & CEO

Executive: Michele Wirfel

______________________________

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15.2 Amendments or Additions. No amendment, modification or additions to this Agreement shall be binding unless in writing and signed by the parties hereto.

15.5 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but both of which together will constitute one and the same instrument.

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conducted in accordance with the JAMS Employment-Arbitration Rules & Procedures and subject to JAMS policy on Employment Arbitration Minimum Standards of Procedural Fairness. If JAMS is no longer able to supply the arbitrator, such arbitrator shall be mutually selected from the American Arbitration Association (AAA). The obligation of the parties to arbitrate pursuant to this clause shall be specifically enforced in accordance with, and shall be conducted consistently with the provisions of Title 9 of Part 3 of the California Code of Civil Procedure as the exclusive remedy of such dispute; provided, however, that provisional injunctive relief may, but need not, be sought in a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the Arbitrator. Final resolution of any dispute through arbitration may include any remedy or relief that the Arbitrator deems just and equitable, including any and all remedies provided by applicable state or federal statutes. At the conclusion of the arbitration, the Arbitrator shall issue a written decision that sets forth the essential findings and conclusions upon which the Arbitrator’s award or decision is based. Any award or relief granted by the Arbitrator hereunder shall be final and binding on the parties hereto and may be enforced by any court of competent jurisdiction.

15.9 Entire Agreement. This Agreement, and the matters incorporated by reference as set forth herein, supersedes any and all agreements, either oral or in writing, between the parties with respect to the employment of the Executive by the Bank and contains all of the covenants and agreements between the parties with respect to the employment of the Executive by the Bank; provided, however, that, this Agreement does not supersede or replace the rights and benefits under any restricted stock agreement between the Bank and the Executive in connection Section 3.8. Each party to this Agreement acknowledges that no other representations, inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not set forth herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding on either party.

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15.14 Effect Of Termination On Certain Provisions. Upon the termination of this Agreement, the obligations of the Bank and the Executive hereunder shall cease except to the extent of the Bank’s obligation to make payments, if any, to or for the benefit of the Executive following termination, and provided that this Section 15.14 and Sections 4, 7.2, 8, 9, 10, 11, 12, 13, 14.1, 14.2, 15.1, 15.2, 15.3, 15.4, 15.6, 15.7, 15.8, 15.9, 15.10, 15.11, 15.12, and 15.13 shall remain in full force and effect.

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement on the date first indicated below.


CALIFORNIA BANK OF COMMERCE,
a California banking corporation

By:		/s/ Steven E. Shelton
Steven E. Shelton, President and CEO

/s/ Michele Wirfel
Michele Wirfel

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EXHIBIT B

Certain Definitions for Employment Agreement Between California

Bank of Commerce and Michele Wirfel

1. “AAA” means the American Arbitration Association.

2. “Arbitrator” means the arbitrator selected under Section 15.7 of the Agreement.

3. “Accrued Obligations” means the sum of the Executive’s Base Salary earned and vacation accrued, if any, through the Date of Termination to the extent not theretofore paid, outstanding expense reimbursements and any compensation previously deferred by the Executive to the extent not theretofore paid.

4. “Agreement” means the Agreement for Employment entered into by and between the California Bank of Commerce, a California banking corporation and Michele Wirfel as of June 19, 2018.

5. “Average Annual Bonus” shall mean the average bonus or incentive compensation amount paid to (or earned by) the Executive during the three (3) fiscal years (or in any shorter number of year, if the length of employment of the Executive is less than three (3) years) immediately preceding the Executive’s termination.

6. “Bank” means the California Bank of Commerce, a California banking corporation, and its successors.

7. “Base Salary” means the current annual salary of the Executive, on the Date of Termination.

8. “Cause” shall mean (i) the Executive willfully breaches or habitually neglects the duties which the Executive is required to perform under this Agreement; (ii) the Executive commits an act of moral turpitude that has a material detrimental effect on the reputation or business of the Bank; (iii) the Executive is convicted of a felony or commits any material and actionable act of dishonesty, fraud, or intentional material misrepresentation in the performance of the Executive’s duties under this Agreement; (iv) the Executive engages in an unauthorized disclosure or use of inside information, trade secrets or other confidential information; or (v) the Executive willfully breaches a fiduciary duty, or violates any law, rule or regulation, which breach or violation results in a material adverse effect on the Bank (taken as a whole). If the Bank decides to terminate the Executive’s employment for Cause, the Bank will provide the Executive with notice specifying the grounds for termination, accompanied by a brief written statement stating the relevant facts supporting such grounds.

9. “Code” means the Internal Revenue Code of 1986, as amended and any successor provisions to such sections.

10. “Date of Termination” means (i) if the Executive’s employment is terminated due to the Executive’s death, the Date of Termination shall be the date of death; (ii) if the Executive’s employment is terminated due to Disability, the Date of Termination is the Disability Effective Date as described in Section 7.1(b) of the Agreement; (iii) if the Executive’s employment is terminated by the Bank for Cause, the Date of Termination is the date on which the Bank gives notice to the Executive of such termination; (iv) if the Executive’s employment is terminated by the Bank without Cause or voluntarily by the Executive, the Date of Termination shall be the date specified in the notice of termination; and (v) if the Executive’s employment terminates for any other reason, the Date of Termination shall be the Executive’s final date of employment.

11. “Disability” shall mean a physical or mental condition of the Executive which occurs and persists and which, in the written opinion of a physician selected by the Bank (under Section 7.1(b) of the Agreement), and in the written opinion of such physician, the condition will render the Executive unable to return to her duties for an indefinite period of not less than 180 days.

12. “Effective Date” means June 19, 2018.

13. “ESOP” means the Bank’s Employee Stock Ownership Plan.

14. “Exchange Act” means the Securities Exchange Act of 1934.

15. “Executive” means Michele Wirfel.

16. “Good Reason” shall mean the following after a Change of Control if without the express consent of the Executive:

ii.

a significant reduction in Executive’s base salary; or

iii.

a material failure of the Bank to comply with any of the provisions of this Agreement; or

iv.

17. “Incentive Plan” means the California Bank of Commerce Incentive Bonus Compensation Program in effect on the Effective Date of the Agreement, as later amended or changed by the Bank.

18. “Incumbent Board” means individuals who constitute the Board of Directors of the Bank on the Effective Date of the Agreement.

19. “Plan” means the California Bank of Commerce 2007 Equity Incentive Plan.

20. “Proprietary Information” shall also be given its broadest possible interpretation and shall mean any and all information disclosed or made available by the Bank to the Executive including, without limitation, any information which is not publicly known or available and upon which the Bank’s business or success depends.

21. “Trade Secrets” shall be given its broadest possible interpretation and shall mean any information, including formulas, patterns, compilations, reports, records, programs, devices, methods, know-how, negative know-how, techniques, raw material properties and specifications, formulations, discoveries, ideas, concepts, designs, technical information, drawings, data, customer and supplier lists, information regarding customers, buyers and suppliers, distribution techniques, production processes, research and development projects, marketing plans, general financial information and financial information concerning customers, the Bank’s legal, business and financial structure and operations, and other confidential and proprietary information or processes which (i) derive independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use and (ii) are the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

22. “Waiver” shall mean the Release and Waiver of All Claims in full, a sample of which is attached as Exhibit C to the Agreement, that is required to be signed by Executive, without revocation, as a condition precedent to Bank being required to pay severance benefits to Executive that are contemplated by Section 7.2(a) or Section 7.2(b).

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven E. Shelton, certify that:

I have reviewed this periodic report on Form 10-Q of California BanCorp.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 11, 2022

/s/ Steven E. Shelton

Steven E. Shelton

Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas A. Sa, certify that:

I have reviewed this periodic report on Form 10-Q of California BanCorp.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 11, 2022

/s/ Thomas A. Sa

Thomas A. Sa

President and Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE

PUBLIC COMPANY ACCOUNTING REFORM AND INVESTOR PROTECTION ACT OF 2002

In connection with the periodic report of California BanCorp (the “Company”) on Form 10-Q for the period ended June 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Steven E. Shelton, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Dated: August 11, 2022

/s/ Steven E. Shelton

Steven E. Shelton

Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE

PUBLIC COMPANY ACCOUNTING REFORM AND INVESTOR PROTECTION ACT OF 2002

In connection with the periodic report of California Bancorp (the “Company”) on Form 10-Q for the period ended June 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Thomas A. Sa, President and Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Dated: August 11, 2022

/s/ Thomas A. Sa

Thomas A. Sa

President and Chief Financial Officer