Southern California Bancorp : Annual Report Document

2022 ANNUAL REPORT

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this document statement are forward-looking statements. These forward-looking statements include statements relating to our projected growth, anticipated future financial performance, financial condition, credit quality and management's long-term performance goals, as well as statements relating to the anticipated effects on the business, financial condition and results of operations from expected developments or events, business growth and strategies of Southern California Bancorp (the "Company") and its wholly owned subsidiary, Bank of Southern California, N.A (the "Bank") collectively refer to ("we", "us," or "our"). These statements, which are based on certain assumptions and estimates and describe our future plans, results, strategies and expectations, can generally be identified by the use of the words and phrases "may," "will," "should," "could," "would," "goal," "plan," "potential," "estimate," "project," "believe," "intend," "anticipate," "expect," "target," "aim," "predict," "continue," "seek," "projection" and other variations of such words and phrases and similar expressions.

We have made the forward-looking statements in this document based on assumptions and estimates that we believe to be reasonable in light of the information available to us at this time. However, these forward-looking statements are subject to significant risks and uncertainties, and could be affected by many factors. Factors that could have a material adverse effect on our business, consolidated financial condition, consolidated results of operations and future growth prospects include, but are not limited to, the following:

• volatility and uncertainty facing the banking industry following the recent failures of financial institutions;
• challenges related to increasing interest rates and the impact on our consolidated financial condition and consolidated results of operations;
• our ability to manage our liquidity;
• business and economic conditions nationally, regionally and in our target markets, particularly in Southern California, which is the principal area in which we operate;
• the lack of soundness of other financial institutions;
• the possibility that we may be required to pay special assessments or higher premiums for deposit insurance;
• disruptions to the credit and financial markets, either nationally, regionally or locally;
• our dependence on the Bank for dividends;
• concentration of our loan portfolio in commercial loans, which loans may be dependent on the borrower's cash flows for repayment and, to some extent, the local and regional economy;
• concentration of our loan portfolio in loans secured by real estate and changes in the prices, values and sales volumes of commercial and residential real estate;
• risks related to construction and land development lending, which involves estimates that may prove to be inaccurate and collateral that may be difficult to sell following foreclosure;
• risks related to Small Business Administration ("SBA") lending, including the risk that we could lose our designation as an SBA Preferred Lender;
• risks related to consumer loans, the repayment of which may be dependent on the borrower's cash flows and may be unsecured;
• concentration of our business activities within the geographic area of Southern California;
• credit risks in our loan portfolio, the adequacy of our reserves for credit losses and the appropriateness of our methodology for calculating such allowance for loan losses;
• the impact of the COVID-19 pandemic;
• the impact of natural disasters, including earthquakes, floods, droughts, and fires, particularly in Southern California;
• our ability to manage the growth of our business and organization;
• risks related to any future acquisitions, including transaction expenses, the potential distraction of management resources and the possibility that we will not realize anticipated benefits from any future acquisitions;
• competition in the banking industry, nationally, regionally or locally;
• failure to maintain adequate liquidity and regulatory capital and comply with evolving federal and state banking regulations;
• inability of our risk management framework to effectively mitigate credit risk, interest rate risk, liquidity risk, price risk, compliance risk, technology risk, operational risk, strategic risk and reputational risk;
• our dependence on our management and our ability to attract and retain experienced and talented bankers;
• failure to keep pace with technological change or difficulties when implementing new technologies;
• system failures, data security breaches, including as a result of cyber-attacks, or failures to prevent breaches of our network security;
• our reliance on communications and information systems to conduct business and reliance on third parties and their affiliates to provide key components of business structure, any disruptions of which could interrupt operations or increase the costs of doing business;
• fraudulent and negligent acts by our customers, employees or vendors;
• our ability to prevent or detect all errors or fraud with our financial reporting controls and procedures;
• increased loan losses or impairment of goodwill and other intangibles;
• an inability to raise necessary capital to fund our growth strategy, operations, or to meet increased minimum regulatory capital levels;
• the sufficiency of our capital, including sources of such capital and the extent to which capital may be used or required;
• provisions of our charter documents and federal banking laws that could deter or delay an acquisition of the Company or changes in our management, even if beneficial to our shareholders;

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• the institution and outcome of litigation and other legal proceedings to which we become subject;
• the impact of recent and future legislative and regulatory changes;
• examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for credit losses, slow the growth of our commercial real estate loans or write-down assets, or otherwise impose restrictions or conditions on our operations, including, but not limited to, our ability to acquire or be acquired;
• our status as an emerging growth company and a smaller reporting company, which reduces our disclosure obligations under the federal securities laws compared to other publicly traded companies;
• the impact of current and future governmental monetary and fiscal policies; and
• other factors and risks described under Item 1A. "Risk Factors" in Amendment No. 1 to our Form 10 registration statement filed with the Securities and Exchange Commission on April 24, 2023, and under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this document.

Because of these risks and other uncertainties, our actual results, performance or achievement, or industry results, may be materially different from the anticipated or estimated results discussed in the forward-looking statements in this document. Our past results of operations are not necessarily indicative of our future results. You should not rely on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. We undertake no obligation to update these forward-looking statements, even though circumstances may change in the future, except as required under federal securities law. We qualify all of our forward-looking statements by these cautionary statements.

Contents

• 2022 FINANCIAL PERFORMANCE HIGHLIGHTS
  2 EXECUTIVE PROFILES
  3 LOCATIONS
  4 FINANCIAL OVERVIEW

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EXECUTIVE PROFILES

BOARD OF DIRECTORS

David I. Rainer

Chairman of the Board and Chief Executive Officer

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Irwin Golds

Lead Independent Director and

CEO and Co-founder, Capitis Real Estate

Frank D. Di Tomaso

Executive Director

Dr. ‡•-‡"ƒ…Šƒ†'

Retired "ƒŽƒ†ƒš‹ŽŽ'ˆƒ…‹ƒŽ-"‰‡'

Richard Martin

Founder and President, R. Martin & Associates, a certified public accounting firm

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Founder and "‡•‹†‡-, ǡ, and MMK Ventures, IncǤ

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Managing "‹…‹'ƒŽǡƒ•-Ž‡"‡‡†˜‹•'"•

Anne Williams

Retired Chief Risk Professional and Former Chief Credit Officer of Bank of Southern California, N.A.

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LEADERSHIP TEAM*

David I. Rainer	Sam Kunianski
Chairman of the Board and	Executive Vice President,
Chief Executive Officer	Chief Banking Officer (Bank)
Richard Hernandez	ƒ"-‹‹•ƒ
President	š‡…--‹˜‡‹…‡"‡•‹†‡-ǡ
Frank D. Di Tomaso	Š‹‡ˆ‹•ˆˆ‹…‡" (Bank)
Manisha Merchant
Executive Director (Bank)
Š'ƒ•'Žƒ	Executive Vice President,
Chief Legal Officer and
š‡…--‹˜‡‹…‡"‡•‹†‡-ǡ
Corporate Secretary
Š‹‡ˆOperating ˆˆ‹…‡",
Peter Nutz
Chief Financial Officer (Bancorp)
Jean Carandang	Executive Vice President,
Chief Credit Officer (Bank)
Executive Vice "‡•‹†‡-ǡ
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Š‹‡ˆFinancialˆˆ‹…‡" (Bank)
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"‡•‹†‡-'ˆ"‹˜ƒ-‡ƒ‹‰(Bank)
š‡…--‹˜‡‹…‡"‡•‹†‡-ǡ
Joann Yeung
Š‹‡ˆˆ'"ƒ-‹'ˆˆ‹…‡" (Bank)
ƒ‡Žƒ•ƒƒ…•'	Senior Vice President,
Chief Accounting Officer (Bank),
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Principal Accounting Officer (Bancorp)
Š‹‡ˆ'‡"ƒ-‹'•ˆˆ‹…‡" (Bank)

*Unless otherwise noted, each Leadership Team member serves as such for both Southern California Bancorp and Bank of Southern California, N.A.

common stock

Stock Exchange Listing

The common stock of Southern California

Bancorp is listed on the Nasdaq Capital

Market under the symbol BCAL.

Transfer Agent

Computershare Investor Services

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